CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
(dollars in thousands)
|
|
Six Months Ended June 30, 2018
|
As Reported:
(1)
|
|
|
Net cash provided by continuing operating activities
|
|
$
|
52,097
|
|
Net cash used in continuing investing activities
|
|
(3,915
|
)
|
|
|
|
As Corrected:
|
|
|
Net cash provided by continuing operating activities
|
|
246,733
|
|
Net cash used in continuing investing activities
|
|
(198,551
|
)
|
(1) "As reported" balances include amounts from continuing operations historically presented within these captions.
|
Recently Adopted Accounting Pronouncements
ASU 2016-02
In February 2016, the Financial Accounting Standards Board ("FASB") issued Topic 842,
Leases,
by issuing ASU No. 2016-02, which requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. The Company adopted ASU 2016-02 as of January 1, 2019, using the modified retrospective approach, which provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a full retrospective approach.
Due to the adoption of the new standard, the right of use assets ("ROU assets") and additional operating lease liabilities ("lease liabilities") as of
June 30, 2019
were
$141.0 million
and
$148.8 million
, respectively. Prepaid rent of
$2.7 million
and deferred liability of
$10.9 million
were included in ROU assets and lease liabilities, respectively. The standard did not materially impact the Company's consolidated net earnings. See
Note 14 - "Leases"
for additional information and disclosures required by Topic 842.
ASU 2018-12
In February 2018, the FASB issued ASU 2018-02,
Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive income
("ASU 2018-02"), which permits the reclassification to retained earnings of disproportionate tax effects in accumulated other comprehensive income (loss) caused by the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act"). The Company adopted ASU 2018-02 as of January 1, 2019, which did not have a material impact on the Condensed Consolidated Financial Statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
Accounting Pronouncements Related to the Current Expected Credit Loss ("CECL") Standard
ASU 2016-13
In June 2016, the FASB issued ASU 2016-13,
“Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,”
and subsequent amendments to the guidance: ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, and ASU 2019-05 in May 2019. The standard, as amended, changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they currently do under the other-than-temporary impairment model. The standard also simplifies the accounting model for purchased credit-impaired debt securities and loans. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2019-04 clarifies that equity instruments without readily determinable fair values for which an entity has elected the measurement alternative should be remeasured to fair value as of the date that an observable transaction occurred. ASU 2019-05 provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. As issued, this ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. The Company is evaluating its alternatives with respect to the available accounting methods under ASU 2016‑13, including the fair value option. If the fair value option is not utilized, adoption of ASU 2016-13 will increase the allowance for credit losses with a resulting negative adjustment to retained earnings on the date of adoption. Additionally, as disclosed below, the Company is evaluating the impact of the FASB's definition of a SRC to the adoption of ASU 2016-13.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
ASU 2019-05
In May 2019, the FASB issued ASU 2019-05, which amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (i) were previously recorded at amortized cost and (ii) are within the scope of ASC 326-203 if the instruments are eligible for the fair value option under ASC 825-10. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. ASU 2019-05’s amendments should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings in the statement of financial position as of the date that an entity adopted the amendments in ASU 2016-13. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early adopt the ASU in any interim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date will be the same as the effective date for ASU 2016-13. We are currently evaluating the methods and impact of adopting this new standard on the Condensed Consolidated Financial Statements.
ASU 2019-04
In May 2019, the FASB issued ASU 2019-04, which clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments. The ASU’s amendments apply to all entities within the scope of the affected guidance. Accrued interest - Amortized cost basis is defined in ASU 2016-13 as "the amount at which a financing receivable or investment is originated or acquired, adjusted for applicable accrued interest, accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, write-offs, foreign exchange, and fair value hedge accounting adjustments". To address stakeholders’ concerns that the inclusion of accrued interest in the definition of amortized cost basis could make application of the credit loss guidance operationally burdensome, ASU 2019-04 provides certain alternatives for the measurement of the allowance for credit losses (ALL) on accrued interest receivable (AIR). These measurement alternatives include (1) measuring an ALL on AIR separately, (2) electing to provide separate disclosure of the AIR component of amortized cost as a practical expedient, and (3) making accounting policy elections to simplify certain aspects of the presentation and measurement of such AIR. As issued, for entities that have adopted ASU 2016-13, the amendments in ASU 2019-04 related to ASU 2016-13 are effective for fiscal years beginning after December 15, 2019, and interim periods therein. ASU 2019-04’s amendments should be applied "on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening retained earnings balance in the statement of financial position as of the date an entity adopted the amendments in ASU 2016-13." Certain disclosures are also required. For all other entities, the effective date will be the same as the effective date in ASU 2016-13.
FASB Definition of a Smaller Reporting Company ("SRC") as related to the CECL standard and evaluation of the impact of the CECL standard
On July 17, 2019, the FASB issued for a 30-day comment period a draft proposal that would reconsider its philosophy for establishing effective dates for major projects for certain classes of companies, including SRCs. Under current SEC definitions, CURO meets the definition of an SRC as of June 30, 2019. The proposed standard would defer required adoption of the CECL standard for SRCs until fiscal periods beginning after December 15, 2022. The Company will continue to monitor the standard setting activities of the FASB and evaluate their potential impact on the adoption of accounting standards such as ASU 2016-13 and ASU 2019-04. We are currently evaluating the methods and impact of adopting the CECL standard on the Condensed Consolidated Financial Statements.
SEC Disclosure Update
In August 2018, the SEC adopted final rules under SEC Release No. 33-10532,
Disclosure Update and Simplification
, amending certain disclosure requirements that had become redundant, duplicative, overlapping, outdated or superseded. Other than the amendment's expanded disclosure requirement for interim financial statements to disclose both current and comparative quarter and year-to-date reconciliations of changes in stockholders' equity, it did not have a material impact on the Company's Condensed Consolidated Financial Statements or Notes thereto for the three and six months ended
June 30, 2019
, nor is it expected to have a material impact on the Company's annual disclosures or financial statements.
NOTE 2 - VARIABLE INTEREST ENTITIES
In August 2018, the Company closed the Non-Recourse Canada SPV facility, whereby certain loan receivables were sold to wholly-owned, bankruptcy-remote special purpose subsidiaries ("VIEs") to collateralize debt incurred under the facility.
As the Company is the primary beneficiary of the VIEs, it includes the assets and liabilities related to the VIEs in its Condensed Consolidated Financial Statements. As required, the Company parenthetically discloses on the Consolidated Balance Sheets the
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
VIEs’ assets that can only be used to settle the VIEs' obligations and liabilities if the VIEs’ creditors have no recourse against the Company's general credit.
The carrying amounts of consolidated VIEs' assets and liabilities associated with the VIE subsidiaries were as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
June 30, 2019
|
|
December 31, 2018
|
Assets
|
|
|
|
Restricted cash
|
$
|
14,819
|
|
|
$
|
12,840
|
|
Gross loans receivable less allowance for loan losses
|
190,121
|
|
|
136,187
|
|
Total Assets
|
$
|
204,940
|
|
|
$
|
149,027
|
|
Liabilities
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
15,020
|
|
|
$
|
4,980
|
|
Deferred revenue
|
45
|
|
|
40
|
|
Accrued interest
|
713
|
|
|
831
|
|
Long-term debt
|
90,977
|
|
|
107,479
|
|
Total Liabilities
|
$
|
106,755
|
|
|
$
|
113,330
|
|
NOTE 3 – LOANS RECEIVABLE AND REVENUE
The following table summarizes revenue by product for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
(in thousands)
|
2019
|
2018
|
|
2019
|
|
2018
|
Unsecured Installment
|
$
|
122,112
|
|
$
|
114,936
|
|
|
$
|
257,890
|
|
|
$
|
240,315
|
|
Secured Installment
|
26,076
|
|
25,777
|
|
|
53,553
|
|
|
52,633
|
|
Open-End
|
54,972
|
|
27,222
|
|
|
107,841
|
|
|
54,445
|
|
Single-Pay
|
45,528
|
|
58,325
|
|
|
92,289
|
|
|
118,682
|
|
Ancillary
|
15,612
|
|
10,909
|
|
|
30,666
|
|
|
21,937
|
|
Total revenue
|
$
|
264,300
|
|
$
|
237,169
|
|
|
$
|
542,239
|
|
|
$
|
488,012
|
|
The following tables summarize Loans receivable by product and the related delinquent loans receivable at June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
(in thousands)
|
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Total
|
Current loans receivable
|
|
$
|
76,126
|
|
$
|
126,685
|
|
$
|
71,218
|
|
$
|
247,915
|
|
$
|
521,944
|
|
Delinquent loans receivable
|
|
—
|
|
38,037
|
|
14,216
|
|
35,396
|
|
87,649
|
|
Total loans receivable
|
|
76,126
|
|
164,722
|
|
85,434
|
|
283,311
|
|
609,593
|
|
Less: allowance for losses
|
|
(4,941
|
)
|
(35,223
|
)
|
(9,996
|
)
|
(51,717
|
)
|
(101,877
|
)
|
Loans receivable, net
|
|
$
|
71,185
|
|
$
|
129,499
|
|
$
|
75,438
|
|
$
|
231,594
|
|
$
|
507,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
(in thousands)
|
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Total
|
Delinquent loans receivable
|
|
|
|
|
|
0-30 days past due
|
|
$
|
14,995
|
|
$
|
7,096
|
|
$
|
14,997
|
|
$
|
37,088
|
|
31-60 days past due
|
|
11,176
|
|
3,358
|
|
9,455
|
|
23,989
|
|
61-90 days past due
|
|
11,866
|
|
3,762
|
|
10,944
|
|
26,572
|
|
Total delinquent loans receivable
|
|
$
|
38,037
|
|
$
|
14,216
|
|
$
|
35,396
|
|
$
|
87,649
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following tables summarize Loans receivable by product and the related delinquent loans receivable at December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Total
|
Current loans receivable
|
|
$
|
80,823
|
|
$
|
141,316
|
|
$
|
75,583
|
|
$
|
207,333
|
|
$
|
505,055
|
|
Delinquent loans receivable
|
|
—
|
|
49,087
|
|
17,389
|
|
—
|
|
66,476
|
|
Total loans receivable
|
|
80,823
|
|
190,403
|
|
92,972
|
|
207,333
|
|
571,531
|
|
Less: allowance for losses
|
|
(4,189
|
)
|
(37,716
|
)
|
(12,191
|
)
|
(19,901
|
)
|
(73,997
|
)
|
Loans receivable, net
|
|
$
|
76,634
|
|
$
|
152,687
|
|
$
|
80,781
|
|
$
|
187,432
|
|
$
|
497,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
|
Unsecured Installment
|
Secured Installment
|
Total
|
Delinquent loans receivable
|
|
|
|
|
|
0-30 days past due
|
|
$
|
17,850
|
|
$
|
7,870
|
|
$
|
25,720
|
|
31-60 days past due
|
|
14,705
|
|
4,725
|
|
19,430
|
|
61-90 days past due
|
|
16,532
|
|
4,794
|
|
21,326
|
|
Total delinquent loans receivable
|
|
$
|
49,087
|
|
$
|
17,389
|
|
$
|
66,476
|
|
The following tables summarize loans guaranteed by the Company under CSO programs and the related delinquent receivables at June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
(in thousands)
|
|
Unsecured Installment
|
Secured Installment
|
Total
|
Current loans receivable guaranteed by the Company
|
|
$
|
54,968
|
|
$
|
1,930
|
|
$
|
56,898
|
|
Delinquent loans receivable guaranteed by the Company
|
|
10,087
|
|
354
|
|
10,441
|
|
Total loans receivable guaranteed by the Company
|
|
65,055
|
|
2,284
|
|
67,339
|
|
Less: Liability for losses on CSO lender-owned consumer loans
|
|
(9,433
|
)
|
(71
|
)
|
(9,504
|
)
|
Loans receivable guaranteed by the Company, net
|
|
