CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2019
|
|
2018
|
|
Cash flows from operating activities
|
|
|
|
|
Net income from continuing operations
|
$
|
28,673
|
|
|
$
|
24,913
|
|
|
Adjustments to reconcile net income to net cash provided by continuing operating activities:
|
|
|
|
|
Depreciation and amortization
|
4,920
|
|
|
4,535
|
|
|
Provision for loan losses
|
102,385
|
|
|
76,883
|
|
|
Amortization of debt issuance costs and bond (premium)/discount
|
872
|
|
|
1,129
|
|
|
Deferred income tax benefit
|
(10,343
|
)
|
|
(1,094
|
)
|
|
Loss on disposal of property and equipment
|
991
|
|
|
478
|
|
|
Loss on extinguishment of debt
|
—
|
|
|
11,683
|
|
|
Increase in cash surrender value of life insurance
|
(723
|
)
|
|
(1,482
|
)
|
|
Share-based compensation expense
|
2,172
|
|
|
1,842
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Fees and service charges on loans receivable
|
1,937
|
|
|
5,093
|
|
|
Prepaid expenses and other assets
|
9,938
|
|
|
9,820
|
|
|
Other assets
|
(5,651
|
)
|
|
(39
|
)
|
|
Accounts payable and accrued liabilities
|
2,326
|
|
|
(3,172
|
)
|
|
Deferred revenue
|
(1,709
|
)
|
|
(1,709
|
)
|
|
Income taxes payable
|
29,562
|
|
|
19,629
|
|
|
Income taxes receivable
|
(9,890
|
)
|
|
(7,411
|
)
|
|
Deferred rent
|
—
|
|
|
280
|
|
|
Accrued Interest
|
(15,329
|
)
|
|
(19,084
|
)
|
|
Other liabilities
|
868
|
|
|
449
|
|
|
Net cash provided by continuing operating activities
|
140,999
|
|
|
122,743
|
|
|
Net cash (used in) provided by discontinued operating activities
|
(504
|
)
|
|
1,411
|
|
|
Net cash provided by operating activities
|
140,495
|
|
|
124,154
|
|
|
Cash flows from investing activities
|
|
|
|
|
Purchase of property, equipment and software
|
(3,119
|
)
|
|
(1,542
|
)
|
|
Loans receivable originated or acquired
|
(420,568
|
)
|
|
(500,501
|
)
|
|
Loans receivable repaid
|
355,621
|
|
|
444,148
|
|
|
Investments in Cognical Holdings
|
(1,568
|
)
|
|
(958
|
)
|
|
Net cash used in continuing investing activities
|
(69,634
|
)
|
|
(58,853
|
)
|
|
Net cash used in discontinued investing activities
|
(14,213
|
)
|
|
(3,782
|
)
|
|
Net cash used in investing activities
|
(83,847
|
)
|
|
(62,635
|
)
|
|
Cash flows from financing activities
|
|
|
|
|
Net proceeds from issuance of common stock
|
—
|
|
|
13,135
|
|
|
Proceeds from Non-Recourse U.S. SPV facility
|
—
|
|
|
3,000
|
|
|
Payments on Non-Recourse U.S. SPV facility
|
—
|
|
|
(12,519
|
)
|
|
Proceeds from Non-Recourse Canada SPV facility
|
3,762
|
|
|
—
|
|
|
Payments on Non-Recourse Canada SPV facility
|
(24,831
|
)
|
|
—
|
|
|
Payments on 12.00% Senior Secured Notes
|
—
|
|
|
(77,500
|
)
|
|
Debt issuance costs paid
|
(199
|
)
|
|
(71
|
)
|
|
Proceeds from credit facilities
|
30,478
|
|
|
10,000
|
|
|
Payments on credit facilities
|
(50,478
|
)
|
|
(10,000
|
)
|
|
Proceeds from exercise of stock options
|
40
|
|
|
—
|
|
|
Payments to net share settle restricted stock units vesting
|
(37
|
)
|
|
—
|
|
|
Net cash used in financing activities
(1)
|
(41,265
|
)
|
|
(83,255
|
)
|
|
Effect of exchange rate changes on cash and restricted cash
|
1,938
|
|
|
(4,360
|
)
|
|
Net increase (decrease) in cash and restricted cash
|
17,321
|
|
|
(26,096
|
)
|
|
Cash and restricted cash at beginning of period
|
99,857
|
|
|
174,491
|
|
|
Cash and restricted cash at end of period
|
$
|
117,178
|
|
|
$
|
148,395
|
|
|
(1) Financing activities include continuing operations only and were not impacted by discontinued operations
|
|
|
|
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF OPERATIONS
Basis of Presentation
The terms “CURO" and the “Company” refer to CURO Group Holdings Corp. and its directly and indirectly owned subsidiaries as a combined entity, except where otherwise stated. The term "CFTC" refers to CURO Financial Technologies Corp., a wholly-owned subsidiary, and its directly and indirectly owned subsidiaries as a consolidated entity, except where otherwise stated.
The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and with the accounting policies described in its Annual Report on Form 10-K for the year ended
December 31, 2018
("2018 Form 10-K"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted, although the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented.
The unaudited Condensed Consolidated Financial Statements and the accompanying notes reflect all adjustments, which are, in the opinion of management, necessary to present fairly the Company's results of operations, financial position and cash flows for the periods presented. On February 25, 2019, the Company's U.K. segment was placed into administration, which resulted in treatment of the segment as discontinued operations for all periods presented. Throughout this Quarterly Report on Form 10-Q ("Form 10-Q"), current and prior period financial information is presented as if the U.K. segment was excluded from continuing operations. For further information about the placement of the segment into administration, refer to "--Nature of Operations" below.
The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related Notes included in the
2018
Form 10-K. Interim results of operations are not necessarily indicative of results that may be expected for future interim periods or for the year ending
December 31, 2019
.
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of CURO and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of Condensed Consolidated Financial Statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the periods reported. Some of the significant estimates that the Company made in the accompanying Condensed Consolidated Financial Statements include allowances for loan losses, certain assumptions related to goodwill and intangibles, accruals related to self-insurance, credit services organization ("CSO") liability for losses and estimated tax liabilities. Actual results may differ from those estimates.
Nature of Operations
CURO is a growth-oriented, technology-enabled, highly-diversified consumer finance company serving a wide range of underbanked consumers in the United States ("U.S."), Canada, and, through February 25, 2019, the United Kingdom ("U.K.").
