10-Q 1 a2018q3groupdoc.htm 10-Q Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to__________
Commission File Number 1-38315
CURO GROUP HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware
 
90-0934597
(State or other jurisdiction
Of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
3527 North Ridge Road, Wichita, KS
 
67205
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (316) 425-1410
Former name, former address and former fiscal year, if changed since last report: No Changes

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
 
Smaller reporting company
 
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ☐    No ☒
At October 31, 2018 there were 45,992,983 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.






CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
FORM 10-Q
THIRD QUARTER ENDED SEPTEMBER 30, 2018
INDEX
 
 
 
 
 
 
 
Page
Item 1.
Financial Statements (unaudited)
 
 
 
September 30, 2018 and December 31, 2017
 
 
 
Three and nine months ended September 30, 2018 and 2017
 
 
 
Three and nine months ended September 30, 2018 and 2017
 
 
 
Nine months ended September 30, 2018 and 2017
 
Item 2.
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


2



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
September 30,
2018
 
December 31,
2017
 
(Unaudited)
 
 
ASSETS
Cash
$
153,361

 
$
162,374

Restricted cash (includes restricted cash of consolidated VIEs of $19,107 and $6,871 as of September 30, 2018 and December 31, 2017, respectively)
24,236

 
12,117

Gross loans receivable (includes loans of consolidated VIEs of $353,384 and $213,846 as of September 30, 2018 and December 31, 2017, respectively)
567,675

 
432,837

Less: allowance for loan losses (includes allowance for losses of consolidated VIEs of $49,951 and $46,140 as of September 30, 2018 and December 31, 2017, respectively)
(76,068
)
 
(69,568
)
Loans receivable, net
491,607

 
363,269

Deferred income taxes

 
772

Income taxes receivable
16,363

 
3,455

Prepaid expenses and other
40,109

 
42,512

Property and equipment, net
79,790

 
87,086

Goodwill
143,966

 
145,607

Other intangibles, net of accumulated amortization of $43,250 and $41,156 as of September 30, 2018 and December 31, 2017, respectively)
33,208

 
32,769

Other
13,090

 
9,770

Total Assets
$
995,730

 
$
859,731

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities
$
52,853

 
$
55,792

Deferred revenue
9,667

 
11,984

Income taxes payable
338

 
4,120

Accrued interest (includes accrued interest of consolidated VIEs of $1,603 and $1,266 as of September 30, 2018 and December 31, 2017, respectively)
7,391

 
25,467

Credit services organization guarantee liability
13,243

 
17,795

Deferred rent
11,288

 
11,577

Long-term debt (includes long-term debt and issuance costs of consolidated VIEs of $169,666 and $7,710 as of September 30, 2018 and $124,590 and $4,188 as of December 31, 2017, respectively)
868,201

 
706,225

Subordinated stockholder debt
2,319

 
2,381

Other long-term liabilities
6,949

 
5,768

Deferred tax liabilities
13,617

 
11,486

Total Liabilities
985,866

 
852,595

Commitments and contingencies


 


Stockholders' Equity


 


Preferred stock - $0.001 par value, 25,000,000 shares authorized; no shares were issued at either period end

 

Class A common stock - $0.001 par value; 225,000,000 shares authorized; 45,992,983 and 44,561,419 issued and outstanding as of September 30, 2018 and December 31, 2017, respectively)
9

 
8

Paid-in capital
64,148

 
46,079

(Accumulated deficit) retained earnings
(3,767
)
 
3,988

Accumulated other comprehensive loss
(50,526
)
 
(42,939
)
Total Stockholders' Equity
9,864

 
7,136

Total Liabilities and Stockholders' Equity
$
995,730

 
$
859,731

See accompanying Notes to Condensed Consolidated Financial Statements.

3


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in thousands, except per share data)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Revenue
$
283,004

 
$
255,119

 
$
793,745

 
$
696,643

Provision for losses
134,523

 
99,341

 
307,540

 
226,523

Net revenue
148,481

 
155,778

 
486,205

 
470,120

 
 
 
 
 
 
 
 
Cost of providing services
 
 
 
 
 
 
 
Salaries and benefits
26,515

 
26,821

 
80,341

 
79,554

Occupancy
13,522

 
13,815

 
40,269

 
41,421

Office
7,742

 
5,715

 
20,799

 
15,519

Other costs of providing services
12,604

 
12,991

 
39,731

 
40,954

Advertising
24,114

 
16,270

 
51,424

 
35,599

Total cost of providing services
84,497

 
75,612

 
232,564

 
213,047

Gross margin
63,984

 
80,166

 
253,641

 
257,073

 
 
 
 
 
 
 
 
Operating expense
 
 
 
 
 
 
 
Corporate, district and other
35,185

 
34,247

 
114,294

 
103,797

Interest expense
23,396

 
18,844

 
66,210

 
60,694

Loss on extinguishment of debt
69,200

 

 
80,883

 
12,458

Restructuring costs

 
7,393

 

 
7,393

Total operating expense
127,781

 
60,484

 
261,387

 
184,342

Net (loss) income before income taxes
(63,797
)
 
19,682

 
(7,746
)
 
72,731

(Benefit) provision for income taxes
(16,775
)
 
9,920

 
9

 
29,988

Net (loss) income
$
(47,022
)
 
$
9,762

 
$
(7,755
)
 
$
42,743

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
45,853

 
37,908

 
45,674

 
37,908

Diluted
48,352

 
38,914

 
48,061

 
38,959

Net income per common share:
 
 
 
 
 
 
 
Basic earnings per share
$
(1.03
)
 
$
0.26

 
$
(0.17
)
 
$
1.13

Diluted earnings per share:
$
(0.97
)
 
$
0.25

 
$
(0.16
)
 
$
1.10

See accompanying Notes to Condensed Consolidated Financial Statements.


4


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Net (loss) income
$
(47,022
)
 
$
9,762

 
$
(7,755
)
 
$
42,743

Other comprehensive income (loss):

 

 

 

Cash flow hedges, net of $0 tax in all periods
(187
)
 

 
(572
)
 
333

Foreign currency translation adjustment, net of $0 tax in all periods
2,648

 
8,397

 
(7,015
)
 
18,148

Other comprehensive income (loss)
2,461

 
8,397

 
(7,587
)
 
18,481

Comprehensive (loss) income
$
(44,561
)
 
$
18,159

 
$
(15,342
)
 
$
61,224

See accompanying Notes to Condensed Consolidated Financial Statements.