$
|
55,622
|
|
$
|
2,213
|
|
$
|
57,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
(in thousands)
|
|
Unsecured Installment
|
Secured Installment
|
Total
|
Delinquent loans receivable
|
|
|
|
|
|
0-30 days past due
|
|
$
|
8,511
|
|
$
|
299
|
|
$
|
8,810
|
|
31-60 days past due
|
|
1,052
|
|
37
|
|
1,089
|
|
61-90 days past due
|
|
524
|
|
18
|
|
542
|
|
Total delinquent loans receivable
|
|
$
|
10,087
|
|
$
|
354
|
|
$
|
10,441
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following tables summarize loans guaranteed by the Company under CSO programs and the related delinquent receivables at December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
|
Unsecured Installment
|
Secured Installment
|
Total
|
Current loans receivable guaranteed by the Company
|
|
$
|
65,743
|
|
$
|
2,504
|
|
$
|
68,247
|
|
Delinquent loans receivable guaranteed by the Company
|
|
11,708
|
|
446
|
|
12,154
|
|
Total loans receivable guaranteed by the Company
|
|
77,451
|
|
2,950
|
|
80,401
|
|
Less: Liability for losses on CSO lender-owned consumer loans
|
|
(11,582
|
)
|
(425
|
)
|
(12,007
|
)
|
Loans receivable guaranteed by the Company, net
|
|
$
|
65,869
|
|
$
|
2,525
|
|
$
|
68,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
|
Unsecured Installment
|
Secured Installment
|
Total
|
Delinquent loans receivable
|
|
|
|
|
0-30 days past due
|
|
$
|
9,684
|
|
$
|
369
|
|
$
|
10,053
|
|
31-60 days past due
|
|
1,255
|
|
48
|
|
1,303
|
|
61-90 days past due
|
|
769
|
|
29
|
|
798
|
|
Total delinquent loans receivable
|
|
$
|
11,708
|
|
$
|
446
|
|
$
|
12,154
|
|
The following table summarizes activity in the allowance for loan losses during the three months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
(in thousands)
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Other
|
Total
|
Balance, beginning of period
|
$
|
3,897
|
|
$
|
33,666
|
|
$
|
9,796
|
|
$
|
46,963
|
|
$
|
—
|
|
$
|
94,322
|
|
Charge-offs
|
(35,759
|
)
|
(37,336
|
)
|
(10,295
|
)
|
(30,688
|
)
|
(1,342
|
)
|
(115,420
|
)
|
Recoveries
|
24,301
|
|
5,366
|
|
2,693
|
|
5,537
|
|
822
|
|
38,719
|
|
Net charge-offs
|
(11,458
|
)
|
(31,970
|
)
|
(7,602
|
)
|
(25,151
|
)
|
(520
|
)
|
(76,701
|
)
|
Provision for losses
|
12,446
|
|
33,514
|
|
7,802
|
|
29,373
|
|
520
|
|
83,655
|
|
Effect of foreign currency translation
|
56
|
|
13
|
|
—
|
|
532
|
|
—
|
|
601
|
|
Balance, end of period
|
$
|
4,941
|
|
$
|
35,223
|
|
$
|
9,996
|
|
$
|
51,717
|
|
$
|
—
|
|
$
|
101,877
|
|
Allowance for loan losses as a percentage of gross loan receivables
|
6.5
|
%
|
21.4
|
%
|
11.7
|
%
|
18.3
|
%
|
N/A
|
|
16.7
|
%
|
The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the three months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2019
|
(in thousands)
|
Unsecured Installment
|
Secured Installment
|
Total
|
Balance, beginning of period
|
$
|
8,583
|
|
$
|
78
|
|
$
|
8,661
|
|
Charge-offs
|
(34,564
|
)
|
(683
|
)
|
(35,247
|
)
|
Recoveries
|
7,078
|
|
657
|
|
7,735
|
|
Net charge-offs
|
(27,486
|
)
|
(26
|
)
|
(27,512
|
)
|
Provision for losses
|
28,336
|
|
19
|
|
28,355
|
|
Balance, end of period
|
$
|
9,433
|
|
$
|
71
|
|
$
|
9,504
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans, in total, during the three months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
(in thousands)
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Other
|
Total
|
Balance, beginning of period
|
$
|
3,897
|
|
$
|
42,249
|
|
$
|
9,874
|
|
$
|
46,963
|
|
$
|
—
|
|
$
|
102,983
|
|
Charge-offs
|
(35,759
|
)
|
(71,900
|
)
|
(10,978
|
)
|
(30,688
|
)
|
(1,342
|
)
|
(150,667
|
)
|
Recoveries
|
24,301
|
|
12,444
|
|
3,350
|
|
5,537
|
|
822
|
|
46,454
|
|
Net charge-offs
|
(11,458
|
)
|
(59,456
|
)
|
(7,628
|
)
|
(25,151
|
)
|
(520
|
)
|
(104,213
|
)
|
Provision for losses
|
12,446
|
|
61,850
|
|
7,821
|
|
29,373
|
|
520
|
|
112,010
|
|
Effect of foreign currency translation
|
56
|
|
13
|
|
—
|
|
532
|
|
—
|
|
601
|
|
Balance, end of period
|
$
|
4,941
|
|
$
|
44,656
|
|
$
|
10,067
|
|
$
|
51,717
|
|
$
|
—
|
|
$
|
111,381
|
|
The following table summarizes activity in the allowance for loan losses during the three months ended
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
(in thousands)
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Other
|
Total
|
Balance, beginning of period
|
$
|
3,514
|
|
$
|
33,638
|
|
$
|
11,639
|
|
$
|
6,846
|
|
$
|
—
|
|
$
|
55,637
|
|
Charge-offs
|
(41,242
|
)
|
(31,612
|
)
|
(11,082
|
)
|
(23,807
|
)
|
(593
|
)
|
(108,336
|
)
|
Recoveries
|
28,266
|
|
5,085
|
|
2,296
|
|
11,883
|
|
38
|
|
47,568
|
|
Net charge-offs
|
(12,976
|
)
|
(26,527
|
)
|
(8,786
|
)
|
(11,924
|
)
|
(555
|
)
|
(60,768
|
)
|
Provision for losses
|
13,101
|
|
23,219
|
|
7,533
|
|
14,848
|
|
555
|
|
59,256
|
|
Effect of foreign currency translation
|
(35
|
)
|
(39
|
)
|
—
|
|
(53
|
)
|
—
|
|
(127
|
)
|
Balance, end of period
|
$
|
3,604
|
|
$
|
30,291
|
|
$
|
10,386
|
|
$
|
9,717
|
|
$
|
—
|
|
$
|
53,998
|
|
Allowance for loan losses as a percentage of gross loan receivables
|
4.3
|
%
|
18.9
|
%
|
12.3
|
%
|
10.7
|
%
|
N/A
|
|
12.8
|
%
|
The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the three months ended
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
(in thousands)
|
Unsecured Installment
|
Secured Installment
|
Total
|
Balance, beginning of period
|
$
|
9,886
|
|
$
|
526
|
|
$
|
10,412
|
|
Charge-offs
|
(33,017
|
)
|
(993
|
)
|
(34,010
|
)
|
Recoveries
|
7,350
|
|
776
|
|
8,126
|
|
Net charge-offs
|
(25,667
|
)
|
(217
|
)
|
(25,884
|
)
|
Provision for losses
|
26,974
|
|
117
|
|
27,091
|
|
Balance, end of period
|
$
|
11,193
|
|
$
|
426
|
|
$
|
11,619
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans, in total, during the three months ended
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
(in thousands)
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Other
|
Total
|
Balance, beginning of period
|
$
|
3,514
|
|
$
|
43,524
|
|
$
|
12,165
|
|
$
|
6,846
|
|
$
|
—
|
|
$
|
66,049
|
|
Charge-offs
|
(41,242
|
)
|
(64,629
|
)
|
(12,075
|
)
|
(23,807
|
)
|
(593
|
)
|
(142,346
|
)
|
Recoveries
|
28,266
|
|
12,435
|
|
3,072
|
|
11,883
|
|
38
|
|
55,694
|
|
Net charge-offs
|
(12,976
|
)
|
(52,194
|
)
|
(9,003
|
)
|
(11,924
|
)
|
(555
|
)
|
(86,652
|
)
|
Provision for losses
|
13,101
|
|
50,193
|
|
7,650
|
|
14,848
|
|
555
|
|
86,347
|
|
Effect of foreign currency translation
|
(35
|
)
|
(39
|
)
|
—
|
|
(53
|
)
|
—
|
|
(127
|
)
|
Balance, end of period
|
$
|
3,604
|
|
$
|
41,484
|
|
$
|
10,812
|
|
$
|
9,717
|
|
$
|
—
|
|
$
|
65,617
|
|
The following table summarizes activity in the allowance for loan losses during the six months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
(in thousands)
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Other
|
Total
|
Balance, beginning of period
|
$
|
4,189
|
|
$
|
37,716
|
|
$
|
12,191
|
|
$
|
19,901
|
|
$
|
—
|
|
$
|
73,997
|
|
Charge-offs
|
(72,280
|
)
|
(81,573
|
)
|
(22,966
|
)
|
(34,326
|
)
|
(2,693
|
)
|
(213,838
|
)
|
Recoveries
|
52,212
|
|
11,684
|
|
5,816
|
|
10,696
|
|
1,721
|
|
82,129
|
|
Net charge-offs
|
(20,068
|
)
|
(69,889
|
)
|
(17,150
|
)
|
(23,630
|
)
|
(972
|
)
|
(131,709
|
)
|
Provision for losses
|
20,714
|
|
67,359
|
|
14,955
|
|
54,690
|
|
972
|
|
158,690
|
|
Effect of foreign currency translation
|
106
|
|
37
|
|
—
|
|
756
|
|
—
|
|
899
|
|
Balance, end of period
|
$
|
4,941
|
|
$
|
35,223
|
|
$
|
9,996
|
|
$
|
51,717
|
|
$
|
—
|
|
$
|
101,877
|
|
Allowance for loan losses as a percentage of gross loan receivables
|
6.5
|
%
|
21.4
|
%
|
11.7
|
%
|
18.3
|
%
|
N/A
|
|
16.7
|
%
|
The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the six months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2019
|
(in thousands)
|
Unsecured Installment
|
Secured Installment
|
Total
|
Balance, beginning of period
|
$
|
11,582
|
|
$
|
425
|
|
$
|
12,007
|
|
Charge-offs
|
(75,545
|
)
|
(1,760
|
)
|
(77,305
|
)
|
Recoveries
|
17,638
|
|
1,459
|
|
19,097
|
|
Net charge-offs
|
(57,907
|
)
|
(301
|
)
|
(58,208
|
)
|
Provision for losses
|
55,758
|
|
(53
|
)
|
55,705
|
|
Balance, end of period
|
$
|
9,433
|
|
$
|
71
|
|
$
|
9,504
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans, in total, during the six months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
(in thousands)
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Other
|
Total
|
Balance, beginning of period
|
$
|
4,189
|
|
$
|
49,298
|
|
$
|
12,616
|
|
$
|
19,901
|
|
$
|
—
|
|
$
|
86,004
|
|
Charge-offs
|
(72,280
|
)
|
(157,118
|
)
|
(24,726
|
)
|
(34,326
|
)
|
(2,693
|
)
|
(291,143
|
)
|
Recoveries
|
52,212
|
|
29,322
|
|
7,275
|
|
10,696
|
|
1,721
|
|
101,226
|
|
Net charge-offs
|
(20,068
|
)
|
(127,796
|
)
|
(17,451
|
)
|
(23,630
|
)
|
(972
|
)
|
(189,917
|
)
|
Provision for losses
|
20,714
|
|
123,117
|
|
14,902
|
|
54,690
|
|
972
|
|
214,395
|
|
Effect of foreign currency translation
|
106
|
|
37
|
|
—
|
|
756
|
|
—
|
|
899
|
|
Balance, end of period
|
$
|
4,941
|
|
$
|
44,656
|
|
$
|
10,067
|
|
$
|
51,717
|
|
$
|
—
|
|
$
|
111,381
|
|
The following table summarizes activity in the allowance for loan losses during the six months ended
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
(in thousands)
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Other
|
Total
|
Balance, beginning of period
|
$
|
5,204
|
|
$
|
38,977
|
|
$
|
13,472
|
|
$
|
6,426
|
|
$
|
—
|
|
$
|
64,079
|
|
Charge-offs
|
(85,578
|
)
|
(66,831
|
)
|
(22,567
|
)
|
(44,156
|
)
|
(1,268
|
)
|
(220,400
|
)
|
Recoveries
|
61,084
|
|
10,303
|
|
5,162
|
|
21,260
|
|
85
|
|
97,894
|
|
Net charge-offs
|
(24,494
|
)
|
(56,528
|
)
|
(17,405
|
)
|
(22,896
|
)
|
(1,183
|
)
|
(122,506
|
)
|
Provision for losses
|
22,993
|
|
47,958
|
|
14,319
|
|
26,276
|
|
1,183
|
|
112,729
|
|
Effect of foreign currency translation
|
(99
|
)
|
(116
|
)
|
—
|
|
(89
|
)
|
—
|
|
(304
|
)
|
Balance, end of period
|
$
|
3,604
|
|
$
|
30,291
|
|
$
|
10,386
|
|
$
|
9,717
|
|
$
|
—
|
|
$
|
53,998
|
|
Allowance for loan losses as a percentage of gross loan receivables
|
4.3
|
%
|
18.9
|
%
|
12.3
|
%
|
10.7
|
%
|
N/A
|
|
12.8
|
%
|
The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the six months ended
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2018
|
(in thousands)
|
Unsecured Installment
|
Secured Installment
|
Total
|
Balance, beginning of period
|
$
|
17,073
|
|
$
|
722
|
|
$
|
17,795
|
|
Charge-offs
|
(74,736
|
)
|
(2,212
|
)
|
(76,948
|
)
|
Recoveries
|
18,326
|
|
1,945
|
|
20,271
|
|
Net charge-offs
|
(56,410
|
)
|
(267
|
)
|
(56,677
|
)
|
Provision for losses
|
50,530
|
|
(29
|
)
|
50,501
|
|
Balance, end of period
|
$
|
11,193
|
|
$
|
426
|
|
$
|
11,619
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes activity in the allowance for loan losses and the liability for losses on CSO lender-owned consumer loans, in total, during the six months ended
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
(in thousands)
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Other
|
Total
|
Balance, beginning of period
|
$
|
5,204
|
|
$
|
56,050
|
|
$
|
14,194
|
|
$
|
6,426
|
|
$
|
—
|
|
$
|
81,874
|
|
Charge-offs
|
(85,578
|
)
|
(141,567
|
)
|
(24,779
|
)
|
(44,156
|
)
|
(1,268
|
)
|
(297,348
|
)
|
Recoveries
|
61,084
|
|
28,629
|
|
7,107
|
|
21,260
|
|
85
|
|
118,165
|
|
Net charge-offs
|
(24,494
|
)
|
(112,938
|
)
|
(17,672
|
)
|
(22,896
|
)
|
(1,183
|
)
|
(179,183
|
)
|
Provision for losses
|
22,993
|
|
98,488
|
|
14,290
|
|
26,276
|
|
1,183
|
|
163,230
|
|
Effect of foreign currency translation
|
(99
|
)
|
(116
|
)
|
—
|
|
(89
|
)
|
—
|
|
(304
|
)
|
Balance, end of period
|
$
|
3,604
|
|
$
|
41,484
|
|
$
|
10,812
|
|
$
|
9,717
|
|
$
|
—
|
|
$
|
65,617
|
|
NOTE 4 – CREDIT SERVICES ORGANIZATION
The CSO fee receivable amounts under CSO programs were
$12.0 million
and
$14.3 million
at
June 30, 2019
and
December 31, 2018
, respectively. The Company bears the risk of loss through its guarantee to purchase specific customer loans that are in default with the lenders. The terms of these loans range from
six
to
18
months. See the 2018 Form 10-K for further details of the Company's accounting policy. As of
June 30, 2019
and
December 31, 2018
, the maximum amount payable under all such guarantees was
$56.0 million
and
$66.9 million
, respectively. If the Company is required to pay any portion of the total amount of the loans it has guaranteed, it will attempt to recover some or the entire amount from the applicable customers. The Company holds no collateral in respect of the guarantees. The Company estimates a liability for losses associated with the guaranty provided to the CSO lenders using assumptions and methodologies similar to the Allowance for loan losses, which it recognizes for its consumer loans. Liability for incurred losses on CSO loans Guaranteed by the Company was
$9.5 million
and
$12.0 million
at
June 30, 2019
and
December 31, 2018
, respectively.