U.K. Segment Placed into Administration
On February 25, 2019, the Company announced that a proposed Scheme of Arrangement ("SOA"), as described in the Company's Current Report on Form 8-K filed January 31, 2019, would not be implemented. In accordance with the provisions of the U.K. Insolvency Act 1986 and as approved by the boards of directors of the Company’s U.K. subsidiaries, Curo Transatlantic Limited and SRC Transatlantic Limited (collectively, “the U.K. Subsidiaries”), insolvency practitioners from KPMG were appointed as administrators (“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 under the direct control of the Administrators. Accordingly, the Company deconsolidated the U.K. Subsidiaries as of February 25, 2019 and presented the U.K. Subsidiaries as Discontinued Operations for all periods presented in this Form 10-Q.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Open-End Loss Recognition
Effective January 1, 2019, the Company modified the timeframe for which it charges-off Open-End loans and made related refinements to its loss provisioning methodology. Prior to January 1, 2019, the Company deemed Open-End loans uncollectible and charged-off when a customer missed a scheduled payment, at which point the loan was considered past-due. Because of the continuing shift to Open-End loans in Canada and analysis of payment patterns on early-stage versus late-stage delinquencies, the Company revised its estimates and now consider Open-End loans uncollectible when the loan has been contractually past-due for 90 consecutive days. Consequently, past-due Open-End loans and related accrued interest now remain in loans receivable for 90 days before being charged-off against the allowance for loan losses. All recoveries on charged-off loans are credited to the allowance for loan losses when received. The Company evaluates the adequacy of the allowance for loan losses compared to the related gross loans receivable balances that include accrued interest.
The aforementioned change was treated as a change in accounting estimate and applied prospectively effective January 1, 2019.
The change affects comparability to prior periods as follows:
|
|
|
|
•
|
Gross combined loans receivable:
balances as of March 31, 2019 include
$32.4 million
of Open-End loans that are up to 90 days past-due with related accrued interest, while such balances for prior periods do not include any past-due loans.
|
|
|
|
|
•
|
Revenues:
for the quarter ended March 31, 2019, revenues include accrued interest on past-due loan balances of
$8.9 million
, while revenues in prior periods do not include comparable amounts.
|
|
|
|
|
•
|
Provision for Losses
: effective January 1, 2019, past-due, unpaid balances plus related accrued interest charge off on day 91. Provision expense is affected by total charge-offs less total recoveries ("NCOs") plus changes to the required allowance for loan losses. Because NCOs now include unpaid principal and up to 90 days of related accrued interest, as compared to prior periods, NCO amounts and rates are higher and the required Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable is higher. The Open-End Allowance for loan losses as a percentage of Open-End gross loans receivable rose from
9.6%
as of December 31, 2018, to
19.5%
as of March 31, 2019.
|
Correction of an Immaterial Error in Previously-Issued Financial Statements
During the year ended December 31, 2018, the Company corrected immaterial errors to its prior presentation of cash flows for loan originations and collections on principal. The Company determined that the historical presentation was in error by not conforming to US GAAP because it included outflows for loan originations and receipts on collections in Cash provided by operating activities rather than in Cash used in investing activities. Accordingly the Company corrected previously-filed financial statements by reclassifying cash outflows for loan originations and receipts on collections of principal of
$56.4 million
from net Cash provided by operating activities to net Cash used in investing activities for the three months ended March 31, 2018. Total cash flows for each period presented did not change. The Company concluded that the errors were immaterial to the unaudited Condensed Consolidated Financial Statements included in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2018. The Company has revised its Condensed Consolidated Financial Statements for the three months ended March 31, 2018 presented in this Form 10-Q. A summary of the correction follows:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Three Months Ended March 31, 2018
|
|
As Reported:
(1)
|
|
|
|
Net cash provided by continuing operating activities
|
|
$
|
66,390
|
|
|
Net cash used in continuing investing activities
|
|
(2,500
|
)
|
|
|
|
|
|
As Corrected:
|
|
|
|
Net cash provided by continuing operating activities
|
|
122,743
|
|
|
Net cash used in continuing investing activities
|
|
(58,853
|
)
|
|
(1) "As reported" balances include amounts from continuing operations historically presented within these captions.
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Recently Adopted Accounting Pronouncements
ASU 2016-02
In February 2016, the Financial Accounting Standards Board ("FASB") established 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.
Adoption of the new standard resulted in the recording of right of use assets ("ROU assets") and additional operating lease liabilities ("lease liabilities") of
$135.4 million
and
$143.4 million
, respectively, as of March 31, 2019. 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.
SEC Disclosure Update
In the third quarter of 2018, the U.S. Securities and Exchange Commission ("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 months ended
March 31, 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 on the Non-Recourse Canada SPV facility, whereby certain loan receivables were sold to wholly-owned, bankruptcy-remote special purposes subsidiaries ("VIEs") to collateralize debt incurred under the facility.
As the Company is the primary beneficiary of the VIEs, the Company 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 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)
|
March 31, 2019
|
|
December 31, 2018
|
|
Assets
|
|
|
|
|
Restricted cash
|
$
|
15,460
|
|
|
$
|
12,840
|
|
|
Gross loans receivable less allowance for loan losses
|
157,867
|
|
|
136,187
|
|
|
Total Assets
|
$
|
173,327
|
|
|
$
|
149,027
|
|
|
Liabilities
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
9,717
|
|
|
$
|
4,980
|
|
|
Deferred revenue
|
44
|
|
|
40
|
|
|
Accrued interest
|
848
|
|
|
831
|
|
|
Long-term debt
|
88,915
|
|
|
107,479
|
|
|
Total Liabilities
|
$
|
99,524
|
|
|
$
|
113,330
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE 3 – LOANS RECEIVABLE AND REVENUE
The following table summarizes revenue by product for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(in thousands)
|
2019
|
2018
|
|
Unsecured Installment
|
$
|
135,778
|
|
$
|
125,379
|
|
|
Secured Installment
|
27,477
|
|
26,856
|
|
|
Open-End
|
52,869
|
|
27,223
|
|
|
Single-Pay
|
46,761
|
|
60,357
|
|
|
Ancillary
|
15,054
|
|
11,028
|
|
|
Total revenue
|
$
|
277,939