5


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands and unaudited)
 
Nine Months Ended September 30,
 
2018
 
2017
Cash flows from operating activities
 
 
 
Net (loss) income
$
(7,755
)
 
$
42,743

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
14,006

 
14,120

Provision for loan losses
307,540

 
226,523

Restructuring costs

 
1,495

Amortization of debt issuance costs
3,411

 
2,637

Amortization of bond (premium)/discount
(488
)
 
809

Deferred income tax benefit
3,005

 
(811
)
Loss on disposal of property and equipment
691

 
403

Loss on extinguishment of debt
80,883

 
12,458

Increase in cash surrender value of life insurance
(2,458
)
 
(1,045
)
Share-based compensation expense
6,112

 
311

Changes in operating assets and liabilities:
 
 
 
Loans receivable
(444,350
)
 
(295,127
)
Accounts payable and accrued liabilities
(3,643
)
 
11,055

Income taxes payable
326

 
11,387

Income taxes receivable
(12,908
)
 
4,590

Other liabilities
(16,973
)
 
(2,136
)
Net cash (used in) provided by operating activities
(72,601
)
 
29,412

Cash flows from investing activities
 
 
 
Purchase of property, equipment and software
(8,200
)
 
(7,917
)
Cash paid for Cognical Holdings preferred shares
(958
)
 
(4,975
)
Changes in restricted cash
(12,284
)
 
(3,360
)
Net cash used in investing activities
(21,442
)
 
(16,252
)
Cash flows from financing activities
 
 
 
Net proceeds from issuance of common stock
11,549

 

Proceeds from exercise of stock options
408

 

Proceeds from Non-Recourse U.S. SPV facility
17,000

 
52,130

Payments on Non-Recourse U.S. SPV facility
(61,590
)
 
(27,258
)
Proceeds from Non-Recourse Canada SPV facility
89,949

 

Proceeds from issuance of 12.00% Senior Secured Notes

 
461,329

Payments on 10.75% Senior Secured Notes

 
(414,882
)
Payments on 12.00% Senior Secured Notes
(605,000
)
 

Proceeds from 8.25% Senior Secured Notes
690,000

 

Payments on 12.00% Senior Cash Pay Notes

 
(125,000
)
Debt issuance costs paid
(17,517
)
 
(14,222
)
Proceeds from credit facilities
65,169

 
33,028

Payments on credit facilities
(36,169
)
 
(33,028
)
Payments of call premiums from early debt extinguishments
(63,350
)
 
(11,152
)
Dividends paid to CURO Group Holdings Corp.

 
(166,583
)
Dividends received from CURO Group Holdings Corp.

 
166,583

Dividends paid to stockholders

 
(36,500
)
Net cash provided by (used in) financing activities
90,449

 
(115,555
)
  Effect of exchange rate changes on cash
(5,419
)
 
4,415

Net decrease in cash
(9,013
)
 
(97,980
)
Cash at beginning of period
162,374

 
193,525

Cash at end of period
$
153,361

 
$
95,545

See accompanying Notes to Condensed Consolidated Financial Statements.

6


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," "we,” “our,” “us,” 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., our wholly-owned subsidiary, and its directly and indirectly owned subsidiaries as a consolidated entity, except where otherwise stated.

We have 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 our 2017 Annual Report on Form 10-K. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with US GAAP have been condensed or omitted, although we believe 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 our results of operations, financial position and cash flows for the periods presented. The adjustments consist solely of normal recurring adjustments. You should read the Condensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and related Notes included in our 2017 Annual Report on 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, 2018.

We completed our initial public offering ("IPO") in December 2017. Prior to our IPO, we effected a 36-for-1 split of our common stock. We have retroactively adjusted all share and per share data for all periods presented to reflect the stock split as if the stock split had occurred at the beginning of the earliest period presented.

After our IPO, we initially qualified as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As an emerging growth company, we elected to take advantage of specified reduced reporting and other requirements that are otherwise generally required of public companies. In August 2018, we completed the issuance of $690.0 million of 8.25% Senior Secured Notes due 2025 ("2025 Notes"). See Note 5 - Long-Term Debt for further discussion of this issuance. This sale, along with the issuance of $605.0 million of 12.00% Senior Secured Notes due 2022 ("2022 Notes") during 2017 exceeded one of the required thresholds to retain emerging growth company status. Specifically, an emerging growth company loses this status on the date on which it has, during the previous three-year period, issued more than $1 billion in non-convertible debt, provided that none of certain other disqualifying conditions have been triggered. As a result of this change of status, we can no longer take advantage of the specified reduced reporting requirements and need to adopt certain recently issued accounting pronouncements for which we were previously allowed to defer. The impact to our accounting policy adoption practices are further described in Note 1. Additionally, the status change will require us to provide an auditor attestation of internal control over financial reporting under Sarbanes-Oxley Act Section 404(b).

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of CURO and its wholly-owned subsidiaries. We have eliminated intercompany transactions and balances 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 we have 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") guarantee liability and estimated tax liabilities. Actual results may differ from those estimates.

Nature of Operations

We are 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 the United Kingdom ("U.K.").


7


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Recently Adopted Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board ("FASB") issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"). Under modification accounting, an entity is required to re-value its equity awards each time there is a modification to the terms of the awards. The provisions in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to account for the effects of a modification, unless certain conditions are met. The amendments in this update were effective for all entities for annual periods, and interim periods therein, beginning after December 15, 2017. ASU 2017-09 was effective for all entities for annual periods, and interim periods therein, as of January 1, 2018. The adoption of this amendment did not have a material impact on our Consolidated Financial Statements.

In January 2017, FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 narrows the definition of a business and provides a framework that gives an entity a basis for making reasonable judgments about whether a transaction involves an asset or a business and provides a screen to determine when a set (an integrated set of assets and activities) is not a business. The screen requires a determination that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, ASU 2017-01 (i) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (ii) removes the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. ASU 2017-01 is effective prospectively for public companies for annual periods beginning after December 15, 2017, including interim periods therein. With our loss of emerging growth company status, we adopted this guidance during the current quarter. The adoption of ASU 2017-01 did not have a material impact on our Consolidated Financial Statements.

In November 2016, FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The adoption should be applied using a retrospective transition method to each period presented. ASU 2016-18 is effective for public companies for fiscal years beginning after December 15, 2017 and interim periods therein. With our loss of emerging growth company status, we adopted this guidance during the current quarter. The adoption of ASU 2016-18 did not have a material impact on the presentation of our statement of cash flows in our Consolidated Financial Statements.

In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”). The amendments in ASU 2016-15 provide guidance on eight specific cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, distributions received from equity method investees and beneficial interests in securitization transactions. ASU 2016-15 was effective for public companies for fiscal years beginning after December 15, 2017 and interim periods therein. With our loss of emerging growth company status, we adopted this guidance during the current quarter. The adoption of ASU 2016-15 did not have a material impact on our Consolidated Statement of Cash Flows as we have historically presented debt prepayment and extinguishment costs as outflows from financing activities and we had no other material cash flows impacted by the guidance.

In January 2016, FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) which requires (i) equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, (ii) public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and (iii) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). ASU 2016-01 eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01 is currently effective for public companies. With our loss of emerging growth company status during 2018, we adopted this guidance during the current quarter. The adoption of ASU 2016-01 did not have a material impact on our Consolidated Financial Statements.