The Company placed
$5.8 million
and
$17.2 million
in collateral accounts for the benefit of lenders at
June 30, 2019
and
December 31, 2018
, respectively, which is reflected in "Prepaid expenses and other" in the Condensed Consolidated Balance Sheets. The balances required to be maintained in these collateral accounts vary by lender, typically based on a percentage of the outstanding loan balances held by the lender. The percentage of outstanding loan balances required for collateral is negotiated between the Company and each such lender.
NOTE 5 – LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
June 30, 2019
|
|
December 31, 2018
|
8.25% Senior Secured Notes (due 2025)
|
|
$
|
677,535
|
|
|
$
|
676,661
|
|
Non-Recourse Canada SPV Facility
|
|
90,977
|
|
|
107,479
|
|
Senior Revolver
|
|
—
|
|
|
20,000
|
|
Long-term debt
|
|
$
|
768,512
|
|
|
$
|
804,140
|
|
8.25%
Senior Secured Notes
In August 2018, the Company issued
$690.0 million
of
8.25%
Senior Secured Notes which mature on September 1, 2025 ("
8.25%
Senior Secured Notes"). Interest on the notes is payable semiannually, in arrears, on March 1 and September 1. In connection with the
8.25%
Senior Secured Notes, the balance of capitalized financing costs of approximately
$12.8 million
, net of amortization, is included in the Condensed Consolidated Balance Sheets as a component of "Long-term debt." These costs are amortized over the term of the
8.25%
Senior Secured Notes as a component of interest expense.
The proceeds of this issuance were used (i) to redeem the outstanding
12.00%
Senior Secured Notes of CFTC, (ii) to repay a portion of the outstanding indebtedness under the
five
-year revolving credit facility of CURO Receivables Finance I, LLC, a wholly-owned subsidiary ("CURO Receivables"), which consisted of a term loan and revolving borrowing capacity, (iii) for general corporate purposes and (iv) to pay fees, expenses, premiums and accrued interest in connection therewith.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
As of
June 30, 2019
and December 31, 2018, the Company was in full compliance with the covenants and other provisions of the
8.25%
Senior Secured Notes.
12.00%
Senior Secured Notes
In February and November 2017, CFTC issued
$470.0 million
and
$135.0 million
, respectively, of
12.00%
Senior Secured Notes due March 1, 2022. In connection with these
12.00%
Senior Secured Notes, the Company capitalized financing costs of approximately
$18.3 million
. These costs were being amortized over the term of the
12.00%
Senior Secured Notes as a component of interest expense.
On March 7, 2018, CFTC redeemed
$77.5 million
of its
12.00%
Senior Secured Notes using a portion of the proceeds from the Company's initial public offering, as required by the underlying indenture (the transaction whereby the
12.00%
Senior Secured Notes were partially redeemed, the “Redemption”), at a price equal to
112.00%
of the principal amount of the
12.00%
Senior Secured Notes redeemed, plus accrued and unpaid interest paid thereon, to the date of Redemption. The Redemption price and the amortization of a corresponding portion of the capitalized financing costs resulted in a loss on Redemption of
$11.7 million
for the three months ended March 31, 2018. Following the Redemption,
$527.5 million
of the original outstanding principal amount of the
12.00%
Senior Secured Notes remained outstanding. The Redemption was conducted pursuant to the Indenture governing the
12.00%
Senior Secured Notes (the “Indenture”), dated as of February 15, 2017, by and among CFTC, the guarantors party thereto and TMI Trust Company, as trustee and collateral agent.
The remainder of the
12.00%
Senior Secured Notes were extinguished effective September 7, 2018 using proceeds from the
8.25%
Senior Secured Notes as described above. The early extinguishment of the
12.00%
Senior Secured Notes resulted in a pretax loss of
$69.2 million
during the year ended December 31, 2018.
Non-Recourse Canada SPV Facility
On August 2, 2018, CURO Canada Receivables Limited Partnership, a newly created, bankruptcy-remote special purpose vehicle (the "Canada SPV Borrower") and a wholly-owned subsidiary, entered into a
four
-year revolving credit facility with Waterfall Asset Management, LLC that provided for
C$175.0 million
of initial borrowing capacity and the ability to expand such capacity up to
C$250.0 million
("Non-Recourse Canada SPV Facility"). The loans bear interest at an annual rate of
6.75%
plus the three-month CDOR. The Canada SPV Borrower also pays a
0.50%
per annum commitment fee on the unused portion of the commitments. In April 2019, the facility's maturity date was extended
one year
, to 2023. As of
June 30, 2019
, the Canada SPV Borrower was in full compliance with the covenants and other provisions of the Non-Recourse Canada SPV Facility.
As of
June 30, 2019
, outstanding borrowings under the Non-Recourse Canada SPV Facility were
$91.0 million
, net of deferred financing costs of
$3.6 million
. For further information on the Non-Recourse Canada SPV, refer to Note 2, "Variable Interest Entities."
Non-Recourse U.S. SPV Facility
In November 2016, CURO Receivables and a wholly-owned subsidiary entered into a
five
-year revolving credit facility with Victory Park Management, LLC and certain other lenders that provided for an
$80.0 million
term loan and
$70.0 million
revolving borrowing capacity that could expand over time (collectively, “Non-Recourse U.S. SPV Facility”). Borrowings under this facility bore interest at an annual rate of up to
12.00%
plus the greater of (i)
1.0%
per annum and (ii) the three-month LIBOR. The SPV Borrower also paid a
0.50%
per annum fee on the unused portion of the commitments. In connection with this facility, the capitalized financing costs at the time of extinguishment, as discussed below, were approximately
$5.3 million
, net of amortization. These capitalized financing costs were included in the Condensed Consolidated Balance Sheet as a component of "Long-term debt" and were amortized over the term of the Non-Recourse U.S. SPV Facility.
On September 30, 2018, a portion of the proceeds from the
8.25%
Senior Secured Notes were used to extinguish the revolver's balance of
$42.4 million
. In October 2018, the Company extinguished the remaining term loan balance of
$80.0 million
and made the final termination payment of
$2.7 million
, resulting in a loss on the extinguishment of debt of
$9.7 million
during the year ended December 31, 2018.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Senior Revolver
On September 1, 2017, the Company entered into a
$25.0 million
Senior Secured Revolving Loan Facility (the “Senior Revolver”). The terms of the Senior Revolver generally conform to the related provisions in the Indenture dated February 15, 2017 for the
12.00%
Senior Secured Notes and complements the Company's other financing sources, while providing seasonal short-term liquidity. In February 2018, the Senior Revolver capacity was increased to
$29.0 million
as permitted by the Indenture to the
12.00%
Senior Secured Notes, based upon consolidated tangible assets. Additionally, in November 2018, the Senior Revolver capacity was increased to
$50.0 million
, as permitted by the Indenture to the
8.25%
Senior Secured Notes. The Senior Revolver is now syndicated with participation by
four
banks.
Under the Senior Revolver, there is
$50.0 million
maximum availability, including up to
$5.0 million
of standby letters of credit, for a
one
-year term, renewable for successive terms following annual review. The current term expires June 30, 2020. The Senior Revolver accrues interest at
one
-month LIBOR plus
5.00%
(subject to a
5%
overall minimum) and is repayable on demand.
The terms of the Senior Revolver require that its outstanding balance be
zero
for at least
30
consecutive days in each calendar year. The Senior Revolver is guaranteed by all subsidiaries that guarantee the
8.25%
Senior Secured Notes and is secured by a lien on substantially all assets of CURO and the guarantor subsidiaries that is senior to the lien securing the
8.25%
Senior Secured Notes. Additionally, the negative covenants of the Senior Revolver generally conform to the related provisions in the Indenture for the 8.25% Senior Secured Notes. The revolver was undrawn at
June 30, 2019
.
The Senior Revolver contains various conditions to borrowing and affirmative, negative and financial maintenance covenants. Certain of the more significant covenants are (i) minimum eligible collateral value, (ii) consolidated interest coverage ratio and (iii) consolidated leverage ratio. The Senior Revolver also contains various events of default, the occurrence of which could result in termination of the lenders’ commitments to lend and the acceleration of all obligations under the Senior Revolver. As of
June 30, 2019
, the Company was in full compliance with the covenants and other provisions of the Senior Revolver.
Cash Money Revolving Credit Facility
Cash Money Cheque Cashing, Inc., a Canadian subsidiary ("Cash Money"), maintains a C
$10.0 million
revolving credit facility with Royal Bank of Canada (the "Cash Money Revolving Credit Facility"), which provides short-term liquidity required to meet the working capital needs of the Company's Canadian operations. Aggregate draws under the revolving credit facility are limited to the lesser of: (i) the borrowing base, which is defined as a percentage of cash, deposits in transit and accounts receivable, and (ii) C
$10.0 million
. As of
June 30, 2019
, the borrowing capacity under the Cash Money Revolving Credit Facility, which was
C$9.7 million
, was reduced by C
$0.3 million
for outstanding stand-by-letters of credit.
The Cash Money Revolving Credit Facility is collateralized by substantially all of Cash Money’s assets and contains various covenants that require, among other things, that the aggregate borrowings outstanding under the facility not exceed the borrowing base, as well as restrictions on the encumbrance of assets and the creation of indebtedness. Borrowings under the Cash Money Revolving Credit Facility bear interest per annum at the prime rate of a Canadian chartered bank plus
1.95%
.
The Cash Money Revolving Credit Facility was undrawn at
June 30, 2019
and December 31, 2018.
Subordinated Stockholder Debt
As part of the acquisition of Cash Money in 2011, the Company received indemnification for certain claims through issuance of an escrow note to the seller. This note bears interest at
10.0%
per annum, and quarterly interest payments are due until the note matures. The balance of this note was repaid in full as of
June 30, 2019
.
NOTE 6 – SHARE-BASED COMPENSATION
The Company's stockholder-approved 2017 Incentive Plan provides for the issuance of up to
5.0
million shares, subject to certain adjustment provisions, which may be issued in the form of stock options, restricted stock awards, restricted stock units (“RSUs”), stock appreciation rights, performance awards and other awards that may be settled in or based upon common stock. Awards may be granted to officers, employees, consultants and directors. The 2017 Incentive Plan provides that shares of common stock subject to awards granted become available for re-issuance if such awards expire, terminate, are canceled for any reason or are forfeited by the recipient.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Restricted Stock Units
Grants of time-based RSUs are valued at the date of grant based on the value of our common stock and are expensed using the straight-line method over the service period. These RSUs are subject to time-based vesting and typically vest over a
three
-year period.
In March 2019, the Company awarded market-based RSUs designed to drive the performance of the management team toward achievement of key corporate objectives. The market-based RSUs vest after
three years
depending upon the Company's total stockholder return over the
three
-year performance period relative to other companies in its selected peer group. These awards are valued using the Monte Carlo simulation pricing model. Expense recognition for the market-based awards occurs over the service period using the straight-line method.
Grants of RSUs do not confer full stockholder rights such as voting rights and cash dividends, but provide for additional dividend equivalent RSU awards in lieu of cash dividends. Unvested shares of RSUs may be forfeited upon termination of employment depending on the circumstances of the termination, or failure to achieve the required performance condition, if applicable.
A summary of the status of time-based and market-based RSUs as of
June 30, 2019
and changes during the
six
months ended
June 30, 2019
are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
Number of RSUs
|
|
|
|
Time-Based
|
Market-Based
|
|
Weighted Average
Grant Date Fair Value per Share
|
December 31, 2018
|
1,060,350
|
|
—
|
|
|
$
|
14.29
|
|
Granted
|
579,540
|
|
394,755
|
|
|
10.07
|
|
Vested
|
(83,481
|
)
|
—
|
|
|
15.59
|
|
Forfeited
|
(68,778
|
)
|
—
|
|
|
14.05
|
|
June 30, 2019
|
1,487,631
|
|
394,755
|
|
|
$
|
12.06
|
|
Share-based compensation expense for the three months ended
June 30, 2019
and
2018
, which includes compensation costs from stock options and RSUs, was
$2.6 million
and
$2.2 million
, respectively, and during the six months ended
June 30, 2019
and
2018
was
$4.8 million
and
$4.0 million
, respectively, and is included in the Condensed Consolidated Statements of Operations as a component of "Corporate, district and other expenses."
As of
June 30, 2019
, there was
$18.5 million
of total unrecognized compensation cost related to stock options and RSUs, of which
$15.4 million
related to stock options and time-based RSUs and
$3.1 million
related to market-based RSUs. Total unrecognized compensation costs will be recognized over a weighted-average period of
2.0 years
.