|
|
$
|
250,843
|
|
The following tables summarize Loans receivable by product and the related delinquent loans receivable at March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
(in thousands)
|
|
Single-Pay
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Total
|
|
Current loans receivable
|
|
$
|
69,753
|
|
$
|
120,915
|
|
$
|
67,375
|
|
$
|
208,346
|
|
$
|
466,389
|
|
|
Delinquent loans receivable
|
|
—
|
|
40,801
|
|
13,581
|
|
32,444
|
|
86,826
|
|
|
Total loans receivable
|
|
69,753
|
|
161,716
|
|
80,956
|
|
240,790
|
|
553,215
|
|
|
Less: allowance for losses
|
|
(3,897
|
)
|
(33,666
|
)
|
(9,796
|
)
|
(46,963
|
)
|
(94,322
|
)
|
|
Loans receivable, net
|
|
$
|
65,856
|
|
$
|
128,050
|
|
$
|
71,160
|
|
$
|
193,827
|
|
$
|
458,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
(in thousands)
|
|
Unsecured Installment
|
Secured Installment
|
Open-End
|
Total
|
|
Delinquent loans receivable
|
|
|
|
|
|
|
0-30 days past due
|
|
$
|
13,455
|
|
$
|
6,001
|
|
$
|
12,423
|
|
$
|
31,879
|
|
|
31-60 days past due
|
|
11,757
|
|
3,555
|
|
9,432
|
|
24,744
|
|
|
61-90 days past due
|
|
15,589
|
|
4,025
|
|
10,589
|
|
30,203
|
|
|
Total delinquent loans receivable
|
|
$
|
40,801
|
|
$
|
13,581
|
|
$
|
32,444
|
|
$
|
86,826
|
|
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
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
(in thousands)
|
|
Unsecured Installment
|
Secured Installment
|
Total
|
|
Current loans receivable guaranteed by the Company
|
|
$
|
51,773
|
|
$
|
1,847
|
|
$
|
53,620
|
|
|
Delinquent loans receivable guaranteed by the Company
|
|
7,967
|
|
284
|
|
8,251
|
|
|
Total loans receivable guaranteed by the Company
|
|
59,740
|
|
2,131
|
|
61,871
|
|
|
Less: Liability for losses on CSO lender-owned consumer loans
|
|
(8,584
|
)
|
(78
|
)
|
(8,662
|
)
|
|
Loans receivable guaranteed by the Company, net
|
|
$
|
51,156
|
|
$
|
2,053
|
|
$
|
53,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
(in thousands)
|
|
Unsecured Installment
|
Secured Installment
|
Total
|
|
Delinquent loans receivable
|
|
|
|
|
|
|
0-30 days past due
|
|
$
|
6,388
|
|
$
|
228
|
|
$
|
6,616
|
|
|
31-60 days past due
|
|
926
|
|
33
|
|
959
|
|
|
61-90 days past due
|
|
653
|
|
23
|
|
676
|
|
|
Total delinquent loans receivable
|
|
$
|
7,967
|
|
$
|
284
|
|
$
|
8,251
|
|
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
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 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
|
(36,521
|
)
|
(44,237
|
)
|
(12,671
|
)
|
(3,638
|
)
|
(1,351
|
)
|
(98,418
|
)
|
|
Recoveries
|
27,911
|
|
6,318
|
|
3,123
|
|
5,159
|
|
898
|
|
43,409
|
|
|
Net charge-offs
|
(8,610
|
)
|
(37,919
|
)
|
(9,548
|
)
|
1,521
|
|
(453
|
)
|
(55,009
|
)
|
|
Provision for losses
|
8,268
|
|
33,845
|
|
7,153
|
|
25,317
|
|
453
|
|
75,036
|
|
|
Effect of foreign currency translation
|
50
|
|
24
|
|
—
|
|
224
|
|
—
|
|
298
|
|
|
Balance, end of period
|
$
|
3,897
|
|
$
|
33,666
|
|
$
|
9,796
|
|
$
|
46,963
|
|
$
|
—
|
|
$
|
94,322
|
|
|
Allowance for loan losses as a percentage of gross loan receivables
|
5.6
|
%
|
20.8
|
%
|
12.1
|
%
|
19.5
|
%
|
N/A
|
|
17.0
|
%
|
The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the three months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
|
(in thousands)
|
Unsecured Installment
|
Secured Installment
|
Total
|
|
Balance, beginning of period
|
$
|
11,582
|
|
$
|
425
|
|
$
|
12,007
|
|
|
Charge-offs
|
(40,980
|
)
|
(1,076
|
)
|
(42,056
|
)
|
|
Recoveries
|
10,560
|
|
802
|
|
11,362
|
|
|
Net charge-offs
|
(30,420
|
)
|
(274
|
)
|
(30,694
|
)
|
|
Provision for losses
|
27,422
|
|
(73
|
)
|
27,349
|
|
|
Balance, end of period
|
$
|
8,584
|
|
$
|
78
|
|
$
|
8,662
|
|
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
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 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
|
(36,521
|
)
|
(85,217
|
)
|
(13,747
|
)
|
(3,638
|
)
|
(1,351
|
)
|
(140,474
|
)
|
|
Recoveries
|
27,911
|
|
16,878
|
|
3,925
|
|
5,159
|
|
898
|
|
54,771
|
|
|
Net charge-offs
|
(8,610
|
)
|
(68,339
|
)
|
(9,822
|
)
|
1,521
|
|
(453
|
)
|
(85,703
|
)
|
|
Provision for losses
|
8,268
|
|
61,267
|
|
7,080
|
|
25,317
|
|
453
|
|
102,385
|
|
|
Effect of foreign currency translation
|
50
|
|
24
|
|
—
|
|
224
|
|
—
|
|
298
|
|
|
Balance, end of period
|
$
|
3,897
|
|
$
|
42,250
|
|
$
|
9,874
|
|
$
|
46,963
|
|
$
|
—
|
|
$
|
102,984
|
|
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 during the three months ended
March 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 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
|
(44,336
|
)
|
(35,219
|
)
|
(11,485
|
)
|
(20,349
|
)
|
(667
|
)
|
(112,056
|
)
|
|
Recoveries
|
32,818
|
|
5,218
|
|
2,866
|
|
9,377
|
|
39
|
|
50,318
|
|
|
Net charge-offs
|
(11,518
|
)
|
(30,001
|
)
|
(8,619
|
)
|
(10,972
|
)
|
(628
|
)
|
(61,738
|
)
|
|
Provision for losses
|
9,892
|
|
24,739
|
|
6,786
|
|
11,428
|
|
628
|
|
53,473
|
|
|
Effect of foreign currency translation
|
(64
|
)
|
(77
|
)
|
—
|
|
(36
|
)
|
—
|
|
(177
|
)
|
|
Balance, end of period
|
$
|
3,514
|
|
$
|
33,638
|
|
$
|
11,639
|
|
$
|
6,846
|
|
$
|
—
|
|
$
|
55,637
|
|
|
Allowance for loan losses as a percentage of gross loan receivables
|
5.7
|
%
|
25.8
|
%
|
16.6
|
%
|
15.2
|
%
|
N/A
|
|
18.1
|
%
|
The following table summarizes activity in the liability for losses on CSO lender-owned consumer loans during the three months ended
March 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
(in thousands)
|
Unsecured Installment
|
Secured Installment
|
Total
|
|
Balance, beginning of period
|
$
|
17,073
|
|
$
|
722
|
|
$
|
17,795
|
|
|
Charge-offs
|
(41,719
|
)
|
(1,219
|
)
|
(42,938
|
)
|
|
Recoveries
|
10,976
|
|
1,169
|
|
12,145
|
|
|
Net charge-offs
|
(30,743
|
)
|
(50
|
)
|
(30,793
|
)
|
|
Provision for losses
|
23,556
|
|
(146
|
)
|
23,410
|
|
|
Balance, end of period
|
$
|
9,886
|
|
$
|
526
|
|
$
|
10,412
|
|
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
March 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 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
|
(44,336
|
)
|
(76,938
|
)
|
(12,704
|
)
|
(20,349
|
)
|
(667
|
)
|
(154,994
|
)
|
|
Recoveries
|
32,818
|
|
16,194
|
|
4,035
|
|
9,377
|
|
39
|
|
62,463
|
|
|
Net charge-offs
|
(11,518
|
)
|
(60,744
|
)
|
(8,669
|
)
|
(10,972
|
)
|
(628
|
)
|
(92,531
|
)
|
|
Provision for losses
|
9,892
|
|
48,295
|
|
6,640
|
|
11,428
|
|
628
|
|
76,883
|
|
|
Effect of foreign currency translation
|
(64
|
)
|
(77
|
)
|
—
|
|
(36
|
)
|
—
|
|
(177
|
)
|
|
Balance, end of period
|
$
|
3,514
|
|
$
|
43,524
|
|
$
|
12,165
|
|
$
|
6,846
|
|
$
|
—
|
|
$
|
66,049
|
|
NOTE 4 – CREDIT SERVICES ORGANIZATION
The CSO fee receivable amounts under CSO programs were
$11.0 million
and
$14.3 million
at
March 31, 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 from 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
March 31, 2019
and
December 31, 2018
, the maximum amount payable under all such guarantees was
$51.6 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
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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
$8.7 million
and
$12.0 million
at
March 31, 2019
and
December 31, 2018
, respectively.