In November 2015, FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015-07 eliminates the requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. ASU 2015-17 is currently effective for public companies. With our loss of emerging growth company

8


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

status during 2018, we adopted this guidance during the current quarter. The adoption of ASU 2015-17 did not have a material impact on our Consolidated Financial Statements.

In May 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration received in exchange for those goods or services. In addition to ASU 2014-09, the FASB issued the following ASUs updating the topic:

In December 2016, ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
In May 2016, ASU No. 2016-12 , Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
In April 2016, ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
In March 2016, ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).
In August 2015, ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date

We adopted the provisions of Topic 606 during the quarter, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (Topic 605). Topic 606 requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Most of our revenue is generated from interest or through servicing of financial contracts, both of which are excluded from the scope of ASU 2014-09. As a result, the standard did not have a material impact on our Condensed Financial Statements and we have made no adjustments to retained earnings or prior comparative periods.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which amends ASC 820, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The provisions of ASU 2018-13 are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods therein. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. We are currently assessing the impact adoption of ASU 2018-13 will have on our Consolidated Financial Statements.

In February 2018, 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"). Current US GAAP requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the period the change is enacted, including items of other comprehensive income for which the related tax effects are presented in other comprehensive income (“stranded tax effects”). ASU 2018-02 allows, but does not require, companies to reclassify stranded tax effects caused by the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act") from accumulated other comprehensive income to retained earnings. Additionally, ASU 2018-02 requires new disclosures by all companies, whether they opt to do the reclassification or not. The provisions of ASU 2018-02 are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. Companies should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the 2017 Tax Act is recognized. We are currently assessing the impact adoption of ASU 2018-02 will have on our Consolidated Financial Statements.

In January 2017, FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 simplified the goodwill impairment test by eliminating Step 2 of the test which requires an entity to compute the implied fair value of goodwill. Instead, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, and is limited to the amount of total goodwill allocated to that reporting unit. Under ASU 2017-04, an entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The provisions of ASU 2017-04 are effective for a public entity's annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We are currently assessing the impact adoption of ASU 2017-04 will have on our Consolidated Financial Statements.

In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” ("ASU 2016-13"). This ASU modifies the impairment model to utilize an expected loss methodology in

9


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU 2016-13 will be effective for public companies for fiscal years beginning after December 15, 2019 and interim periods therein. We anticipate that ASU 2016-13 will impact our current process for measuring credit losses and are currently assessing the impact it will have on our Consolidated Financial Statements.

In February 2016, FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged and lessees will no longer be provided with a source of off-balance sheet financing. In 2018, FASB released an additional transition method to adopt this new ASU. It allows companies to recognize a cumulative-effect adjustment in the period of adoption and to not restate prior periods. We will elect this transition method and it will be effective for us beginning January 1, 2019, with early adoption permitted. We plan, and are on schedule, to adopt the standard effective January 1, 2019. We expect ASU 2016-02 will have a material impact on our balance sheet with recognition of right-of-use assets and lease liabilities for operating leases. However, we do not expect adoption will have a material impact on our income statement. We do not expect the new standard will have material impacts on our liquidity or on our debt-covenant compliance under our current agreements.

NOTE 2 - VARIABLE INTEREST ENTITIES

At September 30, 2018, we held two credit facilities whereby we sell certain loan receivables to wholly-owned, bankruptcy-remote special purpose subsidiaries, which are considered variable interest entities ("VIEs"). We incur additional debt through the non-recourse facilities (See Note 5 - Long-Term Debt for further discussion) that is collateralized by these underlying loan receivables. We entered into the new Non-Recourse Canada SPV facility in August 2018. We extinguished the Non-Recourse U.S. SPV facility using the using the proceeds from the 8.25% Senior Secured Notes due September 1, 2025 ("8.25% Senior Secured Notes") in October 2018 (See Note 15 - Subsequent Events).

We have determined that we are the primary beneficiary of the VIEs and are required to consolidate them. We include the assets and liabilities related to the VIEs in our Consolidated Financial Statements and we account for them as secured borrowings. We parenthetically disclose on our 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 our general credit.

The carrying amounts of the consolidated VIEs' assets and liabilities associated with our special purpose subsidiaries were as follows (September 30, 2018 includes balances for both the U.S. and Canada VIEs while the December 31, 2017 includes the U.S. VIE):
(in thousands)
September 30, 2018
 
December 31, 2017
Assets
 
 
 
Restricted cash
$
19,107

 
$
6,871

Loans receivable less allowance for loan losses
303,433

 
167,706

      Total Assets
$
322,540

 
$
174,577

Liabilities
 
 
 
Accounts payable and accrued liabilities
$
1,360

 
$
12

Deferred revenue
149

 

Accrued interest
1,603

 
1,266

Long-term debt
161,956

 
120,402

      Total Liabilities
$
165,068

 
$
121,680



10


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 September 30,
 
Nine Months Ended September 30,
(in thousands)
2018
 
2017
 
2018
 
2017
Unsecured Installment
$
148,591

 
$
128,785

 
$
405,010

 
$
343,365

Secured Installment
28,562

 
26,407

 
81,195

 
73,249

Open-End
40,290

 
18,630

 
94,735

 
52,342

Single-Pay
53,205

 
70,895

 
178,512

 
197,926

Ancillary
12,356

 
10,402

 
34,293

 
29,761

   Total revenue
$
283,004

 
$
255,119

 
$
793,745

 
$
696,643


The following tables summarize Loans receivable by product and the related delinquent loans receivable at September 30, 2018:
 
 
September 30, 2018
(in thousands)
 
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Total
Current loans receivable
 
$
80,867

$
156,947

$
74,017

$
184,067

$
495,898

Delinquent loans receivable
 

54,618

17,159


71,777

   Total loans receivable
 
80,867

211,565

91,176

184,067

567,675

   Less: allowance for losses
 
(3,768
)
(43,066
)
(11,221
)
(18,013
)
(76,068
)
Loans receivable, net
 
$
77,099

$
168,499

$
79,955

$
166,054

$
491,607


 
 
September 30, 2018
(in thousands)
 
Unsecured Installment
Secured Installment
Total
Delinquent loans receivable
 
 
 
 
0-30 days past due
 
$
21,374

$
8,117

$
29,491

31-60 days past due
 
16,542

4,395

20,937

61-90 days past due
 
16,702

4,647

21,349

Total delinquent loans receivable
 
$
54,618

$
17,159

$
71,777


The following tables summarize Loans receivable by product and the related delinquent loans receivable at December 31, 2017:
 
 
December 31, 2017
(in thousands)
 
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Total
Current loans receivable
 
$
99,400

$
151,343

$
73,165

$
47,949

$
371,857

Delinquent loans receivable
 

44,963

16,017


60,980

   Total loans receivable
 
99,400

196,306

89,182

47,949

432,837

   Less: allowance for losses
 
(5,916
)
(43,754
)
(13,472
)
(6,426
)
(69,568
)
Loans receivable, net
 
$
93,484

$
152,552

$
75,710

$
41,523

$
363,269


11


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

 
 