NOTE 7 – INCOME TAXES
The Company's effective income tax rate from continuing operations was
27.4%
and
27.6%
for the six months ended
June 30, 2019
and
2018
, respectively.
On December 22, 2017, the 2017 Tax Act became law, which reduced the statutory U.S. Federal corporate income tax rate from 35% to 21%, enacted a one-time “deemed repatriation” tax on unremitted earnings accumulated in non-U.S. jurisdictions and imposed a new minimum tax on global intangible low-taxed income ("GILTI"). The Company provided an estimate of the deemed repatriation tax as of December 31, 2017 and pursuant to further IRS guidance, the Company recorded an additional accrual of
$1.2 million
during the six months ended June 30, 2018. The Company recorded an estimated GILTI tax of
$0.5 million
and
$0.6 million
during the six months ended
June 30, 2019
and
2018
, respectively.
The Company intends to reinvest Canada earnings indefinitely in its Canadian operations and therefore has not provided for any non-U.S. withholding tax that would be assessed on dividend distributions. If the earnings of
$159.3 million
were distributed to the U.S., the Company would be subject to Canadian withholding taxes of estimated
$8.0 million
. In the event the earnings were distributed to the U.S., the Company would adjust the income tax provision for the applicable period and would determine the amount of foreign tax credit that would be available.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE 8 – FINANCIAL INSTRUMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Company is required to use valuation techniques that are consistent with the market approach, income approach and/or cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability based on observable market data obtained from independent sources, or unobservable, meaning those that reflect the Company's own estimate about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Accounting standards establish a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs.
The three levels of inputs used to measure fair value are listed below.
Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has access to at the measurement date.
Level 2 – Inputs include quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 – Unobservable inputs reflecting the Company's own judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.
Financial Assets and Liabilities Not Carried at Fair Value
The table below presents the assets and liabilities that were not carried at fair value on the Condensed Consolidated Balance Sheets at
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair Value
|
(in thousands)
|
Carrying Value June 30,
2019
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Financial assets:
|
|
|
|
|
|
Cash
|
$
|
92,297
|
|
$
|
92,297
|
|
$
|
—
|
|
$
|
—
|
|
$
|
92,297
|
|
Restricted cash
|
33,712
|
|
33,712
|
|
—
|
|
—
|
|
33,712
|
|
Loans receivable, net
|
507,716
|
|
—
|
|
—
|
|
507,716
|
|
507,716
|
|
Investment in Cognical
|
7,178
|
|
—
|
|
—
|
|
7,178
|
|
7,178
|
|
Financial liabilities:
|
|
|
|
|
|
Liability for losses on CSO lender-owned consumer loans
|
$
|
9,504
|
|
$
|
—
|
|
$
|
—
|
|
$
|
9,504
|
|
$
|
9,504
|
|
8.25% Senior Secured Notes
|
677,535
|
|
—
|
|
—
|
|
574,211
|
|
574,211
|
|
Non-Recourse Canada SPV facility
|
90,977
|
|
—
|
|
—
|
|
94,565
|
|
94,565
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The table below presents the assets and liabilities that were not carried at fair value on the Condensed Consolidated Balance Sheets at
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair Value
|
(in thousands)
|
Carrying Value December 31,
2018
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Financial assets:
|
|
|
|
|
|
Cash
|
$
|
61,175
|
|
$
|
61,175
|
|
$
|
—
|
|
$
|
—
|
|
$
|
61,175
|
|
Restricted cash
|
25,439
|
|
25,439
|
|
—
|
|
—
|
|
25,439
|
|
Loans receivable, net
|
497,534
|
|
—
|
|
—
|
|
497,534
|
|
497,534
|
|
Investment in Cognical
|
6,558
|
|
—
|
|
—
|
|
6,558
|
|
6,558
|
|
Financial liabilities:
|
|
|
|
|
|
Liability for losses on CSO lender-owned consumer loans
|
$
|
12,007
|
|
$
|
—
|
|
$
|
—
|
|
$
|
12,007
|
|
$
|
12,007
|
|
8.25% Senior Secured notes
|
676,661
|
|
—
|
|
—
|
|
531,179
|
|
531,179
|
|
Non-Recourse Canada SPV facility
|
107,479
|
|
—
|
|
—
|
|
111,335
|
|
111,335
|
|
Senior Revolver
|
20,000
|
|
—
|
|
—
|
|
20,000
|
|
20,000
|
|
Loans receivable are carried on the Condensed Consolidated Balance Sheets net of the Allowance for estimated loan losses. The unobservable inputs used to calculate the carrying values include quantitative factors, such as default trends. Also considered in evaluating the accuracy of the models are changes to the loan portfolio mix, the impact of new loan products, changes to underwriting criteria or lending policies, new store development or entrance into new markets, changes in jurisdictional regulations or laws, recent credit trends and general economic conditions. The carrying value of loans receivable approximates their fair value.
In connection with CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for loans that the Company arranges for consumers on the third-party lenders’ behalf. The Company is required to purchase from the lender defaulted loans that it has guaranteed.
During the second quarter of 2019, Zibby completed an equity raising round at a value per share less than the value per share raised in prior raises. This round included additional investments from existing shareholders and investments by new investors and is considered indicative of the fair value of shares in Zibby. Accordingly, we recognized a
$3.7 million
impairment in our investment in Zibby to adjust it to market value. As of June 30, 2019, we owned approximately
30%
of the outstanding shares of Zibby on a fully diluted basis. See
Note 18 - "Subsequent Events"
for information regarding additional investments in Zibby in July 2019.
The fair value of the
8.25%
Senior Secured Notes was based on broker quotations. The fair values of the Non-Recourse Canada SPV facility and the Senior Revolver were based on the cash needed for their respective final settlements.
NOTE 9 – STOCKHOLDERS' EQUITY
In connection with the Company's initial public offering in December 2017, the underwriters had a
30
-day option to purchase up to an additional
1.0 million
shares of the Company's common stock at the initial public offering price, less the underwriting discount for over-allotments, if any. The underwriters exercised this option and purchased
1.0 million
shares on
January 5, 2018
. The exercise of this option provided additional proceeds of
$13.1 million
.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table summarizes the changes in stockholders' equity for the three and six months ended June 30, 2018 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Paid-in capital
|
|
Retained Earnings (Deficit)
|
|
AOCI
(1)
|
|
Total Stockholders' Equity
|
(dollars in thousands)
|
Shares Outstanding
|
|
Par Value
|
|
|
|
|
Balances at December 31, 2017
|
44,561,419
|
|
|
$
|
8
|
|
|
$
|
46,079
|
|
|
$
|
3,988
|
|
|
$
|
(42,939
|
)
|
|
$
|
7,136
|
|
Net income from continuing operations
|
—
|
|
|
—
|
|
|
—
|
|
|
24,913
|
|
|
—
|
|
|
24,913
|
|
Net loss from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,621
|
)
|
|
—
|
|
|
(1,621
|
)
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,910
|
)
|
|
(2,910
|
)
|
Cash flow hedge expiration
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
54
|
|
Share based compensation expense
|
—
|
|
|
—
|
|
|
1,842
|
|
|
—
|
|
|
—
|
|
|
1,842
|
|
Initial Public Offering, Net Proceeds (underwriter shares)
|
1,000,000
|
|
|
1
|
|
|
13,135
|
|
|
—
|
|
|
—
|
|
|
13,136
|
|
Balances at March 31, 2018
|
45,561,419
|
|
|
$
|
9
|
|
|
$
|
61,056
|
|
|
$
|
27,280
|
|
|
$
|
(45,795
|
)
|
|
$
|
42,550
|
|
Net income from continuing operations
|
—
|
|
|
—
|
|
|
—
|
|
|
18,718
|
|
|
—
|
|
|
18,718
|
|
Net loss from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,743
|
)
|
|
—
|
|
|
(2,743
|
)
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,754
|
)
|
|
(6,754
|
)
|
Cash flow hedge expiration
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(439
|
)
|
|
(439
|
)
|
Share based compensation expense
|
—
|
|
|
—
|
|
|
1,478
|
|
|
—
|
|
|
—
|
|
|
1,478
|
|
Proceeds from exercise of stock options
|
209,132
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
39
|
|
Common stock issued for RSU's vesting
|
49,994
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balances at June 30, 2018
|
45,820,545
|
|
|
$
|
9
|
|
|
$
|
62,573
|
|
|
$
|
43,255
|
|
|
$
|
(52,988
|
)
|
|
$
|
52,849
|
|
(1)
Accumulated other comprehensive income (loss)
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Paid-in capital
|
|
Treasury Stock
|
|
Retained Earnings (Deficit)
|
|
AOCI
(1)
|
|
Total Stockholders' Equity
|
(dollars in thousands)
|
Shares Outstanding
|
|
Par Value
|
|
|
|
|
|
Balances at December 31, 2018
|
46,412,231
|
|
|
$
|
9
|
|
|
$
|
60,015
|
|
|
$
|
—
|
|
|
$
|
(18,065
|
)
|
|
$
|
(61,060
|
)
|
|
$
|
(19,101
|
)
|
Net income from continuing operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,673
|
|
|
—
|
|
|
28,673
|
|
Net income from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,375
|
|
|
—
|
|
|
8,375
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,695
|
|
|
16,695
|
|
Share based compensation expense
|
—
|
|
|
—
|
|
|
2,172
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,172
|
|
Proceeds from exercise of stock options
|
7,888
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
Common stock issued for RSU's vesting, net of shares withheld and withholding paid for employee taxes
|
11,170
|
|
|
—
|
|
|
(110
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(110
|
)
|
Balances at March 31, 2019
|
46,431,289
|
|
|
$
|
9
|
|
|
$
|
62,117
|
|
|
$
|
—
|
|
|
$
|
18,983
|
|
|
$
|
(44,365
|
)
|
|
$
|
36,744
|
|
Net income from continuing operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,667
|
|
|
—
|
|
|
17,667
|
|
Net income from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(834
|
)
|
|
—
|
|
|
(834
|
)
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,635
|
|
|
3,635
|
|
Share based compensation expense
|
—
|
|
|
—
|
|
|
2,644
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,644
|
|
Proceeds from exercise of stock options
|
4,908
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
Purchase of shares under the stock repurchase program
|
(244,200
|
)
|
|
—
|
|
|
—
|
|
|
(2,507
|
)
|
|
—
|
|
|
—
|
|
|
(2,507
|
)
|
Common stock issued for RSU's vesting, net of shares withheld and withholding paid for employee taxes
|
63,285
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balances at June 30, 2019
|
46,255,282
|
|
|
$
|
9
|
|
|
$
|
64,790
|
|
|
$
|
(2,507
|
)
|
|
$
|
35,816
|
|
|
$
|
(40,730
|
)
|
|
$
|
57,378
|
|
(1)
Accumulated other comprehensive income (loss)
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE 10 – EARNINGS PER SHARE
The following table presents the computation of basic and diluted earnings per share (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income from continuing operations
|
$
|
17,667
|
|
|
$
|
18,718
|
|
|
$
|
46,340
|
|
|
$
|
43,631
|
|
Net income (loss) from discontinued operations, net of tax
|
(834
|
)
|
|
(2,743
|
)
|
|
$
|
7,541
|
|
|
$
|
(4,364
|
)
|
Net income
|
$
|
16,833
|
|
|
$
|
15,975
|
|
|
$
|
53,881
|
|
|
$
|
39,267
|
|
|
|
|
|
|
|
|
|
Weighted average common shares - basic
|
46,451
|
|
|
45,650
|
|
|
46,438
|
|
|
45,578
|
|
Dilutive effect of stock options and restricted stock units
|
656
|
|
|
2,346
|
|
|
897
|
|
|
2,179
|
|
Weighted average common shares - diluted
|
47,107
|
|
|
47,996
|
|
|
47,335
|
|
|
47,757
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share:
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.38
|
|
|
$
|
0.41
|
|
|
$
|
1.00
|
|
|
$
|
0.96
|
|
Discontinued operations
|
(0.02
|
)
|
|
(0.06
|
)
|
|
0.16
|
|
|
(0.10
|
)
|
Basic income per share
|
$
|
0.36
|
|
|
$
|
0.35
|
|
|
$
|
1.16
|
|
|
$
|
0.86
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share:
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.38
|
|
|
$
|
0.39
|
|
|
$
|
0.98
|
|
|
$
|
0.92
|
|
Discontinued operations
|
(0.02
|
)
|
|
(0.06
|
)
|
|
0.16
|
|
|
(0.10
|
)
|
Diluted income per share
|
$
|
0.36
|
|
|
$
|
0.33
|
|
|
$
|
1.14
|
|
|
$
|
0.82
|
|
Potential shares of common stock that would have the effect of increasing diluted earnings per share or decreasing diluted loss per share are considered to be anti-dilutive and as such, these shares are not included in calculating "Diluted earnings per share." For the
three and six
months ended
June 30,
2019
,
there were
1.3 million
and
1.2 million
, respectively, of potential shares of common stock excluded from the calculation of diluted earnings per share because their effect was anti-dilutive. There was
no
effect for the three and six months ended
June 30, 2018
.
The Company utilizes the "control number" concept in the computation of Diluted earnings per share to determine whether potential common stock instruments are dilutive. The control number used is income from continuing operations. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories.
NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION
The following table provides supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
(dollars in thousands)
|
2019
|
|
2018
|
Cash paid for:
|
|
|
|
Interest
|
$
|
34,678
|
|
|
$
|
44,250
|
|
Income taxes
|
4,231
|
|
|
11,621
|
|
Non-cash investing activities:
|
|
|
|
Property and equipment accrued in accounts payable
|
$
|
105
|
|
|
$
|
595
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE 12 – SEGMENT REPORTING
Segment information is prepared on the same basis that the Company's Chief Operating Decision Maker ("CODM") reviews financial information for operational decision making purposes. During the first quarter of 2019, the U.K. Subsidiaries met discontinued operations criteria, resulting in
two
reportable operating segments: the U.S. and Canada.