The Company placed
$13.5 million
and
$17.2 million
in collateral accounts for the benefit of lenders at
March 31, 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)
|
|
March 31, 2019
|
|
December 31, 2018
|
|
8.25% Senior Secured Notes (due 2025)
|
|
$
|
677,153
|
|
|
$
|
676,661
|
|
|
Non-Recourse Canada SPV Facility
|
|
88,915
|
|
|
107,479
|
|
|
Senior Revolver
|
|
—
|
|
|
20,000
|
|
|
Long-term debt
|
|
$
|
766,068
|
|
|
$
|
804,140
|
|
8.25%
Senior Secured Notes
In August 2018, the Company issued
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 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.
As of
March 31, 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 extinguishment of the
12.00%
Senior Secured Notes resulted in a pretax loss of
$69.2 million
during the year ended December 31, 2018.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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 provides 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
and now matures in 2023. As of
March 31, 2019
, the Canada SPV Borrower was in full compliance with the covenants and other provisions of the Non-Recourse Canada SPV Facility.
As of
March 31, 2019
, outstanding borrowings under the Non-Recourse Canada SPV Facility were
$88.9 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 provides for an
$80.0 million
term loan and
$70.0 million
revolving borrowing capacity that can expand over time (collectively, “Non-Recourse U.S. SPV Facility”). Borrowings under this facility bear 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 pays a
0.50%
per annum commitment fee on the unused portion of the commitments. In connection with this facility, the balance of capitalized financing costs of approximately
$5.3 million
, net of amortization, was included in the Condensed Consolidated Balance Sheet as a component of "Long-term debt" and was being 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
for the year ended December 31, 2018.
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 Senior Revolver accrues interest at the
one
-month LIBOR plus
5.00%
(subject to a
5%
overall rate 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. The revolver was undrawn at
March 31, 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
March 31, 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
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
(ii) C
$10.0 million
. As of
March 31, 2019
, the borrowing capacity under the Cash Money Revolving Credit Facility was reduced by C
$0.3 million
in 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 include, among other things, that the aggregate borrowings outstanding under the facility not exceed the borrowing base, 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
March 31, 2019
and December 31, 2018.
Subordinated Stockholder Debt
As part of the acquisition of Cash Money in 2011, the Company was provided 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 in May 2019. The balance of this note at
March 31, 2019
and December 31, 2018 was
$2.2 million
.
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.
In March 2019, the Company awarded performance-based RSUs that will vest if certain performance conditions are met by the Company. These RSUs were designed to drive the performance of the management team toward achievement of key corporate objectives and will only vest if the performance targets are met by March 14, 2022. Expense recognition for the performance awards, which was immaterial to the first quarter of 2019, commences if and when it is determined that attainment of the performance goal is probable.
RSUs that have time-based vesting are typically valued at the date of grant based on the value of the Company's common stock and are expensed using the straight-line method over the service period. RSUs that require the achievement of a performance condition to vest are typically valued using the Monte Carlo simulation pricing model. 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 performance-based RSUs as of
March 31, 2019
and changes during the
three
months ended
March 31, 2019
are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of RSUs
|
|
|
|
|
Time-Based
|
Performance-Based
|
|
Weighted Average
Grant Date Fair Value per Share
|
|
December 31, 2018
|
1,060,350
|
|
—
|
|
|
$
|
14.29
|
|
|
Granted
|
434,272
|
|
394,752
|
|
|
9.93
|
|
|
Vested
|
(17,406
|
)
|
—
|
|
|
15.94
|
|
|
Forfeited
|
(68,778
|
)
|
—
|
|
|
14.05
|
|
|
March 31, 2019
|
1,408,438
|
|
394,752
|
|
|
$
|
12.28
|
|
Share-based compensation expense during the three months ended
March 31, 2019
and
2018
, which includes compensation costs from stock options and RSUs was
$2.1 million
and
$1.8 million
, respectively, and is included in the Condensed Consolidated Statements of Operations as a component of "Corporate, district and other" expense.
As of
March 31, 2019
, there was
$20.4 million
of total unrecognized compensation cost related to stock options and RSUs, of which
$17.1 million
related to stock options and time-based RSUs and
$3.3 million
related to performance-based RSUs. Total unrecognized compensation costs will be recognized over a weighted-average period of
2.2 years
.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE 7 – INCOME TAXES
The Company's effective income tax rate from continuing operations was
25.9%
and
31.5%
for the three months ended
March 31, 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 three months ended March 31, 2018. The Company recorded an estimated GILTI tax of
$0.4 million
and
$0.6 million
during the three months ended
March 31, 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
$165.8 million
were distributed to the U.S., the Company would be subject to Canadian withholding taxes of estimated
$8.3 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.
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.
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair Value
|
|
(in thousands)
|
Carrying Value March 31,
2019
|
Level 1
|
Level 2
|
Level 3
|
March 31, 2019
|
|
Financial assets:
|
|
|
|
|
|
|
Cash
|
$
|
82,859
|
|
$
|
82,859
|
|
$
|
—
|
|
$
|
—
|
|
$
|
82,859
|
|
|
Restricted cash
|
34,319
|
|
34,319
|
|
—
|
|
—
|
|
34,319
|
|
|
Loans receivable, net
|
458,893
|
|
—
|
|
—
|
|
458,893
|
|
458,893
|
|
|
Investment in Cognical
|
6,558
|
|
—
|
|
—
|
|
6,558
|
|
6,558
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
Liability for losses on CSO lender-owned consumer loans
|
$
|
8,662
|
|
$
|
—
|
|
$
|
—
|
|
$
|
8,662
|
|
$
|
8,662
|
|
|
8.25% Senior Secured Notes
|
677,153
|
|
—
|
|
—
|
|
580,659
|
|
580,659
|
|
|
Non-Recourse Canada SPV facility
|
88,915
|
|
—
|
|
—
|
|
92,718
|
|
92,718
|
|
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
|
December 31, 2018
|
|
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.