December 31, 2017
(in thousands)
 
Unsecured Installment
Secured Installment
Total
Delinquent loans receivable
 
 
 


0-30 days past due
 
$
18,358

$
8,116

$
26,474

31-60 days past due
 
12,836

3,628

16,464

61-90 days past due
 
13,769

4,273

18,042

Total delinquent loans receivable
 
$
44,963

$
16,017

$
60,980


The following tables summarize loans guaranteed by us under our CSO programs and the related delinquent receivables at September 30, 2018:
 
 
September 30, 2018
(in thousands)
 
Unsecured Installment
Secured Installment
Total
Current loans receivable guaranteed by the Company
 
$
63,688

$
2,425

$
66,113

Delinquent loans receivable guaranteed by the Company
 
12,119

593

12,712

Total loans receivable guaranteed by the Company
 
75,807

3,018

78,825

Less: CSO guarantee liability
 
(12,750
)
(493
)
(13,243
)
Loans receivable guaranteed by the Company, net
 
$
63,057

$
2,525

$
65,582


 
 
September 30, 2018
(in thousands)
 
Unsecured Installment
Secured Installment
Total
Delinquent loans receivable
 
 
 


0-30 days past due
 
$
10,419

$
462

$
10,881

31-60 days past due
 
1,077

65

1,142

61-90 days past due
 
623

66

689

Total delinquent loans receivable
 
$
12,119

$
593

$
12,712


The following tables summarize loans guaranteed by us under our CSO programs and the related delinquent receivables at December 31, 2017:    
 
 
December 31, 2017
(in thousands)
 
Unsecured Installment
Secured Installment
Total
Current loans receivable guaranteed by the Company
 
$
62,676

$
3,098

$
65,774

Delinquent loans receivable guaranteed by the Company
 
12,480

537

13,017

Total loans receivable guaranteed by the Company
 
75,156

3,635

78,791

Less: CSO guarantee liability
 
(17,073
)
(722
)
(17,795
)
Loans receivable guaranteed by the Company, net
 
$
58,083

$
2,913

$
60,996



12


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

 
 
December 31, 2017
(in thousands)
 
Unsecured Installment
Secured Installment
Total
Delinquent loans receivable
 
 
 
 
0-30 days past due
 
$
10,477

$
459

$
10,936

31-60 days past due
 
1,364

41

1,405

61-90 days past due
 
639

37

676

Total delinquent loans receivable
 
$
12,480

$
537

$
13,017


The following table summarizes activity in the allowance for loan losses during the three months ended September 30, 2018:
 
Three Months Ended September 30, 2018
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Other
Total
Balance, beginning of period
$
4,372

$
35,279

$
10,386

$
9,717

$

$
59,754

Charge-offs
(43,427
)
(37,151
)
(11,188
)
(32,770
)
(3,207
)
(127,743
)
Recoveries
29,500

5,748

2,325

9,191

2,646

49,410

Net charge-offs
(13,927
)
(31,403
)
(8,863
)
(23,579
)
(561
)
(78,333
)
Provision for losses
13,511

39,025

9,698

31,686

561

94,481

Effect of foreign currency translation
(188
)
165


189


166

Balance, end of period
$
3,768

$
43,066

$
11,221

$
18,013

$

$
76,068

Allowance for loan losses as a percentage of gross loan receivables
4.7
%
20.4
%
12.3
%
9.8
%
N/A

13.4
%

The following table summarizes activity in the CSO guarantee liability during the three months ended September 30, 2018:
 
Three Months Ended
September 30, 2018
(in thousands)
Unsecured Installment
Secured Installment
Total
Balance, beginning of period
$
11,193

$
426

$
11,619

Charge-offs
(44,896
)
(1,087
)
(45,983
)
Recoveries
6,901

665

7,566

Net charge-offs
(37,995
)
(422
)
(38,417
)
Provision for losses
39,552

490

40,042

Balance, end of period
$
12,750

$
493

$
13,243


The following table summarizes activity in the allowance for loan losses and the CSO guarantee liability, in total, during the three months ended September 30, 2018:
 
Three Months Ended September 30, 2018
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Other
Total
Balance, beginning of period
$
4,372

$
46,472

$
10,812

$
9,717

$

$
71,373

Charge-offs
(43,427
)
(82,047
)
(12,275
)
(32,770
)
(3,207
)
(173,726
)
Recoveries
29,500

12,649

2,990

9,191

2,646

56,976

Net charge-offs
(13,927
)
(69,398
)
(9,285
)
(23,579
)
(561
)
(116,750
)
Provision for losses
13,511

78,577

10,188

31,686

561

134,523

Effect of foreign currency translation
(188
)
165

(1
)
189


165

Balance, end of period
$
3,768

$
55,816

$
11,714

$
18,013

$

$
89,311


13


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 September 30, 2017:
 
Three Months Ended September 30, 2017
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Other
Total
Balance, beginning of period
$
5,313

$
41,406

$
19,196

$
4,523

$

$
70,438

Charge-offs
(51,709
)
(29,058
)
(8,985
)
(10,437
)
(1,446
)
(101,635
)
Recoveries
31,194

3,169

1,911

4,446

921

41,641

Net charge-offs
(20,515
)
(25,889
)
(7,074
)
(5,991
)
(525
)
(59,994
)
Provision for losses
20,632

31,110

1,989

6,348

525

60,604

Effect of foreign currency translation
(88
)
311




223

Balance, end of period
$
5,342

$
46,938

$
14,111

$
4,880

$

$
71,271

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 CSO guarantee liability during the three months ended September 30, 2017:
 
Three Months Ended September 30, 2017
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Total
Balance, beginning of period
$

$
14,748

$
834

$
15,582

Charge-offs
(235
)
(43,124
)
(1,487
)
(44,846
)
Recoveries
233

6,326

858

7,417

Net charge-offs
(2
)
(36,798
)
(629
)
(37,429
)
Provision for losses
2

38,106

629

38,737

Balance, end of period
$

$
16,056

$
834

$
16,890


The following table summarizes activity in the allowance for loan losses and the CSO guarantee liability, in total, during the three months ended September 30, 2017:
 
Three Months Ended September 30, 2017
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Other
Total
Balance, beginning of period
$
5,313

$
56,154

$
20,030

$
4,523

$

$
86,020

Charge-offs
(51,944
)
(72,182
)
(10,472
)
(10,437
)
(1,446
)
(146,481
)
Recoveries
31,427

9,495

2,769

4,446

921

49,058

Net charge-offs
(20,517
)
(62,687
)
(7,703
)
(5,991
)
(525
)
(97,423
)
Provision for losses
20,634