Management’s evaluation of performance utilizes gross margin and operating profit before the allocation of interest expense and professional services. The following reporting segment results reflect this basis for evaluation and were determined in accordance with the same accounting principles used in the Condensed Consolidated Financial Statements.
The following table illustrates summarized financial information concerning reportable segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(dollars in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues by segment:
|
|
|
|
|
|
|
|
U.S.
|
$
|
210,046
|
|
|
$
|
190,126
|
|
|
$
|
436,165
|
|
|
$
|
394,719
|
|
Canada
|
54,254
|
|
|
47,043
|
|
|
106,074
|
|
|
93,293
|
|
Consolidated revenue
|
$
|
264,300
|
|
|
$
|
237,169
|
|
|
$
|
542,239
|
|
|
$
|
488,012
|
|
Gross margin by segment:
|
|
|
|
|
|
|
|
U.S.
|
$
|
65,067
|
|
|
$
|
64,048
|
|
|
$
|
154,870
|
|
|
$
|
155,392
|
|
Canada
|
16,114
|
|
|
13,300
|
|
|
31,808
|
|
|
27,802
|
|
Consolidated gross margin
|
$
|
81,181
|
|
|
$
|
77,348
|
|
|
$
|
186,678
|
|
|
$
|
183,194
|
|
Segment operating income:
|
|
|
|
|
|
|
|
U.S.
|
$
|
17,029
|
|
|
$
|
15,362
|
|
|
$
|
48,224
|
|
|
$
|
42,194
|
|
Canada
|
8,091
|
|
|
8,534
|
|
|
15,615
|
|
|
18,082
|
|
Consolidated operating profit
|
$
|
25,120
|
|
|
$
|
23,896
|
|
|
$
|
63,839
|
|
|
$
|
60,276
|
|
Expenditures for long-lived assets by segment:
|
|
|
|
|
|
|
|
U.S.
|
$
|
2,568
|
|
|
$
|
1,195
|
|
|
$
|
4,998
|
|
|
$
|
1,983
|
|
Canada
|
477
|
|
|
220
|
|
|
1,166
|
|
|
974
|
|
Consolidated expenditures for long-lived assets
|
$
|
3,045
|
|
|
$
|
1,415
|
|
|
$
|
6,164
|
|
|
$
|
2,957
|
|
The following table provides gross loans receivable by segment:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
June 30,
2019
|
|
December 31,
2018
|
U.S.
|
$
|
340,968
|
|
|
$
|
361,473
|
|
Canada
|
268,625
|
|
|
210,058
|
|
Total gross loans receivable
|
$
|
609,593
|
|
|
$
|
571,531
|
|
The following table provides net long-lived assets, comprised of property and equipment, by segment. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
June 30, 2019
|
|
December 31, 2018
|
U.S.
|
$
|
44,209
|
|
|
$
|
47,918
|
|
Canada
|
28,784
|
|
|
28,832
|
|
Total net long-lived assets
|
$
|
72,993
|
|
|
$
|
76,750
|
|
The Company's CODM does not review assets by segment for purposes of allocating resources or decision-making purposes; therefore, total assets by segment are not disclosed.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE 13 – CONTINGENT LIABILITIES
Securities Litigation
On December 5, 2018, a putative securities fraud class action lawsuit was filed against the Company and its chief executive officer, chief financial officer and chief operating officer in the United States District Court for the District of Kansas, captioned
Yellowdog Partners, LP v. CURO Group Holdings Corp., Donald F. Gayhardt, William Baker and Roger W. Dean
, Civil Action No. 18-2662. On May 31, 2019, plaintiffs filed a consolidated complaint naming Doug Rippel, Chad Faulkner, Mike McKnight, Friedman Fleischer & Lowe Capital Partners II, L.P., FFL Executive Partners II, L.P., and FFL Parallel Fund II, L.P. as additional defendants. The complaint alleges that the Company and the individual defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and that certain defendants also violated Section 20(a) of the Exchange Act as "control persons" of CURO. Plaintiffs purport to bring these claims on behalf of a class of investors who purchased Company common stock between April 27, 2018 and October 24, 2018.
Plaintiffs allege generally that, during the putative class period, the Company made misleading statements and omitted material information regarding its efforts to transition the Canadian inventory of products from Single-Pay loans to Open-End loans. Plaintiffs assert that the Company and the individual defendants made these misstatements and omissions to keep the stock price high. Plaintiffs seek unspecified damages and other relief.
While the Company is vigorously contesting this lawsuit, it cannot determine the final resolution or when it might be resolved. In addition to the expenses incurred in defending this litigation and any damages that may be awarded in the event of an adverse ruling, management’s efforts and attention may be diverted from the ordinary business operations to address these claims. Regardless of the outcome, this litigation may have a material adverse impact on results because of defense costs, including costs related to indemnification obligations, diversion of resources and other factors.
The Company has also received an inquiry from the SEC regarding the Company's public disclosures surrounding its efforts to transition the Canadian inventory of products from Single-Pay loans to Open-End loans.
City of Austin
The Company was cited in July 2016 by the City of Austin, Texas for alleged violations of the Austin ordinance addressing products offered by CSOs. The Austin ordinance regulates aspects of products offered under the Company's credit access bureau ("CAB") program, including loan sizes and repayment terms. The Company believes that: (i) the Austin ordinance (similar to its counterparts elsewhere in Texas) conflicts with Texas state law and (ii) in any event, the Company's product complies with the ordinance, when the ordinance is properly construed. The Austin Municipal Court agreed with the Company's position that the ordinance conflicts with Texas law and, accordingly, did not address the second argument. In September 2017, the Travis County Court reversed the Municipal Court’s decision and remanded the case for further proceedings. To date, a hearing and trial on the merits have not been scheduled. The Company does not anticipate having a final determination of the lawfulness of its CAB program under the Austin ordinance (and similar ordinances in other Texas cities) in the near future. A final adverse decision could potentially result in material monetary liability in Austin and elsewhere in Texas, and would force the Company to restructure the loans it originates in Austin and elsewhere in Texas.
Other Legal Matters
The Company is a defendant in certain litigation matters encountered in the ordinary course of business. Certain of these matters may be covered to an extent by insurance. In the opinion of management, based upon the advice of legal counsel, the likelihood is remote that the impact of any of these pending litigation matters, either individually or in the aggregate, would have a material adverse effect on the Company's consolidated financial condition, results of operations or cash flows.
NOTE 14 – LEASES
The Company entered into operating leases for the buildings in which it operates that expire at various times through 2040. The Company determines if an arrangement is a lease at inception. Operating leases are included in "Right of use asset - operating leases" and "Lease liability - operating leases" in the Condensed Consolidated Balance Sheets. The Company currently has finance leases which in the aggregate are immaterial and not presented in the Condensed Consolidated Balance Sheets.
ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The majority of the leases have an original term of
five years
with
two
,
five
-year renewal options. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Most of the leases have escalation clauses and several also require payment of certain period costs, including maintenance, insurance and property taxes. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company had operating lease costs of approximately
$17.0 million
for the period ended
June 30, 2019
. Some of the leases are with related parties and have terms similar to the non-related party leases previously described. Operating lease costs for unrelated third-party leases were
$15.3 million
and for related party leases were
$1.7 million
for the three months ended
June 30, 2019
.
During the six months ended
June 30, 2019
, cash paid for amounts included in the measurement of the liabilities and the operating cash flows were
$17.4 million
.
The following table summarizes the future minimum lease payments that the Company is contractually obligated to make under operating leases as of June 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Third-Party
|
|
Related-Party
|
|
Total
|
2019
|
$
|
15,517
|
|
|
$
|
1,840
|
|
|
$
|
17,357
|
|
2020
|
30,735
|
|
|
3,752
|
|
|
34,487
|
|
2021
|
30,344
|
|
|
3,852
|
|
|
34,196
|
|
2022
|
29,353
|
|
|
3,909
|
|
|
33,262
|
|
2023
|
25,280
|
|
|
3,616
|
|
|
28,896
|
|
Thereafter
|
44,277
|
|
|
10,883
|
|
|
55,160
|
|
Total
|
175,506
|
|
|
27,852
|
|
|
203,358
|
|
Less: Imputed interest
|
(45,852
|
)
|
|
(8,663
|
)
|
|
(54,515
|
)
|
Operating lease liabilities
|
$
|
129,654
|
|
|
$
|
19,189
|
|
|
$
|
148,843
|
|
As of June 30, 2019, the weighted average remaining lease term was
6.3 years
, and the weighted average operating discount rate used to determine the operating lease liability was
10.3%
.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE 15 – DISCONTINUED OPERATIONS
On February 25, 2019, in accordance with the provisions of the U.K. Insolvency Act 1986 and as approved by the boards of directors of the U.K. Subsidiaries, insolvency practitioners from KPMG were appointed as Administrators for the U.K. Subsidiaries. The effect of the U.K. Subsidiaries’ entry into administration was to place their management, affairs, business and property of the U.K. Subsidiaries under the direct control of the Administrators. Accordingly, the Company deconsolidated the U.K. Subsidiaries, which comprised the U.K. reportable operating segment, as of February 25, 2019 and classified them as Discontinued Operations for all periods presented.
Revenue and expenses related to discontinued operations included activity prior to the deconsolidation of the U.K. Subsidiaries effective February 25, 2019. For the six months ended June 30, 2019, "Loss on disposition" of
$39.4 million
included the non-cash effect of eliminating assets and liabilities of the U.K. Subsidiaries as of the date of deconsolidation, as well as the effect of cumulative currency exchange rate differences on the U.S. investment in the U.K.
In connection with the disposition of the U.K. Subsidiaries, the U.S. entity that owned the Company's interests in the U.K. Subsidiaries recognized a loss on investment. This loss resulted in an estimated U.S. federal and state income tax benefit of
$46.6 million
, which will be available to offset the Company's future U.S. federal and state income tax obligations. In the second quarter of 2019, the Company revised the estimate of the tax basis in the U.K. Subsidiaries, resulting in a
$0.8 million
reduction in the income tax benefit recorded in the first quarter of 2019.
The following table presents financial results of the U.K. Subsidiaries, which meet the criteria of Discontinued Operations and, therefore, are excluded from the Company's results of continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(in thousands)
|
2019
|
|
2018
|
|
2019
(1)
|
|
2018
|
Revenue
|
$
|
—
|
|
|
$
|
11,814
|
|
|
$
|
6,957
|
|
|
$
|
22,729
|
|
Provision for losses
|
—
|
|
|
5,639
|
|
|
1,703
|
|
|
9,787
|
|
Net revenue
|
—
|
|
|
6,175
|
|
|
5,254
|
|
|
12,942
|
|
|
|
|
|
|
|
|
|
Cost of providing services
|
|
|
|
|
|
|
|
Office
|
—
|
|
|
545
|
|
|
246
|
|
|
1,073
|
|
Other costs of providing services
|
—
|
|
|
125
|
|
|
61
|
|
|
1,094
|
|
Advertising
|
—
|
|
|
2,441
|
|
|
775
|
|
|
4,312
|
|
Total cost of providing services
|
—
|
|
|
3,111
|
|
|
1,082
|
|
|
6,479
|
|
Gross margin
|
—
|
|
|
3,064
|
|
|
4,172
|
|
|
6,463
|
|
Operating expense (income)
|
|
|
|
|
|
|
|
Corporate, district and other expenses
|
—
|
|
|
5,675
|
|
|
3,810
|
|
|
10,700
|
|
Interest income
|
—
|
|
|
(7
|
)
|
|
(4
|
)
|
|
(12
|
)
|
Loss on disposition
|
—
|
|
|
—
|
|
|
39,414
|
|
|
—
|
|
Total operating expense
|
—
|
|
|
5,668
|
|
|
43,220
|
|
|
10,688
|
|
Pre-tax (loss) income from operations of discontinued operations
|
—
|
|
|
(2,604
|
)
|
|
(39,048
|
)
|
|
(4,225
|
)
|
Income tax expense (benefit) related to disposition
|
834
|
|
|
139
|
|
|
(46,589
|
)
|
|
139
|
|
Net income (loss) from discontinued operations
|
$
|
(834
|
)
|
|
$
|
(2,743
|
)
|
|
$
|
7,541
|
|
|
$
|
(4,364
|
)
|
(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019.
|
|
|
|
|
|
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following table presents the aggregate carrying amounts of the assets and liabilities of the U.K. Subsidiaries:
|
|
|
|
|
|
|
|
(in thousands)
|
June 30,
2019
|
December 31,
2018
|
ASSETS
|
Cash
|
$
|
—
|
|
$
|
9,859
|
|
Restricted cash
|
—
|
|
3,384
|
|
Gross loans receivable
|
—
|
|
25,256
|
|
Less: allowance for loan losses
|
—
|
|
(5,387
|
)
|
Loans receivable, net
|
—
|
|
19,869
|
|
Prepaid expenses and other
|
—
|
|
1,482
|
|
Other
|
—
|
|
267
|
|
Total assets classified as discontinued operations in the Condensed Consolidated Balance Sheets
|
$
|
—
|
|
$
|
34,861
|
|
LIABILITIES
|
Accounts payable and accrued liabilities
|
$
|
—
|
|
$
|
8,136
|
|
Deferred revenue
|
—
|
|
180
|
|
Accrued interest
|
—
|
|
(5
|
)
|
Deferred rent
|
—
|
|
149
|
|
Other long-term liabilities
|
—
|
|
422
|
|
Total liabilities classified as discontinued operations in the Condensed Consolidated Balance Sheets
|
$
|
—
|
|
$
|
8,882
|
|
The following table presents cash flows of the U.K. Subsidiaries:
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
(in thousands)
|
2019
(1)
|
|
2018
|
Net cash (used in) / provided by discontinued operating activities
|
$
|
(504
|
)
|
|
$
|
5,458
|
|
Net cash used in discontinued investing activities
|
(14,213
|
)
|
|
(14,349
|
)
|
Net cash used in discontinued financing activities
|
—
|
|
|
—
|
|
(1) Includes U.K. Subsidiaries financial results from January 1, 2019 to February 25, 2019.
|
|
|
|
NOTE 16 – CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In August 2018, CGHC issued
$690.0 million
of
8.25%
Senior Secured Notes due September 1, 2025. The proceeds from issuance of the
8.25%
Senior Secured Notes were used to extinguish the February and November 2017
12.00%
Senior Secured Notes due March 1, 2022. The redemption was conducted pursuant to the indenture governing the
8.25%
Senior Secured Notes. See
Note 5, "Long-Term Debt,
" for additional details.