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
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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
.
The following table summarizes the changes in stockholders' equity for the three months ended March 31, 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
|
|
|
(1)
Accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Paid-in capital
|
|
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
|
|
|
(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
March 31,
|
|
|
2019
|
|
2018
|
|
Net income from continuing operations
|
$
|
28,673
|
|
|
$
|
24,913
|
|
|
Net income (loss) from discontinued operations, net of tax
|
8,375
|
|
|
(1,621
|
)
|
|
Net income
|
$
|
37,048
|
|
|
$
|
23,292
|
|
|
|
|
|
|
|
Weighted average common shares - basic
|
46,424
|
|
|
45,506
|
|
|
Dilutive effect of stock options and restricted stock units
|
895
|
|
|
1,910
|
|
|
Weighted average common shares - diluted
|
47,319
|
|
|
47,416
|
|
|
|
|
|
|
|
Basic income (loss) per share:
|
|
|
|
|
Continuing operations
|
$
|
0.62
|
|
|
$
|
0.55
|
|
|
Discontinued operations
|
0.18
|
|
|
(0.04
|
)
|
|
Basic income per share
|
$
|
0.80
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
Diluted income (loss) per share:
|
|
|
|
|
Continuing operations
|
$
|
0.61
|
|
|
$
|
0.53
|
|
|
Discontinued operations
|
0.18
|
|
|
(0.03
|
)
|
|
Diluted income per share
|
$
|
0.79
|
|
|
$
|
0.50
|
|
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
months ended
March 31,
2019
,
there were
1.4 million
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 months ended
March 31, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(dollars in thousands)
|
2019
|
|
2018
|
|
Cash paid for:
|
|
|
|
|
Interest
|
$
|
32,195
|
|
|
$
|
40,225
|
|
|
Income taxes
|
1,456
|
|
|
4,431
|
|
|
Non-cash investing activities:
|
|
|
|
|
Property and equipment accrued in accounts payable
|
$
|
349
|
|
|
$
|
317
|
|
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
March 31,
|
|
(dollars in thousands)
|
2019
|
|
2018
|
|
Revenues by segment:
|
|
|
|
|
U.S.
|
$
|
226,119
|
|
|
$
|
204,593
|
|
|
Canada
|
51,820
|
|
|
46,250
|
|
|
Consolidated revenue
|
$
|
277,939
|
|
|
$
|
250,843
|
|
|
Gross margin by segment:
|
|
|
|
|
U.S.
|
$
|
89,803
|
|
|
$
|
91,344
|
|
|
Canada
|
15,694
|
|
|
14,502
|
|
|
Consolidated gross margin
|
$
|
105,497
|
|
|
$
|
105,846
|
|
|
Segment operating income:
|
|
|
|
|
U.S.
|
$
|
31,195
|
|
|
$
|
26,832
|
|
|
Canada
|
7,524
|
|
|
9,548
|
|
|
Consolidated operating profit
|
$
|
38,719
|
|
|
$
|
36,380
|
|
|
Expenditures for long-lived assets by segment:
|
|
|
|
|
U.S.
|
$
|
2,430
|
|
|
$
|
788
|
|
|
Canada
|
689
|
|
|
754
|
|
|
Consolidated expenditures for long-lived assets
|
$
|
3,119
|
|
|
$
|
1,542
|
|
The following table provides gross loans receivable by segment:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
U.S.
|
$
|
321,534
|
|
|
$
|
361,473
|
|
|
Canada
|
231,681
|
|
|
210,058
|
|
|
Total gross loans receivable
|
$
|
553,215
|
|
|
$
|
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)
|
March 31, 2019
|
|
December 31, 2018
|
|
U.S.
|
$
|
46,360
|
|
|
$
|
47,918
|
|
|
Canada
|
28,900
|
|
|
28,832
|
|
|
Total net long-lived assets
|
$
|
75,260
|
|
|
$
|
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. The complaint alleges that the Company and the individual defendants violated Section 10(b) of the Exchange Act and that the individual 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 July 31, 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.
Related to this securities litigation matter, 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
$8.5 million
for the period ended
March 31, 2019
. Some of the leases are with related parties and have terms similar to the non-related party leases previously described. Operating lease costs on unrelated third-party leases was
$7.6 million
and for related party leases was
$0.8 million
for the three months ended
March 31, 2019
.
During the three months ended
March 31, 2019
, cash paid for amounts included in the measurement of the liabilities and the operating cash flows was
$8.6 million
.
The following table summarizes the future minimum lease payments that the Company is contractually obligated to make under operating leases as of March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Third-Party
|
|
Related-Party
|
|
Total
|
|
2019
|
$
|
23,222
|
|
|
$
|
2,764
|
|
|
$
|
25,986
|
|
|
2020
|
30,338
|
|
|
3,773
|
|
|
34,111
|
|
|
2021
|
29,918
|
|
|
3,875
|
|
|
33,793
|
|
|
2022
|
28,906
|
|
|
3,743
|
|
|
32,649
|
|
|
2023
|
24,411
|
|
|
1,299
|
|
|
25,710
|
|
|
Thereafter
|
40,326
|
|
|
1,114
|
|
|
41,440
|
|
|
Total
|
177,121
|
|
|
16,568
|
|
|
193,689
|
|
|
Less: Imputed interest
|
(46,823
|
)
|
|
(3,429
|
)
|
|
(50,252
|
)
|
|
Operating lease liabilities
|
$
|
130,298
|
|
|
$
|
13,139
|
|
|
$
|
143,437
|
|
As of March 31, 2019, the weighted average remaining lease term was
6.1 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 are classified as Discontinued Operations for all periods presented.