69,216

2,618

6,348

525

99,341

Effect of foreign currency translation
(88
)
311




223

Balance, end of period
$
5,342

$
62,994

$
14,945

$
4,880

$

$
88,161


14


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 nine months ended September 30, 2018:
 
Nine Months Ended September 30, 2018
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Other
Total
Balance, beginning of period
$
5,916

$
43,754

$
13,472

$
6,426

$

$
69,568

Charge-offs
(135,951
)
(112,630
)
(33,755
)
(76,926
)
(4,475
)
(363,737
)
Recoveries
94,783

18,083

7,487

30,451

2,733

153,537

Net charge-offs
(41,168
)
(94,547
)
(26,268
)
(46,475
)
(1,742
)
(210,200
)
Provision for losses
39,340

93,936

24,017

57,962

1,742

216,997

Effect of foreign currency translation
(320
)
(77
)

100


(297
)
Balance, end of period
$
3,768

$
43,066

$
11,221

$
18,013

$

$
76,068

Allowance for loan losses as a percentage of gross loan receivables
4.7
%
20.4
%
12.3
%
9.8
%
N/A

13.4
%

The following table summarizes activity in the CSO guarantee liability during the nine months ended September 30, 2018:

 
Nine Months Ended September 30, 2018
(in thousands)
Unsecured Installment
Secured Installment
Total
Balance, beginning of period
$
17,073

$
722

$
17,795

Charge-offs
(119,632
)
(3,299
)
(122,931
)
Recoveries
25,227

2,610

27,837

Net charge-offs
(94,405
)
(689
)
(95,094
)
Provision for losses
90,082

461

90,543

Balance, end of period
$
12,750

$
493

$
13,243


The following table summarizes activity in the allowance for loan losses and the CSO guarantee liability, in total, during the nine months ended September 30, 2018:
 
Nine Months Ended September 30, 2018
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Other
Total
Balance, beginning of period
$
5,916

$
60,827

$
14,194

$
6,426

$

$
87,363

Charge-offs
(135,951
)
(232,262
)
(37,054
)
(76,926
)
(4,475
)
(486,668
)
Recoveries
94,783

43,310

10,097

30,451

2,733

181,374

Net charge-offs
(41,168
)
(188,952
)
(26,957
)
(46,475
)
(1,742
)
(305,294
)
Provision for losses
39,340

184,018

24,478

57,962

1,742

307,540

Effect of foreign currency translation
(320
)
(77
)
(1
)
100


(298
)
Balance, end of period
$
3,768

$
55,816

$
11,714

$
18,013

$

$
89,311



15


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 nine months ended September 30, 2017:
 
Nine Months Ended September 30, 2017
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Other
Total
Balance, beginning of period
$
5,501

$
17,775

$
10,737

$
5,179

$

$
39,192

Charge-offs
(140,614
)
(53,632
)
(15,926
)
(28,113
)
(3,846
)
(242,131
)
Recoveries
94,535

13,803

6,726

13,903

2,450

131,417

Net charge-offs
(46,079
)
(39,829
)
(9,200
)
(14,210
)
(1,396
)
(110,714
)
Provision for losses
45,810

68,264

12,574

13,911

1,396

141,955

Effect of foreign currency translation
110

728




838

Balance, end of period
$
5,342

$
46,938

$
14,111

$
4,880

$

$
71,271

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 CSO guarantee liability during the nine months ended September 30, 2017:
 
Nine Months Ended September 30, 2017
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Total
Balance, beginning of period
$
274

$
15,630

$
1,148

$
17,052

Charge-offs
(2,121
)
(104,246
)
(6,790
)
(113,157
)
Recoveries
1,335

23,051

4,041

28,427

Net charge-offs
(786
)
(81,195
)
(2,749
)
(84,730
)
Provision for losses
512

81,621

2,435

84,568

Balance, end of period
$

$
16,056

$
834

$
16,890


The following table summarizes activity in the allowance for loan losses and the CSO guarantee liability, in total, during the nine months ended September 30, 2017:
 
Nine Months Ended September 30, 2017
(in thousands)
Single-Pay
Unsecured Installment
Secured Installment
Open-End
Other
Total
Balance, beginning of period
$
5,775

$
33,405

$
11,885

$
5,179

$

$
56,244

Charge-offs
(142,735
)
(157,878
)
(22,716
)
(28,113
)
(3,846
)
(355,288
)
Recoveries
95,870

36,854

10,767

13,903

2,450

159,844

Net charge-offs
(46,865
)
(121,024
)
(11,949
)
(14,210
)
(1,396
)
(195,444
)
Provision for losses
46,322

149,885

15,009

13,911

1,396

226,523

Effect of foreign currency translation
110

728




838

Balance, end of period
$
5,342

$
62,994

$
14,945

$
4,880

$

$
88,161


NOTE 4 – CREDIT SERVICES ORGANIZATION
The CSO fee receivable amounts under our CSO programs were $13.7 million and $14.5 million at September 30, 2018 and December 31, 2017, respectively. As noted, we bear the risk of loss through our guarantee to purchase any defaulted customer loans from the lenders. The terms of these loans range from three to 18 months. As of September 30, 2018 and December 31, 2017, the maximum amount payable under all such guarantees was $65.9 million and $65.2 million, respectively. Our guarantee liability was $13.2 million and $17.8 million at September 30, 2018 and December 31, 2017, respectively.

We have placed $17.0 million and $17.9 million in collateral accounts for the lenders at September 30, 2018 and December 31, 2017, 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 based upon lender but are typically based on a percentage

16


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

of the outstanding loan balances held by the lender. The percentage of outstanding loan balances required for collateral is negotiated between us and each such lender.

NOTE 5 – LONG-TERM DEBT
Long-term debt consisted of the following:
(in thousands)
 
September 30, 2018
 
December 31, 2017
8.25% Senior Secured Notes (due 2025)
 
$
677,245

 
$

12.00% Senior Secured Notes (due 2022)
 

 
585,823

Non-Recourse U.S. SPV Facility
 
76,614

 
120,402

Non-Recourse Canada SPV Facility
 
85,342

 

Senior Revolver
 
29,000

 

Cash Money Revolving Credit Facility
 

 

     Long-term debt
 
$
868,201

 
$
706,225

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 ("12.00% Senior Secured Notes"). The February issuance refinanced similar notes that were nearing maturity, and the extinguishment of the existing notes resulted in a pretax loss of $12.5 million during the nine months ended September 30, 2017. In connection with these 12.00% Senior Secured Notes, we capitalized financing costs of approximately $18.3 million, the balance of which is included in the Condensed Consolidated Balance Sheets as a component of Long-term debt and is being amortized over the term of the 12.00% Senior Secured Notes and included as a component of interest expense.

On February 5, 2018, CFTC issued a notice of redemption for $77.5 million of its 12.00% Senior Secured Notes using a portion of the cash proceeds from our IPO as required by the underlying indenture (the transaction whereby the 12.00% Senior Secured Notes were partially redeemed, the “Redemption”). The Redemption occurred on March 7, 2018 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. Following the Redemption, $527.5 million of the original outstanding principal amount of the 12.00% Senior Secured Notes remain outstanding. CFTC conducted the Redemption 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.