In August 2018, CURO Canada Receivables Limited Partnership, a newly created, bankruptcy-remote special purpose vehicle (the "Canada SPV Borrower") and a wholly-owned subsidiary, entered into a
four
-year revolving credit facility with Waterfall Asset Management, LLC that provided for
C$175.0 million
of initial borrowing capacity and the ability to expand such capacity up to
C$250.0 million
("Non-Recourse Canada SPV Facility"). See
Note 5. "Long-Term Debt"
for additional details.
In March 2018, CFTC redeemed
$77.5 million
of the
12.00%
Senior Secured Notes at a price equal to
112.00%
of the principal amount plus accrued and unpaid interest to the date of redemption. The redemption was conducted pursuant to the indenture governing the
12.00%
Senior Secured Notes, dated as of February 15, 2017, by and among CFTC, the guarantors party thereto and TMI Trust Company, as trustee and collateral agent. Consistent with the terms of the Indenture, CFTC used a portion of the cash proceeds from the Company's initial public offering, to redeem the
12.00%
Senior Secured Notes.
In November 2017, CFTC issued
$135.0 million
aggregate principal amount of additional
12.00%
Senior Secured Notes in a private offering exempt from the registration requirements of the Securities Act (the "Additional Notes Offering"). CFTC used the proceeds from the Additional Notes Offering, together with available cash, to (i) pay a cash dividend, in an amount of
$140.0 million
to the Company, CFTC’s sole stockholder, and ultimately the Company's stockholders and (ii) pay fees, expenses, premiums and accrued interest in connection with the Additional Notes Offering. CFTC received the consent of the holders of a majority of
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
the outstanding principal amount of the current Senior Secured Notes to a one-time waiver with respect to the restrictions contained in Section 5.07(a) of the indenture governing the
12.00%
Senior Secured Notes to permit the dividend.
In February 2017, CFTC issued
$470.0 million
aggregate principal amount
12.00%
Senior Secured Notes, the proceeds of which were used together with available cash, to (i) redeem the outstanding
10.75%
Senior Secured Notes due 2018 of CURO Intermediate, (ii) redeem the outstanding
12.00%
Senior Cash Pay Notes due 2017 and (iii) pay fees, expenses, premiums and accrued interest in connection with the offering. CFTC sold the Senior Secured Notes to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”) or outside the U.S. to non-U.S. persons in compliance with Regulation S of the Securities Act.
The following condensed consolidating financing information, which has been prepared in accordance with the requirements for presentation of Rule 3-10(d) of Regulation S-X promulgated under the Securities Act, presents the condensed consolidating financial information separately for:
|
|
(i)
|
CURO as the issuer of the
8.25%
Senior Secured Notes;
|
|
|
(ii)
|
The Company's subsidiary guarantors, which are comprised of its domestic subsidiaries, including CFTC as the issuer of the
12.00%
Senior Secured Notes that were redeemed in August 2018, CURO Intermediate, and U.S. SPV as the issuer of the Non-Recourse U.S. SPV Facility that was extinguished in October 2018, and excluding Canada SPV (the “Subsidiary Guarantors”), on a consolidated basis, which are 100% owned by CURO, and which are guarantors of the
8.25%
Senior Secured Notes issued in August 2018;
|
|
|
(iii)
|
The Company's other subsidiaries on a consolidated basis, which are not guarantors of the
8.25%
Senior Secured Notes (the “Subsidiary Non-Guarantors”)
|
|
|
(iv)
|
Consolidating and eliminating entries representing adjustments to:
|
|
|
a.
|
eliminate intercompany transactions between or among us, the Subsidiary Guarantors and the Subsidiary Non-Guarantors; and
|
|
|
b.
|
eliminate the investments in subsidiaries;
|
|
|
(v)
|
The Company and its subsidiaries on a consolidated basis.
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
(dollars in thousands)
|
Subsidiary
Guarantors
|
Subsidiary
Non-Guarantors
|
Canada SPV
|
CURO
|
Eliminations
|
CURO
Consolidated
|
Assets:
|
|
|
|
|
|
|
Cash
|
$
|
68,354
|
|
$
|
23,943
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
92,297
|
|
Restricted cash
|
16,198
|
|
2,695
|
|
14,819
|
|
—
|
|
—
|
|
33,712
|
|
Loans receivable, net
|
269,298
|
|
48,297
|
|
190,121
|
|
—
|
|
—
|
|
507,716
|
|
Right of use asset - operating leases
|
79,000
|
|
61,982
|
|
—
|
|
—
|
|
—
|
|
140,982
|
|
Deferred income taxes
|
(7,848
|
)
|
—
|
|
—
|
|
10,485
|
|
—
|
|
2,637
|
|
Income taxes receivable
|
(470
|
)
|
6,395
|
|
—
|
|
31,654
|
|
—
|
|
37,579
|
|
Prepaid expenses and other
|
23,038
|
|
7,203
|
|
—
|
|
—
|
|
—
|
|
30,241
|
|
Property and equipment, net
|
44,209
|
|
28,784
|
|
—
|
|
—
|
|
—
|
|
72,993
|
|
Goodwill
|
91,131
|
|
29,319
|
|
—
|
|
—
|
|
—
|
|
120,450
|
|
Other intangibles, net
|
8,420
|
|
22,237
|
|
—
|
|
—
|
|
—
|
|
30,657
|
|
Intercompany receivable
|
107,251
|
|
—
|
|
—
|
|
—
|
|
(107,251
|
)
|
—
|
|
Investment in subsidiaries
|
—
|
|
—
|
|
—
|
|
(1,515
|
)
|
1,515
|
|
—
|
|
Other
|
15,401
|
|
690
|
|
—
|
|
—
|
|
—
|
|
16,091
|
|
Total assets
|
$
|
713,982
|
|
$
|
231,545
|
|
$
|
204,940
|
|
$
|
40,624
|
|
$
|
(105,736
|
)
|
$
|
1,085,355
|
|
Liabilities and Stockholders' equity:
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
44,667
|
|
$
|
(1,166
|
)
|
$
|
15,020
|
|
$
|
753
|
|
$
|
—
|
|
$
|
59,274
|
|
Deferred revenue
|
5,237
|
|
3,430
|
|
45
|
|
—
|
|
—
|
|
8,712
|
|
Lease liability - operating leases
|
86,685
|
|
62,158
|
|
—
|
|
—
|
|
—
|
|
148,843
|
|
Income taxes payable
|
(18,731
|
)
|
—
|
|
—
|
|
18,731
|
|
—
|
|
—
|
|
Accrued interest
|
2
|
|
—
|
|
713
|
|
18,975
|
|
—
|
|
19,690
|
|
Payable to CURO Holdings Corp.
|
736,920
|
|
—
|
|
—
|
|
(736,920
|
)
|
—
|
|
—
|
|
CSO liability for losses
|
9,504
|
|
—
|
|
—
|
|
—
|
|
—
|
|
9,504
|
|
Long-term debt
|
—
|
|
—
|
|
90,976
|
|
677,536
|
|
—
|
|
768,512
|
|
Intercompany payable
|
—
|
|
20,002
|
|
87,249
|
|
—
|
|
(107,251
|
)
|
—
|
|
Other liabilities
|
7,999
|
|
595
|
|
—
|
|
—
|
|
—
|
|
8,594
|
|
Deferred tax liabilities
|
(4,171
|
)
|
4,848
|
|
—
|
|
4,171
|
|
—
|
|
4,848
|
|
Total liabilities
|
868,112
|
|
89,867
|
|
194,003
|
|
(16,754
|
)
|
(107,251
|
)
|
1,027,977
|
|
Stockholder’s equity
|
(154,130
|
)
|
141,678
|
|
10,937
|
|
57,378
|
|
1,515
|
|
57,378
|
|
Total liabilities and stockholder’s equity
|
$
|
713,982
|
|
$
|
231,545
|
|
$
|
204,940
|
|
$
|
40,624
|
|
$
|
(105,736
|
)
|
$
|
1,085,355
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(dollars in thousands)
|
Subsidiary
Guarantors
|
Subsidiary
Non-Guarantors
|
Canada SPV
|
CURO
|
Eliminations
|
CURO
Consolidated
|
Assets:
|
|
|
|
|
|
|
Cash
|
$
|
42,403
|
|
$
|
18,772
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
61,175
|
|
Restricted cash
|
9,993
|
|
2,606
|
|
12,840
|
|
—
|
|
—
|
|
25,439
|
|
Loans receivable, net
|
304,542
|
|
56,805
|
|
136,187
|
|
—
|
|
—
|
|
497,534
|
|
Deferred income taxes
|
—
|
|
1,534
|
|
—
|
|
—
|
|
—
|
|
1,534
|
|
Income taxes receivable
|
7,190
|
|
—
|
|
—
|
|
9,551
|
|
—
|
|
16,741
|
|
Prepaid expenses and other
|
37,866
|
|
5,722
|
|
—
|
|
—
|
|
—
|
|
43,588
|
|
Property and equipment, net
|
47,918
|
|
28,832
|
|
—
|
|
—
|
|
—
|
|
76,750
|
|
Goodwill
|
91,131
|
|
28,150
|
|
—
|
|
—
|
|
—
|
|
119,281
|
|
Other intangibles, net
|
8,418
|
|
21,366
|
|
—
|
|
—
|
|
—
|
|
29,784
|
|
Intercompany receivable
|
77,009
|
|
—
|
|
—
|
|
—
|
|
(77,009
|
)
|
—
|
|
Investment in subsidiaries
|
—
|
|
—
|
|
—
|
|
(101,665
|
)
|
101,665
|
|
—
|
|
Other
|
12,253
|
|
677
|
|
—
|
|
—
|
|
—
|
|
12,930
|
|
Assets from discontinued operations
|
—
|
|
2,406
|
|
—
|
|
—
|
|
32,455
|
|
34,861
|
|
Total assets
|
$
|
638,723
|
|
$
|
166,870
|
|
$
|
149,027
|
|
$
|
(92,114
|
)
|
$
|
57,111
|
|
$
|
919,617
|
|
Liabilities and Stockholder's equity:
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
38,240
|
|
$
|
5,734
|
|
$
|
4,980
|
|
$
|
192
|
|
$
|
—
|
|
$
|
49,146
|
|
Deferred revenue
|
5,981
|
|
3,462
|
|
40
|
|
—
|
|
—
|
|
9,483
|
|
Income taxes payable
|
—
|
|
1,579
|
|
—
|
|
—
|
|
—
|
|
1,579
|
|
Accrued interest
|
149
|
|
—
|
|
831
|
|
19,924
|
|
—
|
|
20,904
|
|
Payable to CURO Holdings Corp.