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
March 31,
|
|
(in thousands)
|
2019
(1)
|
|
2018
|
|
Revenue
|
$
|
6,957
|
|
|
$
|
10,915
|
|
|
Provision for losses
|
1,703
|
|
|
4,148
|
|
|
Net revenue
|
5,254
|
|
|
6,767
|
|
|
|
|
|
|
|
Cost of providing services
|
|
|
|
|
Office
|
246
|
|
|
528
|
|
|
Other costs of providing services
|
61
|
|
|
969
|
|
|
Advertising
|
775
|
|
|
1,871
|
|
|
Total cost of providing services
|
1,082
|
|
|
3,368
|
|
|
Gross margin
|
4,172
|
|
|
3,399
|
|
|
Operating expense (income)
|
|
|
|
|
Corporate, district and other
|
3,810
|
|
|
5,025
|
|
|
Interest income
|
(4
|
)
|
|
(5
|
)
|
|
Total operating expense
|
3,806
|
|
|
5,020
|
|
|
Income (loss) from operations of discontinued operations
|
366
|
|
|
(1,621
|
)
|
|
Gain on disposal of discontinued operations, net of estimated income tax benefit of $47,423
|
8,009
|
|
|
—
|
|
|
Income from discontinued operations
|
$
|
8,375
|
|
|
$
|
(1,621
|
)
|
|
(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)
|
March 31,
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 AND STOCKHOLDERS' EQUITY
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(in thousands)
|
2019
(1)
|
|
2018
|
|
Net cash (used in) / provided by discontinued operating activities
|
$
|
(504
|
)
|
|
$
|
1,411
|
|
|
Net cash used in discontinued investing activities
|
(14,213
|
)
|
|
(3,782
|
)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
(dollars in thousands)
|
Subsidiary
Guarantors
|
Subsidiary
Non-Guarantors
|
Canada SPV
|
CURO
|
Eliminations
|
CURO
Consolidated
|
|
Assets:
|
|
|
|
|
|
|
|
Cash
|
$
|
62,729
|
|
$
|
20,130
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
82,859
|
|
|
Restricted cash
|
15,775
|
|
3,084
|
|
15,460
|
|
—
|
|
—
|
|
34,319
|
|
|
Loans receivable, net
|
254,622
|
|
46,403
|
|
157,868
|
|
—
|
|
—
|
|
458,893
|
|
|
Right of use asset - operating leases
|
74,840
|
|
60,565
|
|
—
|
|
—
|
|
—
|
|
135,405
|
|
|
Deferred income taxes
|
(6,445
|
)
|
5,014
|
|
—
|
|
6,445
|
|
—
|
|
5,014
|
|
|
Income taxes receivable
|
—
|
|
—
|
|
—
|
|
40,872
|
|
—
|
|
40,872
|
|
|
Prepaid expenses and other
|
30,459
|
|
6,052
|
|
—
|
|
—
|
|
—
|
|
36,511
|
|
|
Property and equipment, net
|
46,360
|
|
28,900
|
|
—
|
|
—
|
|
—
|
|
75,260
|
|
|
Goodwill
|
91,131
|
|
28,747
|
|
—
|
|
—
|
|
—
|
|
119,878
|
|
|
Other intangibles, net
|
8,165
|
|
21,803
|
|
—
|
|
—
|
|
—
|
|
29,968
|
|
|
Intercompany receivable
|
74,174
|
|
—
|
|
—
|
|
—
|
|
(74,174
|
)
|
—
|
|
|
Investment in subsidiaries
|
—
|
|
—
|
|
—
|
|
(36,075
|
)
|
36,075
|
|
—
|
|
|
Other
|
14,473
|
|
678
|
|
—
|
|
—
|
|
—
|
|
15,151
|
|
|
Total assets
|
$
|
666,283
|
|
$
|
221,376
|
|
$
|
173,328
|
|
$
|
11,242
|
|
$
|
(38,099
|
)
|
$
|
1,034,130
|
|
|
Liabilities and Stockholders' equity:
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
39,420
|
|
$
|
2,886
|
|
$
|
9,717
|
|
$
|
19
|
|
$
|
—
|
|
$
|
52,042
|
|
|
Deferred revenue
|
4,574
|
|
3,233
|
|
44
|
|
—
|
|
—
|
|
7,851
|
|
|
Lease liability - operating leases
|
82,667
|
|
60,745
|
|
—
|
|
—
|
|
—
|
|
143,412
|
|
|
Income taxes payable
|
(26,737
|
)
|
4,425
|
|
—
|
|
26,737
|
|
—
|
|
4,425
|
|
|
Accrued interest
|
2
|
|
—
|
|
847
|
|
4,744
|
|
—
|
|
5,593
|
|
|
Payable to CURO Holdings Corp.
|
738,730
|
|
—
|
|
—
|
|
(738,730
|
)
|
—
|
|
—
|
|
|
CSO liability for losses
|
8,662
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,662
|
|
|
Long-term debt (excluding current maturities)
|
—
|
|
—
|
|
88,915
|
|
677,153
|
|
—
|
|
766,068
|
|
|
Subordinated shareholder debt
|
—
|
|
2,243
|
|
—
|
|
—
|
|
—
|
|
2,243
|
|
|
Intercompany payable
|
—
|
|
337
|
|
73,837
|
|
—
|
|
(74,174
|
)
|
—
|
|
|
Other liabilities
|
5,942
|
|
744
|
|
—
|
|
—
|
|
—
|
|
6,686
|
|
|
Deferred tax liabilities
|
(4,171
|
)
|
—
|
|
—
|
|
4,575
|
|
—
|
|
404
|
|
|
Total liabilities
|
849,089
|
|
74,613
|
|
173,360
|
|
(25,502
|
)
|
(74,174
|
)
|
997,386
|
|
|
Stockholder’s equity
|
(182,806
|
)
|
146,763
|
|
(32
|
)
|
36,744
|
|
36,075
|
|
36,744
|
|
|
Total liabilities and stockholder’s equity
|
$
|
666,283
|
|
$
|
221,376
|
|
$
|
173,328
|
|
$
|
11,242
|
|
$
|
(38,099
|
)
|
$
|
1,034,130
|
|
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 March 31, 2019
|
|
(dollars in thousands)
|
Subsidiary
Guarantors
|
Subsidiary
Non-Guarantors
|
Canada SPV
|
CURO
|
Eliminations
|
CURO
Consolidated
|
|
Revenue
|
$
|
226,119
|
|
$
|
26,774
|
|
$
|
25,046
|
|
$
|
—
|
|
$
|
—
|
|
$
|
277,939
|
|
|
Provision for losses
|
84,980
|
|
4,099
|
|
13,306
|
|
—
|
|
—
|
|
102,385
|
|
|
Net revenue
|
141,139
|
|
22,675
|
|
11,740
|
|
—
|
|
—
|
|
175,554
|
|
|
Cost of providing services:
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
19,951
|
|
8,750
|
|
—
|
|
—
|
|
—
|
|
28,701
|
|
|
Occupancy
|
8,010
|
|
6,227
|
|
—
|
|
—
|
|
—
|
|
14,237
|
|
|
Office
|
3,889
|
|
1,224
|
|
—
|
|
—
|
|
—
|
|
5,113
|
|
|
Other costs of providing services
|
13,132
|
|
1,088
|
|
—
|
|
—
|
|
—
|
|
14,220
|
|
|
Advertising
|
6,354
|
|
1,432
|
|
—
|
|
—
|
|
—
|
|
7,786
|
|
|
Total cost of providing services
|
51,336
|
|
18,721
|
|
—
|
|
—
|
|
—
|
|
70,057
|
|
|
Gross margin
|
89,803
|
|
3,954
|
|
11,740
|
|
—
|
|
—
|
|
105,497
|
|
|
Operating (income) expense:
|
|
|
|
|
|
|
|
|
Corporate, district and other
|
41,538
|
|
5,183
|
|
25
|
|
2,342
|
|
—
|
|
49,088
|
|
|
Intercompany management fee
|
(3,403
|
)