On August 13, 2018, CGHC issued $690.0 million of 8.25% Senior Secured Notes due September 1, 2025 ("8.25% Senior Secured Notes"). 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 and resulted in a pretax loss of $69.2 million during the three months ended September 30, 2018. In connection with the 8.25% Senior Secured Notes, we capitalized financing costs of approximately $12.9 million, the balance of which is included in the Condensed Consolidated Balance Sheet as a component of Long-term debt and is being amortized over the term of the 8.25% Senior Secured Notes and included as a component of interest expense.

As of September 30, 2018, CGHC was in full compliance with the covenants and other provisions of the 8.25% Senior Secured Notes.

Non-Recourse U.S. SPV Facility

In November 2016, CURO Receivables Finance I, LLC, a Delaware limited liability company (the “SPV Borrower”) and our wholly-owned subsidiary, entered into a five-year revolving credit facility that provides an $80.0 million term loan and $70.0 million revolving borrowing capacity that can expand over time (“Non-Recourse U.S. SPV Facility”). The loans 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. During the quarter, we paid $3.9 million of interest. As of September 30, 2018, the SPV Borrower was in full compliance with the covenants and other provisions of the Non-Recourse U.S. SPV Facility. During the three months ended 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, we extinguished the remaining term loan balance of $80.0 million. We made the final termination payment of $2.7 million on October 26, 2018, resulting in a loss on the extinguishment of debt of $9.7 million in October 2018. See Note 15, "Subsequent Events" for additional details on the October extinguishment.

17


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 our wholly-owned subsidiary, entered into a four-year revolving credit facility 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. During the quarter, we paid $0.4 million of interest cost. This facility matures in 2022. As of September 30, 2018, the Canada SPV Borrower was in full compliance with the covenants and other provisions of the Non-Recourse Canada SPV Facility.

Senior Revolver

In September 2017, CFTC and CURO Intermediate Holdings Corp., our wholly-owned subsidiary, 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 our 12.00% Senior Secured Notes and complements our 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. The Senior Revolver is now syndicated with participation by a second bank.

There is $29.0 million maximum availability under the Senior Revolver, including up to $5.0 million of standby letters of credit, for a one-year term, renewable for successive terms following annual review. As of September 30, 2018, CFTC and CURO Intermediate Holdings Corp. were in full compliance with the covenants and other provisions of the Senior Revolver. The Senior Revolver was fully drawn as of September 30, 2018.

Cash Money Revolving Credit Facility

Cash Money Cheque Cashing, Inc., one of our Canadian subsidiaries, maintains a C$7.3 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 our Canadian operations. Aggregate draws under this facility are limited to the lesser of: (i) the borrowing base, which is defined as a percentage of cash, deposits in transit and accounts receivable, and (ii) C$7.3 million. As of December 31, 2017, the borrowing capacity under our 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 September 30, 2018 and December 31, 2017.

In July 2018 the Cash Money Revolving Credit Facility capacity was increased from C$7.3 million to C$10.0 million.

NOTE 6 – SHARE-BASED COMPENSATION

On November 8, 2017, our stockholders approved a new equity plan (“2017 Incentive Plan”). The 2017 Incentive Plan provides for the issuance of up to 5.0 million shares, subject to certain adjustment provisions, for the granting 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 our common stock. Awards may be granted to certain of our officers, employees, consultants and directors. The 2017 Incentive Plan provides that shares of common stock subject to awards granted become available for issuance if such awards expire, terminate, are canceled for any reason or are forfeited by the recipient.

RSUs are typically valued at the date of grant based on the value of our common stock and are expensed using the straight-line method over the service period. 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 RSUs as of September 30, 2018 and changes during the nine months ended September 30, 2018 is presented in the following table:

18


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

 
Units
 
Weighted Average
Grant Date Fair Value
December 31, 2017
1,516,241

 
$
14.00

Granted
90,372

 
17.46

Vested
(49,994
)
 
14.20

Forfeited

 

September 30, 2018
1,556,619

 
$
14.19


Share-based compensation expense during the three months ended September 30, 2018 and 2017, which includes compensation costs from stock options and RSUs, was $2.1 million and $0.5 million, respectively, and during the nine months ended September 30, 2018 and 2017 was $6.1 million and $1.8 million, respectively, and is included in the Condensed Consolidated Statements of Income as a component of "Corporate, district and other" expense. The increased expense during the nine months ended September 30, 2018 is primarily due to grants of RSUs in December 2017, as further disclosed in our 2017 Annual Report on Form 10-K.

As of September 30, 2018, there was $16.5 million of unrecognized compensation cost related to share-based awards, which we will recognize over a weighted-average period of 2.2 years.

NOTE 7 – INCOME TAXES

Our effective tax rate was 26.3% and 50.4% during the three months ended September 30, 2018 and 2017, respectively. Our effective tax rate was (0.1)% and 41.2% during the nine months ended September 30, 2018 and 2017, respectively.

On December 22, 2017, the 2017 Tax Act became law, which enacted various changes to the U.S. corporate tax law. Some of the most significant provisions affecting us include a reduced U.S. corporate income tax rate from 35% to 21% effective in 2018, a one-time “deemed repatriation” tax on unremitted earnings accumulated in non-U.S. jurisdictions and reported on the 2017 corporate income tax return, and a 2018 and forward minimum tax on global intangible low-taxed income ("GILTI"). At 2017 year-end, we recorded an estimated provisional deemed repatriation tax of $8.1 million. Subsequently, the IRS issued additional guidance regarding the calculation of the deemed repatriation tax and we recorded an additional accrual of $1.2 million during the period ended March 31, 2018. Through September 30, 2018, we have estimated zero GILTI tax for 2018. Previously, through June, 2018, we had estimated $1.1 million of GILTI tax annually and recorded approximately $0.6 million in the first quarter of 2018. Changes in estimates of foreign sourced income resulted in the reversal of the previously recorded $0.6 million during the three months ended September 30, 2018.

During the three months ended September 30, 2018 we recorded a tax benefit of $3.3 million for the fair market value impact of a 2010 plan that we modified in 2017 creating a taxable event. Additionally, we have not recorded a tax benefit for losses in the U.K. or in certain subsidiaries in Canada.

As of September 30, 2018, we estimated and provided $9.3 million for cumulative undistributed non-U.S. earnings as part of the 2017 repatriation tax provision and the 2018 GILTI tax in the 2017 Tax Act. We intend to reinvest our foreign earnings indefinitely in our non-U.S. operations and therefore have not provided for any non-U.S. withholding tax that would be assessed on dividend distributions. If the earnings of $172.9 million were distributed to the U.S., we would be subject to estimated Canadian withholding taxes of approximately $8.6 million. In the event the earnings were distributed to the U.S., we would adjust our income tax provision for the 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. We are 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 market data obtained from independent sources, or unobservable, meaning those that reflect our 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 us 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.