|
768,345
|
|
—
|
|
—
|
|
(768,345
|
)
|
—
|
|
—
|
|
CSO liability for losses
|
12,007
|
|
—
|
|
—
|
|
—
|
|
—
|
|
12,007
|
|
Deferred rent
|
9,559
|
|
1,292
|
|
—
|
|
—
|
|
—
|
|
10,851
|
|
Long-term debt
|
20,000
|
|
—
|
|
107,479
|
|
676,661
|
|
—
|
|
804,140
|
|
Subordinated shareholder debt
|
—
|
|
2,196
|
|
—
|
|
—
|
|
—
|
|
2,196
|
|
Intercompany payable
|
—
|
|
224
|
|
44,330
|
|
—
|
|
(44,554
|
)
|
—
|
|
Other liabilities
|
4,967
|
|
833
|
|
—
|
|
—
|
|
—
|
|
5,800
|
|
Deferred tax liabilities
|
15,175
|
|
—
|
|
—
|
|
(1,445
|
)
|
—
|
|
13,730
|
|
Liabilities from discontinued operations
|
—
|
|
8,882
|
|
—
|
|
—
|
|
—
|
|
8,882
|
|
Total liabilities
|
874,423
|
|
24,202
|
|
157,660
|
|
(73,013
|
)
|
(44,554
|
)
|
938,718
|
|
Stockholder’s equity
|
(235,700
|
)
|
142,668
|
|
(8,633
|
)
|
(19,101
|
)
|
101,665
|
|
(19,101
|
)
|
Total liabilities and stockholder’s equity
|
$
|
638,723
|
|
$
|
166,870
|
|
$
|
149,027
|
|
$
|
(92,114
|
)
|
$
|
57,111
|
|
$
|
919,617
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Condensed Consolidating Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
(dollars in thousands)
|
Subsidiary
Guarantors
|
Subsidiary
Non-Guarantors
|
Canada SPV
|
CURO
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
210,046
|
|
$
|
28,162
|
|
$
|
26,092
|
|
$
|
—
|
|
$
|
—
|
|
$
|
264,300
|
|
Provision for losses
|
92,552
|
|
6,344
|
|
13,114
|
|
—
|
|
—
|
|
112,010
|
|
Net revenue
|
117,494
|
|
21,818
|
|
12,978
|
|
—
|
|
—
|
|
152,290
|
|
Cost of providing services:
|
|
|
|
|
|
|
|
Salaries and benefits
|
17,422
|
|
8,664
|
|
—
|
|
—
|
|
—
|
|
26,086
|
|
Occupancy
|
8,033
|
|
5,899
|
|
—
|
|
—
|
|
—
|
|
13,932
|
|
Office
|
4,004
|
|
1,453
|
|
—
|
|
—
|
|
—
|
|
5,457
|
|
Other costs of providing services
|
11,789
|
|
1,065
|
|
—
|
|
—
|
|
—
|
|
12,854
|
|
Advertising
|
11,179
|
|
1,601
|
|
—
|
|
—
|
|
—
|
|
12,780
|
|
Total cost of providing services
|
52,427
|
|
18,682
|
|
—
|
|
—
|
|
—
|
|
71,109
|
|
Gross margin
|
65,067
|
|
3,136
|
|
12,978
|
|
—
|
|
—
|
|
81,181
|
|
Operating (income) expense:
|
|
|
|
|
|
|
|
Corporate, district and other expenses
|
30,766
|
|
6,422
|
|
(781
|
)
|
2,631
|
|
—
|
|
39,038
|
|
Intercompany management fee
|
(3,237
|
)
|
3,229
|
|
8
|
|
—
|
|
—
|
|
—
|
|
Interest expense
|
27
|
|
7
|
|
2,375
|
|
14,614
|
|
—
|
|
17,023
|
|
Intercompany interest (income) expense
|
(1,513
|
)
|
890
|
|
623
|
|
—
|
|
—
|
|
—
|
|
Total operating expense
|
26,043
|
|
10,548
|
|
2,225
|
|
17,245
|
|
—
|
|
56,061
|
|
Income (loss) from continuing operations before income taxes
|
39,024
|
|
(7,412
|
)
|
10,753
|
|
(17,245
|
)
|
—
|
|
25,120
|
|
Provision (benefit) for income tax expense
|
9,591
|
|
1,094
|
|
—
|
|
(3,232
|
)
|
—
|
|
7,453
|
|
Net income (loss) from continuing operations
|
29,433
|
|
(8,506
|
)
|
10,753
|
|
(14,013
|
)
|
—
|
|
17,667
|
|
Net loss on discontinued operations
|
—
|
|
(834
|
)
|
—
|
|
—
|
|
—
|
|
(834
|
)
|
Net (loss) income
|
29,433
|
|
(9,340
|
)
|
10,753
|
|
(14,013
|
)
|
—
|
|
16,833
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
CFTC
|
—
|
|
—
|
|
—
|
|
30,846
|
|
(30,846
|
)
|
—
|
|
Guarantor Subsidiaries
|
29,433
|
|
—
|
|
—
|
|
—
|
|
(29,433
|
)
|
—
|
|
Non-Guarantor Subsidiaries
|
(9,340
|
)
|
—
|
|
—
|
|
—
|
|
9,340
|
|
—
|
|
SPV Subs
|
10,753
|
|
—
|
|
—
|
|
—
|
|
(10,753
|
)
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
60,279
|
|
$
|
(9,340
|
)
|
$
|
10,753
|
|
$
|
16,833
|
|
$
|
(61,692
|
)
|
$
|
16,833
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
(dollars in thousands)
|
CFTC
|
CURO Intermediate
|
Subsidiary Guarantors
|
Subsidiary Non-Guarantors
|
SPV Subs
|
Eliminations
|
CFTC
Consolidated
|
CURO
|
Eliminations
|
CURO Consolidated
|
Revenue
|
$
|
—
|
|
$
|
—
|
|
$
|
118,034
|
|
$
|
47,043
|
|
$
|
72,092
|
|
$
|
—
|
|
$
|
237,169
|
|
$
|
—
|
|
$
|
—
|
|
$
|
237,169
|
|
Provision for losses
|
—
|
|
—
|
|
46,320
|
|
14,360
|
|
25,667
|
|
—
|
|
86,347
|
|
—
|
|
—
|
|
86,347
|
|
Net revenue
|
—
|
|
—
|
|
71,714
|
|
32,683
|
|
46,425
|
|
—
|
|
150,822
|
|
—
|
|
—
|
|
150,822
|
|
Cost of providing services:
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
—
|
|
18,070
|
|
8,838
|
|
—
|
|
—
|
|
26,908
|
|
—
|
|
—
|
|
26,908
|
|
Occupancy
|
—
|
|
—
|
|
7,643
|
|
5,677
|
|
—
|
|
—
|
|
13,320
|
|
—
|
|
—
|
|
13,320
|
|
Office
|
—
|
|
—
|
|
4,247
|
|
1,285
|
|
—
|
|
—
|
|
5,532
|
|
—
|
|
—
|
|
5,532
|
|
Other store operating expenses
|
—
|
|
—
|
|
11,254
|
|
881
|
|
466
|
|
—
|
|
12,601
|
|
—
|
|
—
|
|
12,601
|
|
Advertising
|
—
|
|
—
|
|
12,409
|
|
2,704
|
|
—
|
|
—
|
|
15,113
|
|
—
|
|
—
|
|
15,113
|
|
Total cost of providing services
|
—
|
|
—
|
|
53,623
|
|
19,385
|
|
466
|
|
—
|
|
73,474
|
|
—
|
|
—
|
|
73,474
|
|
Gross Margin
|
—
|
|
—
|
|
18,091
|
|
13,298
|
|
45,959
|
|
—
|
|
77,348
|
|
—
|
|
—
|
|
77,348
|
|
Operating (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
Corporate, district and other expenses
|
458
|
|
18
|
|
25,383
|
|
4,759
|
|
46
|
|
—
|
|
30,664
|
|
2,316
|
|
—
|
|
32,980
|
|
Intercompany management fee
|
—
|
|
—
|
|
(6,920
|
)
|
3,281
|
|
3,639
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Interest expense
|
16,585
|
|
—
|
|
(60
|
)
|
7
|
|
3,940
|
|
—
|
|
20,472
|
|
—
|
|
—
|
|
20,472
|
|
Intercompany interest (income) expense
|
—
|
|
(904
|
)
|
(180
|
)
|
1,084
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Loss on extinguishment of debt
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Total operating expense
|
17,043
|
|
(886
|
)
|
18,223
|
|
9,131
|
|
7,625
|
|
—
|
|
51,136
|
|
2,316
|
|
—
|
|
53,452
|
|
(Loss) income from continuing operations before income taxes
|
(17,043
|
)
|
886
|
|
(132
|
)
|
4,167
|
|
38,334
|
|
—
|
|
26,212
|
|
(2,316
|
)
|
—
|
|
23,896
|
|
(Benefit) provision for income tax expense
|
(5,418
|
)
|
13,668
|
|
(4,458
|
)
|
1,962
|
|
—
|
|
—
|
|
5,754
|
|
(576
|
)
|
—
|
|
5,178
|
|
Net (loss) income from continuing operations
|
(11,625
|
)
|
(12,782
|
)
|
4,326
|
|
2,205
|
|
38,334
|
|
—
|
|
20,458
|
|
(1,740
|
)
|
—
|
|
18,718
|
|
Net loss from discontinued operations
|
—
|
|
—
|
|
—
|
|
(2,743
|
)
|
—
|
|
—
|
|
(2,743
|
)
|
—
|
|
—
|
|
(2,743
|
)
|
Net (loss) income
|
(11,625
|
)
|
(12,782
|
)
|
4,326
|
|
(538
|
)
|
38,334
|
|
—
|
|
17,715
|
|
(1,740
|
)
|
—
|
|
15,975
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
CFTC
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20,458
|
|
(20,458
|
)
|
—
|
|
CURO Intermediate
|
(12,782
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
12,782
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Guarantor Subsidiaries
|
4,326
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(4,326
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
Non-Guarantor Subsidiaries
|
2,205
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,205
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
SPV Subs
|
38,334
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(38,334
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
20,458
|
|
$
|
(12,782
|
)
|
$
|
4,326
|
|
$
|
(538
|
)
|
$
|
38,334
|
|
$
|
(32,083
|
)
|
$
|
17,715
|
|
$
|
18,718
|
|
$
|
(20,458
|
)
|
$
|
15,975
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
(dollars in thousands)
|
Subsidiary
Guarantors
|
Subsidiary
Non-Guarantors
|
Canada SPV
|
CURO
|
Eliminations
|
CURO
Consolidated
|
Revenue
|
$
|
436,165
|
|
$
|
54,936
|
|
$
|
51,138
|
|
$
|
—
|
|
$
|
—
|
|
$
|
542,239
|
|
Provision for losses
|
177,532
|
|
10,443
|
|
26,420
|
|
—
|
|
—
|
|
214,395
|
|
Net revenue
|
258,633
|
|
44,493
|
|
24,718
|
|
—
|
|
—
|
|
327,844
|
|
Cost of providing services:
|
|
|
|
|
|
|
Salaries and benefits
|
37,373
|
|
17,414
|
|
—
|
|
—
|
|
—
|
|
54,787
|
|
Occupancy
|
16,043
|
|
12,126
|
|
—
|
|
—
|
|
—
|
|
28,169
|
|
Office
|
7,893
|
|
2,677
|
|
—
|
|
—
|
|
—
|
|
10,570
|
|
Other costs of providing services
|
24,921
|
|
2,153
|
|
—
|
|
—
|
|
—
|
|
27,074
|
|
Advertising
|
17,533
|
|
3,033
|
|
—
|
|
—
|
|
—
|
|
20,566
|
|
Total cost of providing services
|
103,763
|
|
37,403
|
|
—
|
|
—
|
|
—
|
|
141,166
|
|
Gross margin
|
154,870
|
|
7,090
|
|
24,718
|
|
—
|
|
—
|
|
186,678
|
|
Operating (income) expense:
|
|
|
|
|
|
|
Corporate, district and other expenses
|
72,304
|
|
11,604
|
|
(755
|
)
|
4,973
|
|
—
|
|
88,126
|
|
Intercompany management fee
|
(6,300
|
)
|
6,284
|
|
16
|
|
—
|
|
—
|
|
—
|
|
Interest expense
|
317
|
|
79
|
|
5,265
|
|
29,052
|
|
—
|
|
34,713
|
|
Intercompany interest (income) expense
|
(2,393
|
)
|
1,770
|
|
623
|
|
—
|
|
—
|
|
—
|
|
Total operating expense
|
63,928
|
|
19,737
|
|
5,149
|
|
34,025
|
|
—
|
|
122,839
|
|
Income (loss) from continuing operations before income taxes
|
90,942
|
|
(12,647
|
)
|
19,569
|
|
(34,025
|
)
|
—
|
|
63,839
|
|
Provision (benefit) for income tax expense
|
23,610
|
|
2,129
|
|
—
|
|
(8,240
|
)
|
—
|
|
17,499
|
|
Net income (loss) from continuing operations
|
67,332
|
|
(14,776
|
)
|
19,569
|
|
(25,785
|
)
|
—
|
|
46,340
|
|
Net loss on discontinued operations
|
—
|
|
7,541
|
|
—
|
|
—
|
|
—
|
|
7,541
|
|
Net (loss) income
|
67,332
|
|
(7,235
|
)
|
19,569
|
|
(25,785
|
)
|
—
|
|
53,881
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
CFTC
|
—
|
|
—
|
|
—
|
|
79,666
|
|
(79,666
|
)
|
—
|
|
Guarantor Subsidiaries
|
67,332
|
|
—
|
|
—
|
|
—
|
|
(67,332
|
)
|
—
|
|
Non-Guarantor Subsidiaries
|
(7,235
|
)
|
—
|
|
—
|
|
—
|
|
7,235
|
|
—
|
|
SPV Subs
|
19,569
|
|
—
|
|
—
|
|
—
|
|
(19,569
|
)
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
146,998
|
|
$
|
(7,235
|
)
|
$
|
19,569
|
|
$
|
53,881
|
|
$
|
(159,332
|
)
|
$
|
53,881
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
(dollars in thousands)
|
CFTC
|
CURO Intermediate
|
Subsidiary Guarantors
|
Subsidiary Non-Guarantors
|
SPV Subs
|
Eliminations
|
CFTC
Consolidated
|
CURO
|
Eliminations
|
CURO Consolidated
|
Revenue
|
$
|
—
|
|
$
|
—
|
|
$
|
246,442
|
|
$
|
93,293
|
|
$
|
148,277
|
|
$
|
—
|
|
$
|
488,012
|
|
$
|
—
|
|
$
|
—
|
|
$
|
488,012
|
|
Provision for losses
|
—
|
|
—
|
|
82,089
|
|
26,910
|
|
54,231
|
|
—
|
|
163,230
|
|
—
|
|
—
|
|
163,230
|
|
Net revenue
|
—
|
|
—
|
|
164,353
|
|
66,383
|
|
94,046
|
|
—
|
|
324,782
|
|
—
|
|
—
|
|
324,782
|
|
Cost of providing services:
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
—
|
|
36,089
|
|
17,737
|
|
—
|
|
—
|
|
53,826
|
|
—
|
|
—
|
|
53,826
|
|
Occupancy
|
—
|
|
—
|
|
15,289
|
|
11,458
|
|
—
|
|
—
|
|
26,747
|
|
—
|
|
—
|
|
26,747
|
|
Office
|
—
|
|
—
|
|
9,830
|
|
2,155
|
|
—
|
|
—
|
|
11,985
|
|
—
|
|
—
|
|
11,985
|
|
Other store operating expenses
|
—
|
|
—
|
|
23,284
|
|
1,801
|
|
947
|
|
—
|
|
26,032
|
|
—
|
|
—
|
|
26,032
|
|
Advertising
|
—
|
|
—
|
|
17,568
|
|
5,430
|
|
—
|
|
—
|
|
22,998
|
|
—
|
|
—
|
|
22,998
|
|
Total cost of providing services
|
—
|
|
—
|
|