|
3,395
|
|
8
|
|
—
|
|
—
|
|
—
|
|
|
Interest expense
|
290
|
|
71
|
|
2,891
|
|
14,438
|
|
—
|
|
17,690
|
|
|
Intercompany interest (income) expense
|
(1,071
|
)
|
1,071
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total operating expense
|
37,354
|
|
9,720
|
|
2,924
|
|
16,780
|
|
—
|
|
66,778
|
|
|
Income (loss) from continuing operations before income taxes
|
52,449
|
|
(5,766
|
)
|
8,816
|
|
(16,780
|
)
|
—
|
|
38,719
|
|
|
Provision (benefit) for income tax expense
|
14,020
|
|
1,034
|
|
—
|
|
(5,008
|
)
|
—
|
|
10,046
|
|
|
Net income (loss) from continuing operations
|
38,429
|
|
(6,800
|
)
|
8,816
|
|
(11,772
|
)
|
—
|
|
28,673
|
|
|
Net loss on discontinued operations
|
—
|
|
8,375
|
|
—
|
|
—
|
|
—
|
|
8,375
|
|
|
Net (loss) income
|
38,429
|
|
1,575
|
|
8,816
|
|
(11,772
|
)
|
—
|
|
37,048
|
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
|
CFTC
|
—
|
|
—
|
|
—
|
|
48,820
|
|
(48,820
|
)
|
—
|
|
|
Guarantor Subsidiaries
|
38,429
|
|
—
|
|
—
|
|
—
|
|
(38,429
|
)
|
—
|
|
|
Non-Guarantor Subsidiaries
|
1,575
|
|
—
|
|
—
|
|
—
|
|
(1,575
|
)
|
—
|
|
|
SPV Subs
|
8,816
|
|
—
|
|
—
|
|
—
|
|
(8,816
|
)
|
—
|
|
|
Net income (loss) attributable to CURO
|
$
|
87,249
|
|
$
|
1,575
|
|
$
|
8,816
|
|
$
|
37,048
|
|
$
|
(97,640
|
)
|
$
|
37,048
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
(dollars in thousands)
|
CFTC
|
CURO Intermediate
|
Subsidiary Guarantors
|
Subsidiary Non-Guarantors
|
SPV Subs
|
Eliminations
|
CFTC
Consolidated
|
CURO
|
Eliminations
|
CURO Consolidated
|
|
Revenue
|
$
|
—
|
|
$
|
—
|
|
$
|
128,408
|
|
$
|
46,250
|
|
$
|
76,185
|
|
$
|
—
|
|
$
|
250,843
|
|
$
|
—
|
|
$
|
—
|
|
$
|
250,843
|
|
|
Provision for losses
|
—
|
|
—
|
|
35,769
|
|
12,550
|
|
28,564
|
|
—
|
|
76,883
|
|
—
|
|
—
|
|
76,883
|
|
|
Net revenue
|
—
|
|
—
|
|
92,639
|
|
33,700
|
|
47,621
|
|
—
|
|
173,960
|
|
—
|
|
—
|
|
173,960
|
|
|
Cost of providing services:
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
—
|
|
—
|
|
18,018
|
|
8,900
|
|
—
|
|
—
|
|
26,918
|
|
—
|
|
—
|
|
26,918
|
|
|
Occupancy
|
—
|
|
—
|
|
7,646
|
|
5,781
|
|
—
|
|
—
|
|
13,427
|
|
—
|
|
—
|
|
13,427
|
|
|
Office
|
—
|
|
—
|
|
5,582
|
|
871
|
|
—
|
|
—
|
|
6,453
|
|
—
|
|
—
|
|
6,453
|
|
|
Other store operating expenses
|
—
|
|
—
|
|
12,030
|
|
920
|
|
481
|
|
—
|
|
13,431
|
|
—
|
|
—
|
|
13,431
|
|
|
Advertising
|
—
|
|
—
|
|
5,159
|
|
2,726
|
|
—
|
|
—
|
|
7,885
|
|
—
|
|
—
|
|
7,885
|
|
|
Total cost of providing services
|
—
|
|
—
|
|
48,435
|
|
19,198
|
|
481
|
|
—
|
|
68,114
|
|
—
|
|
—
|
|
68,114
|
|
|
Gross Margin
|
—
|
|
—
|
|
44,204
|
|
14,502
|
|
47,140
|
|
—
|
|
105,846
|
|
—
|
|
—
|
|
105,846
|
|
|
Operating (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate, district and other
|
448
|
|
7
|
|
27,992
|
|
4,897
|
|
30
|
|
—
|
|
33,374
|
|
2,055
|
|
—
|
|
35,429
|
|
|
Intercompany management fee
|
—
|
|
—
|
|
(6,443
|
)
|
3,035
|
|
3,408
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Interest expense
|
18,322
|
|
—
|
|
(112
|
)
|
57
|
|
4,087
|
|
—
|
|
22,354
|
|
—
|
|
—
|
|
22,354
|
|
|
Intercompany interest (income) expense
|
—
|
|
(801
|
)
|
(79
|
)
|
880
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Loss on extinguishment of debt
|
11,683
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,683
|
|
—
|
|
—
|
|
11,683
|
|
|
Total operating expense
|
30,453
|
|
(794
|
)
|
21,358
|
|
8,869
|
|
7,525
|
|
—
|
|
67,411
|
|
2,055
|
|
—
|
|
69,466
|
|
|
(Loss) income from continuing operations before income taxes
|
(30,453
|
)
|
794
|
|
22,846
|
|
5,633
|
|
39,615
|
|
—
|
|
38,435
|
|
(2,055
|
)
|
—
|
|
36,380
|
|
|
(Benefit) provision for income tax expense
|
(6,841
|
)
|
18,497
|
|
(1,585
|
)
|
1,929
|
|
—
|
|
—
|
|
12,000
|
|
(533
|
)
|
—
|
|
11,467
|
|
|
Net (loss) income from continuing operations
|
(23,612
|
)
|
(17,703
|
)
|
24,431
|
|
3,704
|
|
39,615
|
|
—
|
|
26,435
|
|
(1,522
|
)
|
—
|
|
24,913
|
|
|
Net loss from discontinued operations
|
—
|
|
—
|
|
—
|
|
(1,621
|
)
|
—
|
|
—
|
|
(1,621
|
)
|
—
|
|
—
|
|
(1,621
|
)
|
|
Net (loss) income
|
(23,612
|
)
|
(17,703
|
)
|
24,431
|
|
2,083
|
|
39,615
|
|
—
|
|
24,814
|
|
(1,522
|
)
|
—
|
|
23,292
|
|
|
Equity in net income (loss) of subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
CFTC
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
24,814
|
|
(24,814
|
)
|
—
|
|
|
CURO Intermediate
|
(17,703
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
17,703
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Guarantor Subsidiaries
|
24,431
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(24,431
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Non-Guarantor Subsidiaries
|
3,704
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(3,704
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
SPV Subs
|
39,615
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(39,615
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Net income (loss) attributable to CURO
|
$
|
26,435
|
|
$
|
(17,703
|
)
|
$
|
24,431
|
|
$
|
2,083
|
|
$
|
39,615
|
|
$
|
(50,047
|
)
|
$
|
24,814
|
|
$
|
23,292
|
|
$
|
(24,814
|
)
|
$
|
23,292
|
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 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
|
$
|
88,291
|
|
$
|
(1,574
|
)
|
$
|
53,969
|
|
$
|
67
|
|
$
|
246
|
|
$
|
140,999
|
|
|
Net cash used in discontinued operating activities