19


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.

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 our own judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. We develop these inputs based on the best information available, including our own data.

Financial Assets and Liabilities Not Measured at Fair Value

The table below presents the carrying amounts and estimated fair values of assets and liabilities that were not recorded at fair value on the Condensed Consolidated Balance Sheets at September 30, 2018.
 
 
Estimated Fair Value
(dollars in thousands)
Carrying Value September 30,
2018
Level 1
Level 2
Level 3
September 30, 2018
Financial assets:
 
 
 
 
 
Cash
$
153,361

$
153,361

$

$

$
153,361

Restricted cash
24,236

24,236



24,236

Loans receivable, net
491,607



491,607

491,607

Investment in Cognical
6,600



6,600

6,600

Financial liabilities:
 
 
 
 
 
Credit services organization guarantee liability
$
13,243

$

$

$
13,243

$
13,243

2018 Senior Secured Notes
677,245



651,848

651,848

Non-Recourse U.S. SPV facility
76,614



80,000

80,000

Non-Recourse Canada SPV facility
85,342



89,666

89,666


The table below presents the carrying amounts and estimated fair values of assets and liabilities that were not recorded at fair value on the Condensed Consolidated Balance Sheets at December 31, 2017.
 
 
Estimated Fair Value
(dollars in thousands)
Carrying Value December 31,
2017
Level 1
Level 2
Level 3
December 31, 2017
Financial assets:
 
 
 
 
 
Cash
$
162,374

$
162,374

$

$

$
162,374

Restricted cash
12,117

12,117



12,117

Loans receivable, net
363,269



363,269

363,269

Investment in Cognical
5,600



5,600

5,600

Financial liabilities:
 
 
 
 
 
Credit services organization guarantee liability
$
17,795

$

$

$
17,795

$
17,795

2017 Senior Secured notes
585,823



663,475

663,475

Non-Recourse U.S. SPV facility
120,402



124,590

124,590


Loans receivable are carried on the Condensed Consolidated Balance Sheets net of the allowance for estimated loan losses, which we calculate primarily based upon models that back-test subsequent collections history for each type of loan product. The unobservable inputs used to calculate the carrying value include additional quantitative factors, such as current default trends and changes to the portfolio mix are also considered in evaluating the accuracy of the models, as well as additional qualitative factors such as 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. Loans have terms ranging up to 60 months. The carrying value of loans receivable approximates the fair value.

20


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


In connection with our CSO programs, we guarantee consumer loan payment obligations to unrelated third-party lenders for loans that we arrange for consumers on the third-party lenders’ behalf. We are required to purchase from the lender defaulted loans we have guaranteed. The estimated fair value of the guarantee liability related to CSO loans we have guaranteed was $13.2 million and $17.8 million as of September 30, 2018 and December 31, 2017, respectively. We record the initial measurement of this guarantee liability at fair value using Level 3 inputs with subsequent measurement of the liability measured as a contingent loss. The unobservable inputs used to calculate fair value include the nature of the loan products, the creditworthiness of the borrowers in the customer base, our historical loan default history for similar loans, industry loan default history, historical collection rates on similar products, current default trends, past-due account roll rates, 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 fair value of our Senior Secured Notes was based on broker quotations. The fair value of the Non-Recourse U.S. SPV facility was based on the cash needed for final settlement.

Derivative Financial Instrument

We seek to minimize risks from foreign currency rate fluctuations on anticipated transactions in the ordinary course of business through the use of cash flow hedges. During the nine months ended September 30, 2018, we entered into a series of cash flow hedges in which the hedging instruments were forwards to purchase £10.4 million. These contracts will complete in the three months ending December 31, 2018.

We performed an assessment that determined all critical terms of the hedging instrument and the hedged transaction match and, as such, have qualitatively concluded that changes in the hedge instrument’s intrinsic value will completely offset the change in the expected cash flows based on changes in the spot rate. Since the effectiveness of this hedge is assessed based on changes in the hedge instrument’s intrinsic value, the change in the time value of the contract would be excluded from the assessment of hedge effectiveness. We recorded changes in the hedge instrument’s intrinsic value, to the extent that they were effective as a hedge, in "Other comprehensive income." As of September 30, 2018 we have recorded an unrealized loss of $0.6 million in "Other comprehensive income" associated with this hedge.

Foreign Currency Forward Contract

On June 29, 2018, we entered into a forward contract that is not designated to receive hedge accounting treatment. The purpose of this forward contract is to reduce income statement volatility resulting from our foreign currency denominated assets and liabilities in Canada and to protect the cash required to settle those items. The forward contract is recorded at fair value on the balance sheet with changes in the fair value being recorded in the income statement. As of September 30, 2018, the forward contract did not have a fair value and did not impact the Condensed Consolidated Financial Statements.

Purchase of Cognical Holdings Inc. Preferred Shares

During the three months ended March 31, 2018, we purchased 560,872 additional preferred shares of Cognical Holdings, Inc. ("Cognical") for $1.0 million. As a result of this transaction, along with share purchases during 2017, we currently own 10.4% of the equity of Cognical. We record these purchases in "Other assets" on our Consolidated Balance Sheets. No additional interest in Cognical was acquired through September 30, 2018.

NOTE 9 – STOCKHOLDERS' EQUITY
In connection with our IPO in December 2017, the underwriters had a 30-day option to purchase up to an additional 1.0 million shares at the initial public offering price, less the underwriting discount to 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 to us of $13.1 million.


21


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

NOTE 10 – EARNINGS PER SHARE

The following presents the computation of basic earnings per share (in thousands, except per share amounts):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Basic: (1)
 
 
 
 
 
 
 
Net income
$
(47,022
)
 
$
9,762

 
$
(7,755
)
 
$
42,743

Weight average common shares
45,853

 
37,908

 
45,674

 
37,908

Basic earnings per share
$
(1.03
)

$
0.26


$
(0.17
)
 
$
1.13

(1) We have adjusted the share and per share information to reflect the 36-to-1 split of our common stock, which occurred In November 2017.

The following computation reconciles the differences between the basic and diluted earnings per share presentations (in thousands, except per share amounts):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Diluted: (1)
 
 
 
 
 
 
 
Net income
$
(47,022
)
 
$
9,762

 
$
(7,755
)
 
$
42,743

Weighted average common shares - basic
45,853

 
37,908

 
45,674

 
37,908

Dilutive effect of stock options and restricted stock units
2,499

 
1,006

 
2,387

 
1,051

Weighted average common shares - diluted
48,352

 
38,914


48,061

 
38,959

Diluted earnings per share
$
(0.97
)

$
0.25


$
(0.16
)
 
$
1.10

(1) We have adjusted the share and per share information to reflect the 36-to-1 split of our common stock, which occurred in November 2017.