102,060
|
|
38,581
|
|
947
|
|
—
|
|
141,588
|
|
—
|
|
—
|
|
141,588
|
|
Gross Margin
|
—
|
|
—
|
|
62,293
|
|
27,802
|
|
93,099
|
|
—
|
|
183,194
|
|
—
|
|
—
|
|
183,194
|
|
Operating (income) expense:
|
|
|
|
|
|
|
|
|
|
|
Corporate, district and other expenses
|
906
|
|
25
|
|
53,375
|
|
9,656
|
|
76
|
|
—
|
|
64,038
|
|
4,371
|
|
—
|
|
68,409
|
|
Intercompany management fee
|
—
|
|
—
|
|
(13,822
|
)
|
6,775
|
|
7,047
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Interest expense
|
34,907
|
|
—
|
|
(172
|
)
|
64
|
|
8,027
|
|
—
|
|
42,826
|
|
—
|
|
—
|
|
42,826
|
|
Intercompany interest (income) expense
|
—
|
|
(1,784
|
)
|
(259
|
)
|
2,043
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Loss on extinguishment of debt
|
11,683
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,683
|
|
—
|
|
—
|
|
11,683
|
|
Total operating expense
|
47,496
|
|
(1,759
|
)
|
39,122
|
|
18,538
|
|
15,150
|
|
—
|
|
118,547
|
|
4,371
|
|
—
|
|
122,918
|
|
(Loss) income from continuing operations before income taxes
|
(47,496
|
)
|
1,759
|
|
23,171
|
|
9,264
|
|
77,949
|
|
—
|
|
64,647
|
|
(4,371
|
)
|
—
|
|
60,276
|
|
(Benefit) provision for income tax expense
|
(12,259
|
)
|
32,165
|
|
(6,043
|
)
|
3,891
|
|
—
|
|
—
|
|
17,754
|
|
(1,109
|
)
|
—
|
|
16,645
|
|
Net (loss) income from continuing operations
|
(35,237
|
)
|
(30,406
|
)
|
29,214
|
|
5,373
|
|
77,949
|
|
—
|
|
46,893
|
|
(3,262
|
)
|
—
|
|
43,631
|
|
Net loss from discontinued operations
|
—
|
|
—
|
|
—
|
|
(4,364
|
)
|
—
|
|
—
|
|
(4,364
|
)
|
—
|
|
—
|
|
(4,364
|
)
|
Net (loss) income
|
(35,237
|
)
|
(30,406
|
)
|
29,214
|
|
1,009
|
|
77,949
|
|
—
|
|
42,529
|
|
(3,262
|
)
|
—
|
|
39,267
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
CFTC
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
42,529
|
|
(42,529
|
)
|
—
|
|
CURO Intermediate
|
(30,406
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
30,406
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Guarantor Subsidiaries
|
29,214
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(29,214
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
Non-Guarantor Subsidiaries
|
1,009
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,009
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
SPV Subs
|
77,949
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(77,949
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
Net income (loss) attributable to CURO
|
$
|
42,529
|
|
$
|
(30,406
|
)
|
$
|
29,214
|
|
$
|
1,009
|
|
$
|
77,949
|
|
$
|
(77,766
|
)
|
$
|
42,529
|
|
$
|
39,267
|
|
$
|
(42,529
|
)
|
$
|
39,267
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
(dollars in thousands)
|
Subsidiary Guarantors
|
Subsidiary
Non-Guarantors
|
Canada SPV
|
CURO
|
Eliminations
|
CURO Consolidated
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operating activities
|
$
|
204,323
|
|
$
|
10,929
|
|
$
|
93,690
|
|
$
|
1,833
|
|
$
|
1,544
|
|
$
|
312,319
|
|
Net cash used in discontinued operating activities
|
—
|
|
(504
|
)
|
—
|
|
—
|
|
—
|
|
(504
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, equipment and software
|
(4,998
|
)
|
(1,166
|
)
|
—
|
|
—
|
|
—
|
|
(6,164
|
)
|
Investment in Cognical Holdings
|
(4,368
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(4,368
|
)
|
Originations of loans, net
|
(142,871
|
)
|
(3,227
|
)
|
(71,101
|
)
|
—
|
|
—
|
|
(217,199
|
)
|
Net cash (used in) provided by continuing investing activities
|
(152,237
|
)
|
(4,393
|
)
|
(71,101
|
)
|
—
|
|
—
|
|
(227,731
|
)
|
Net cash used in discontinued investing activities
|
—
|
|
(14,213
|
)
|
—
|
|
—
|
|
—
|
|
(14,213
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Non-Recourse U.S. SPV facility
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Payments on Non-Recourse U.S. SPV facility
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Proceeds from Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
3,750
|
|
—
|
|
—
|
|
3,750
|
|
Payments on Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
(24,752
|
)
|
—
|
|
—
|
|
(24,752
|
)
|
Proceeds from revolving credit facilities
|
30,000
|
|
38,002
|
|
—
|
|
—
|
|
—
|
|
68,002
|
|
Payments on revolving credit facilities
|
(50,000
|
)
|
(38,002
|
)
|
—
|
|
—
|
|
—
|
|
(88,002
|
)
|
Payments on subordinated stockholder debt
|
—
|
|
(2,245
|
)
|
—
|
|
—
|
|
—
|
|
(2,245
|
)
|
Proceeds from exercise of stock options
|
69
|
|
—
|
|
—
|
|
(42
|
)
|
—
|
|
27
|
|
Debt issuance costs paid
|
—
|
|
—
|
|
(169
|
)
|
(29
|
)
|
—
|
|
(198
|
)
|
Repurchase of common stock
|
—
|
|
—
|
|
—
|
|
(1,762
|
)
|
—
|
|
(1,762
|
)
|
Net cash used in provided by financing activities
(1)
|
(19,931
|
)
|
(2,245
|
)
|
(21,171
|
)
|
(1,833
|
)
|
—
|
|
(45,180
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and restricted cash
|
—
|
|
2,444
|
|
561
|
|
—
|
|
(1,544
|
)
|
1,461
|
|
Net increase (decrease) in cash and restricted cash
|
32,155
|
|
(7,982
|
)
|
1,979
|
|
—
|
|
—
|
|
26,152
|
|
Cash and restricted cash at beginning of period
|
52,397
|
|
34,620
|
|
12,840
|
|
—
|
|
—
|
|
99,857
|
|
Cash at end of period
|
$
|
84,552
|
|
$
|
26,638
|
|
$
|
14,819
|
|
$
|
—
|
|
$
|
—
|
|
$
|
126,009
|
|
(1) Financing activities include continuing operations only and were not impacted by discontinued operations
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
|
(dollars in thousands)
|
CFTC
|
CURO Intermediate
|
Subsidiary Guarantors
|
Subsidiary
Non-Guarantors
|
SPV Subs
|
Eliminations
|
CFTC
Consolidated
|
CURO
|
CURO
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) in continuing operating activities
|
$
|
87,848
|
|
$
|
—
|
|
$
|
38,259
|
|
$
|
53,104
|
|
$
|
67,767
|
|
$
|
12,305
|
|
$
|
259,283
|
|
$
|
(12,550
|
)
|
$
|
246,733
|
|
Net cash provided by (used in) discontinued operating activities
|
—
|
|
—
|
|
—
|
|
14,225
|
|
—
|
|
(8,767
|
)
|
5,458
|
|
—
|
|
5,458
|
|
Net cash provided by (used in) operating activities
|
87,848
|
|
—
|
|
38,259
|
|
67,329
|
|
67,767
|
|
3,538
|
|
264,741
|
|
(12,550
|
)
|
252,191
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property, equipment and software
|
—
|
|
—
|
|
(1,983
|
)
|
(974
|
)
|
—
|
|
—
|
|
(2,957
|
)
|
—
|
|
(2,957
|
)
|
Originations of loans, net
|
—
|
|
—
|
|
(84,640
|
)
|
(48,795
|
)
|
(61,201
|
)
|
—
|
|
(194,636
|
)
|
—
|
|
(194,636
|
)
|
Investment in Cognical Holdings
|
(958
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(958
|
)
|
—
|
|
(958
|
)
|
Net cash (used in) provided by continuing investing activities
|
(958
|
)
|
—
|
|
(86,623
|
)
|
(49,769
|
)
|
(61,201
|
)
|
—
|
|
(198,551
|
)
|
—
|
|
(198,551
|
)
|
Net cash provided by (used in) discontinued investing activities
|
—
|
|
—
|
|
—
|
|
(14,349
|
)
|
—
|
|
—
|
|
(14,349
|
)
|
—
|
|
(14,349
|
)
|
Net cash provided by (used in) investing activities
|
(958
|
)
|
—
|
|
(86,623
|
)
|
(64,118
|
)
|
(61,201
|
)
|
—
|
|
(212,900
|
)
|
—
|
|
(212,900
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from Non-Recourse U.S. SPV facility
|
—
|
|
—
|
|
—
|
|
—
|
|
13,000
|
|
—
|
|
13,000
|
|
—
|
|
13,000
|
|
Payments on Non-Recourse U.S. SPV facility
|
—
|
|
—
|
|
—
|
|
—
|
|
(19,163
|
)
|
—
|
|
(19,163
|
)
|
—
|
|
(19,163
|
)
|
Proceeds from revolving credit facilities
|
10,000
|
|
—
|
|
—
|
|
8,798
|
|
—
|
|
—
|
|
18,798
|
|
—
|
|
18,798
|
|
Payments on revolving credit facilities
|
(10,000
|
)
|
—
|
|
—
|
|
(8,798
|
)
|
—
|
|
—
|
|
(18,798
|
)
|
—
|
|
(18,798
|
)
|
Net proceeds from issuance of common stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
12,431
|
|
12,431
|
|
Proceeds from exercise of stock options
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
39
|
|
39
|
|
Payments on 12.00% Senior Secured Notes
|
(77,500
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(77,500
|
)
|
—
|
|
(77,500
|
)
|
Payments of call premiums from early debt extinguishments
|
(9,300
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(9,300
|
)
|
—
|
|
(9,300
|
)
|
Debt issuance costs paid
|
(90
|
)
|
—
|
|
—
|
|
(78
|
)
|
—
|
|
—
|
|
(168
|
)
|
—
|
|
(168
|
)
|
Net cash (used in) provided by financing activities
(1)
|
(86,890
|
)
|
—
|
|
—
|
|
(78
|
)
|
(6,163
|
)
|
—
|
|
(93,131
|
)
|
12,470
|
|
(80,661
|
)
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
—
|
|
—
|
|
—
|
|
(651
|
)
|
—
|
|
(3,538
|
)
|
(4,189
|
)
|
—
|
|
(4,189
|
)
|
Net (decrease) increase in cash and restricted cash
|
—
|
|
—
|
|
(48,364
|
)
|
2,482
|
|
403
|
|
—
|
|
(45,479
|
)
|
(80
|
)
|
(45,559
|
)
|
Cash and restricted cash at beginning of period
|
—
|
|
—
|
|
119,056
|
|
48,484
|
|
6,871
|
|
—
|
|
174,411
|
|
80
|
|
174,491
|
|
Cash and restricted cash at end of period
|
—
|
|
—
|
|
70,692
|
|
50,966
|
|
7,274
|
|
—
|
|
128,932
|
|
—
|
|
128,932
|
|
Less: Cash and restricted cash at end of period of Discontinued Operations
|
—
|
|
—
|
|
—
|
|
12,460
|
|
—
|
|
—
|
|
12,460
|
|
—
|
|
12,460
|
|
Cash and restricted cash at end of period of Continuing Operations
|
$
|
—
|
|
$
|
—
|
|
$
|
70,692
|
|
$
|
38,506
|
|
$
|
7,274
|
|
$
|
—
|
|
$
|
116,472
|
|
$
|
—
|
|
$
|
116,472
|
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE 17 – SHARE REPURCHASE PROGRAM
In April 2019, the Company's Board of Directors authorized a share repurchase program providing for the repurchase of up to
$50.0 million
of its common stock. The repurchase program, which commenced June 2019, will continue until completed or terminated. CURO expects the purchases to be made from time-to-time in the open market, in privately negotiated transactions or both, at the Company's discretion and subject to market conditions and other factors. Any repurchased shares will be available for use in connection with equity plans or other corporate purposes.
Under this program, the Company has repurchased
244,200
shares of common stock through
June 30, 2019
. The table below summarizes share repurchase activity during the three and six months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
(in thousands, except per share amounts and number of share amounts)
|
|
2019
|
Total number of shares repurchased
|
|
244,200
|
|
Average price paid per share
|
|
$
|
10.26
|
|
Total value of shares repurchased
|
|
$
|
2,507
|
|
|
|
|
Total authorized repurchase amount
|
|
$
|
50,000
|
|
Total value of shares repurchased
|
|
2,507
|
|
Total remaining authorized repurchase amount
|
|
$
|
47,493
|
|
NOTE 18 – SUBSEQUENT EVENTS
Cognical Investment
Share Repurchase Program
The Company repurchased
989,500
shares from July 1, 2019 through August 2, 2019:
|
|
|
|
|
|
|
|
July 1 - August 2
|
(in thousands, except per share amounts and number of share amounts)
|
|
2019
|
Total number of shares repurchased
|
|
989,500
|
|
Average price paid per share
|
|
$
|
10.85
|
|
Total value of shares repurchased
|
|
$
|
10,731
|
|