|
—
|
|
(504
|
)
|
—
|
|
—
|
|
—
|
|
(504
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, equipment and software
|
(2,430
|
)
|
(689
|
)
|
—
|
|
—
|
|
—
|
|
(3,119
|
)
|
|
Investment in Cognical Holdings
|
(1,568
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,568
|
)
|
|
Originations of loans, net
|
(38,226
|
)
|
3,652
|
|
(30,373
|
)
|
—
|
|
—
|
|
(64,947
|
)
|
|
Net cash (used in) provided by continuing investing activities
|
(42,224
|
)
|
2,963
|
|
(30,373
|
)
|
—
|
|
—
|
|
(69,634
|
)
|
|
Net cash used in discontinued investing activities
|
—
|
|
(14,213
|
)
|
—
|
|
—
|
|
—
|
|
(14,213
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
3,762
|
|
—
|
|
—
|
|
3,762
|
|
|
Payments on Non-Recourse Canada SPV facility
|
—
|
|
—
|
|
(24,831
|
)
|
—
|
|
—
|
|
(24,831
|
)
|
|
Proceeds from revolving credit facilities
|
15,000
|
|
15,478
|
|
—
|
|
—
|
|
—
|
|
30,478
|
|
|
Payments on revolving credit facilities
|
(35,000
|
)
|
(15,478
|
)
|
—
|
|
—
|
|
—
|
|
(50,478
|
)
|
|
Payments to net share settle RSUs
|
—
|
|
—
|
|
—
|
|
(37
|
)
|
—
|
|
(37
|
)
|
|
Proceeds from exercise of stock options
|
40
|
|
—
|
|
—
|
|
—
|
|
—
|
|
40
|
|
|
Debt issuance costs paid
|
—
|
|
—
|
|
(169
|
)
|
(30
|
)
|
—
|
|
(199
|
)
|
|
Net cash used in provided by financing activities
(1)
|
(19,960
|
)
|
—
|
|
(21,238
|
)
|
(67
|
)
|
—
|
|
(41,265
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and restricted cash
|
—
|
|
1,922
|
|
262
|
|
—
|
|
(246
|
)
|
1,938
|
|
|
Net increase (decrease) in cash and restricted cash
|
26,107
|
|
(11,406
|
)
|
2,620
|
|
—
|
|
—
|
|
17,321
|
|
|
Cash and restricted cash at beginning of period
|
52,397
|
|
34,620
|
|
12,840
|
|
—
|
|
—
|
|
99,857
|
|
|
Cash at end of period
|
$
|
78,504
|
|
$
|
23,214
|
|
$
|
15,460
|
|
$
|
—
|
|
$
|
—
|
|
$
|
117,178
|
|
|
(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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 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
|
$
|
87,829
|
|
$
|
—
|
|
$
|
(5,956
|
)
|
$
|
15,391
|
|
$
|
29,225
|
|
$
|
9,469
|
|
$
|
135,958
|
|
$
|
(13,215
|
)
|
$
|
122,743
|
|
|
Net cash provided by (used in) discontinued operating activities
|
—
|
|
—
|
|
—
|
|
6,958
|
|
—
|
|
(5,547
|
)
|
1,411
|
|
—
|
|
1,411
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, equipment and software
|
—
|
|
—
|
|
(788
|
)
|
(754
|
)
|
—
|
|
—
|
|
(1,542
|
)
|
—
|
|
(1,542
|
)
|
|
Originations of loans, net
|
—
|
|
—
|
|
(28,277
|
)
|
(13,767
|
)
|
(14,309
|
)
|
—
|
|
(56,353
|
)
|
—
|
|
(56,353
|
)
|
|
Investment in Cognical Holdings
|
(958
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(958
|
)
|
—
|
|
(958
|
)
|
|
Net cash (used in) provided by continuing operating activities
|
(958
|
)
|
—
|
|
(29,065
|
)
|
(14,521
|
)
|
(14,309
|
)
|
—
|
|
(58,853
|
)
|
—
|
|
(58,853
|
)
|
|
Net cash provided by (used in) discontinued investing activities
|
—
|
|
—
|
|
—
|
|
(3,782
|
)
|
—
|
|
—
|
|
(3,782
|
)
|
—
|
|
(3,782
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Non-Recourse U.S. SPV facility
|
—
|
|
—
|
|
—
|
|
—
|
|
3,000
|
|
—
|
|
3,000
|
|
—
|
|
3,000
|
|
|
Payments on Non-Recourse U.S. SPV facility
|
—
|
|
—
|
|
—
|
|
—
|
|
(12,519
|
)
|
—
|
|
(12,519
|
)
|
—
|
|
(12,519
|
)
|
|
Proceeds from revolving credit facilities
|
10,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10,000
|
|
—
|
|
10,000
|
|
|
Payments on revolving credit facilities
|
(10,000
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(10,000
|
)
|
—
|
|
(10,000
|
)
|
|
Net proceeds from issuance of common stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,135
|
|
13,135
|
|
|
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
|
(71
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(71
|
)
|
—
|
|
(71
|
)
|
|
Net cash (used in) provided by financing activities
(1)
|
(86,871
|
)
|
—
|
|
—
|
|
—
|
|
(9,519
|
)
|
—
|
|
(96,390
|
)
|
13,135
|
|
(83,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
—
|
|
—
|
|
—
|
|
(438
|
)
|
—
|
|
(3,922
|
)
|
(4,360
|
)
|
—
|
|
(4,360
|
)
|
|
Net (decrease) increase in cash and restricted cash
|
—
|
|
—
|
|
(35,021
|
)
|
3,608
|
|
5,397
|
|
—
|
|
(26,016
|
)
|
(80
|
)
|
(26,096
|
)
|
|
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
|
$
|
—
|
|
$
|
—
|
|
$
|
84,035
|
|
$
|
52,092
|
|
$
|
12,268
|
|
$
|
—
|
|
$
|
148,395
|
|
$
|
—
|
|
$
|
148,395
|
|
|
(1) Financing activities included continuing operations only and were not impacted by discontinued.
|
CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE 17 – SUBSEQUENT EVENTS
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 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.
Cognical Investment
In April 2019, as part of a broader capital structure reorganization, the Company made an additional
$2.8 million
cash investment in Cognical Holdings, which operates under the Zibby brand. This funding round is expected to remain open through June 11, 2019. As a result of its investments in Cognical as well as Cognical’s overall reorganization, the Company expects to own a
30%
to
35%
interest in its outstanding shares, dependent upon total new capital contributed by other investors. When the funding round is completed, the Company expects to have financial information to determine the fair market value of its investments in Cognical Holdings.