Potential common shares 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, we do not include these shares in calculating "Diluted earnings per share." For the three and nine months ended September 30, 2018 and 2017, there were no potential common shares excluded from the calculation of diluted earnings per share because their effect was anti-dilutive.

NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides supplemental cash flow information:
 
Nine Months Ended
September 30,
(dollars in thousands)
2018
 
2017
Cash paid for:
 
 
 
Interest
$
80,748

 
$
60,089

Income taxes
15,868

 
16,650

Non-cash investing activities:
 
 
 
Property and equipment accrued in accounts payable
$
1,240

 
$
208


NOTE 12 – SEGMENT REPORTING
We prepare segment information on the same basis that our chief operating decision maker reviews financial information for operational decision making purposes. We have three reportable operating segments: the U.S., Canada and the U.K.
The segment performance measure below is based on gross margin. In management’s evaluation of performance, certain costs, such as corporate expenses, district expenses and interest expense, are not allocated by segment. Accordingly the following reporting segment results do not include such allocated costs. There are no intersegment revenues, and we determined the amounts below in accordance with the same accounting principles used in our Condensed Consolidated Financial Statements.

22


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

The following table illustrates summarized financial information concerning our reportable segments.
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(dollars in thousands)
2018
 
2017
 
2018
 
2017
Revenues by segment:
 
 
 
 
 
 
 
U.S.
$
223,273

 
$
193,826

 
$
617,992

 
$
531,912

Canada
46,209

 
50,658

 
139,502

 
135,819

U.K.
13,522

 
10,635

 
36,251

 
28,912

Consolidated revenue
$
283,004

 
$
255,119

 
$
793,745

 
$
696,643

Gross margin by segment:
 
 
 
 
 
 
 
U.S.
$
60,105

 
$
61,103

 
$
215,497

 
$
201,354

Canada
489

 
15,649

 
28,291

 
45,911

U.K.
3,390

 
3,414

 
9,853

 
9,808

Consolidated gross margin
$
63,984

 
$
80,166

 
$
253,641

 
$
257,073

Expenditures for long-lived assets by segment:
 
 
 
 
 
 
 
U.S.
$
4,483

 
$
1,535

 
$
6,466

 
$
6,183

Canada
590

 
180

 
1,564

 
656

U.K.
72

 
250

 
170

 
1,078

Consolidated expenditures for long-lived assets
$
5,145

 
$
1,965

 
$
8,200

 
$
7,917

The following table provides the proportion of gross loans receivable by segment:
(dollars in thousands)
September 30,
2018
 
December 31,
2017
U.S.
$
344,182

 
$
308,696

Canada
193,581

 
104,551

U.K.
29,912

 
19,590

Total gross loans receivable
$
567,675

 
$
432,837


The following table illustrates our net long-lived assets, comprised of property and equipment by geographic region. These amounts are aggregated on a legal entity basis and do not necessarily reflect where the asset is physically located:
(dollars in thousands)
September 30, 2018
 
December 31, 2017
U.S.
$
48,371

 
$
52,627

Canada
30,133

 
32,924

U.K.
1,286

 
1,535

Total net long-lived assets
$
79,790

 
$
87,086


Our chief operating decision maker does not review assets by segment for purposes of allocating resources or decision-making purposes; therefore, total assets by segment are not disclosed.

NOTE 13 – CONTINGENT LIABILITIES
Reimbursement Offer; Possible Changes in Payment Practices

During 2017, it was determined that a limited universe of borrowers may have incurred bank overdraft or non-sufficient funds fees because of possible confusion about certain electronic payments we initiated on their loans. As a result, we decided to reimburse such fees through payments or credits against outstanding loan balances, subject to per-customer dollar limitations, upon receipt of (i) claims from potentially affected borrowers stating that they were in fact confused by our practices and (ii) bank statements from such borrowers showing that fees for which reimbursement is sought were incurred at a time that such borrowers might reasonably have been confused about our practices. As of September 30, 2018, net of payments made, we no longer have a liability for this matter.     


23


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)

Additionally, in June 2018, we discontinued the use of secondary payment cards for affected borrowers referenced above who did not explicitly reauthorize the use of secondary payment cards.  For those borrowers, in the event we cannot obtain payment through the bank account or payment card listed on the borrower’s application, we will need to rely exclusively on other collection methods such as delinquency notices and/or collection calls. Our discontinuance of using secondary cards for affected borrowers will increase collections costs and reduce collections effectiveness.

City of Austin

We were cited on July 5, 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 our Credit Access Business ("CAB") programs, including loan sizes and repayment terms. We believe that: (i) the Austin ordinance (like its counterparts elsewhere in the state) conflicts with Texas state law and (ii) our product in any event complies with the ordinance, when the ordinance is properly construed. The Austin Municipal Court agreed with our position that the ordinance conflicts with Texas law and, accordingly, did not address our second argument. In September 2017, the Travis County Court reversed the Municipal Court’s decision and remanded the case for further proceedings. We do not anticipate having a final determination of the lawfulness of our 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 us to restructure the loans we originate in Austin and elsewhere in Texas.

Other Legal Matters
We are also a defendant in certain routine litigation matters encountered in the ordinary course of our 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 pending legal proceedings and claims, either individually or in the aggregate, would have a material adverse effect on our Consolidated Financial Statements.

NOTE 14 – CONDENSED CONSOLIDATING FINANCIAL INFORMATION

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 our wholly-owned subsidiary, 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.

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 us, CFTC’s sole stockholder, and ultimately our 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 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 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 our IPO, to redeem such 12.00% Senior Secured Notes.

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.


24


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


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)
CFTC as the issuer of the 12.00% Senior Secured Notes;
(iii)
CURO Intermediate as the issuer of the 10.75% senior secured notes that were redeemed in February 2017;
(iv)
Our subsidiary guarantors, which are comprised of our domestic subsidiaries, excluding CFTC, U.S. SPV, Canada SPV and CURO Intermediate (the “Subsidiary Guarantors”), on a consolidated basis, which are 100% owned by us, and which are guarantors of the 8.25% Senior Secured Notes issued in August 2018, 12.00% Senior Secured Notes issued in February 2017 and the 10.75% Senior Secured Notes redeemed in February 2017;
(v)
Our other subsidiaries on a consolidated basis, which are not guarantors of the Senior Secured Notes (the “Subsidiary Non-Guarantors”)
(vi)
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 our subsidiaries;
(vii)
Us and our subsidiaries on a consolidated basis.

25


CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)


Condensed Consolidating Balance Sheets
<
 
September 30, 2018
(dollars in thousands)
CFTC
CURO Intermediate
Subsidiary
Guarantors
Subsidiary
Non-Guarantors
US SPV
Canada SPV
Eliminations
CFTC Consolidated
CURO
Eliminations
CURO
Consolidated
Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash
$

$

$
116,142

$
37,219

$

$

$

$
153,361

$

$

$
153,361

Restricted cash