Segment Information (Tables)

9 Months Ended

Sep. 30, 2015

Schedule of Segment Reporting Information, by Segment

The following tables present the Company's operating segment results for the periods presented:



	Three Months Ended September 30,				Nine Months Ended September 30,
Cash Proceeds on Purchased Debt	2015		2014		2015		2014
Domestic	$	75,986	$	91,035	$	239,251	$	293,373
Canada	10,285		11,066		33,100		32,872
Consolidated	$	86,271	$	102,101	$	272,351	$	326,245



	Three Months Ended September 30,				Nine Months Ended September 30,
Total Revenues	2015		2014		2015		2014
Domestic	$	42,952	$	50,004	$	130,635	$	175,208
Canada	7,580		6,995		21,145		20,147
Consolidated	$	50,532	$	56,999	$	151,780	$	195,355



	Three Months Ended September 30,				Nine Months Ended September 30,
Adjusted EBITDA(1)	2015		2014		2015		2014
Domestic	$	32,316	$	39,742	$	99,837	$	131,945
Canada	7,679		8,054		24,744		23,853
Consolidated	$	39,995	$	47,796	$	124,581	$	155,798

(1)

Segment Adjusted EBITDA is calculated consistently with the methodology used to report the Company's consolidated Adjusted EBITDA, except with regard to the costs of certain overhead items that may benefit both operating segments. The costs of these overhead items are included in the calculation of Domestic Adjusted EBITDA, but have not been allocated to Canada. This treatment of certain overhead costs is consistent with CODM review.

Segment assets were as follows as of the dates presented:



Total Assets	September 30, 2015		December 31, 2014
Domestic	$	384,762	$	414,711
Canada	38,803		33,376
Consolidated	$	423,565	$	448,087

Long-lived assets, excluding financial instruments and deferred taxes, of our Canada segment were not material at September 30, 2015 or December 31, 2014.

Reconciliation of Net loss to Adjusted EBITDA

Segment net income or loss is not presented herein, which is consistent with the CODM's review of segment information. The table below reconciles consolidated net loss to consolidated Adjusted EBITDA for the periods presented:



Reconciliation of Net Loss to Adjusted EBITDA	Three Months Ended September 30,						Nine Months Ended September 30,
Reconciliation of Net Loss to Adjusted EBITDA	2015			2014			2015			2014
Net loss	$	(9,724	)	$	(13,008	)	$	(39,571	)	$	(22,671	)
Interest expense	11,165			11,049			33,460			33,133
Interest income	(41		)	(44		)	(125		)	(101		)
Income tax expense	766			1,699			3,169			4,807
Depreciation and amortization	1,585			1,738			4,971			5,086
EBITDA	3,751			1,434			1,904			20,254
Adjustments related to purchased debt accounting
Proceeds applied to purchased debt principal(1)	36,918			44,820			125,452			133,720
Purchased debt valuation allowance reversals(2)	(1,568		)	1,331			(4,216		)	808
Certain other or non-cash expenses
Stock option expense(3)	9			17			29			66
Other(4)	885			194			1,412			950
Adjusted EBITDA	$	39,995		$	47,796		$	124,581		$	155,798


(1)	Cash proceeds applied to purchased debt principal rather than recorded as revenue.


(2)	Represents non-cash valuation allowance reversals on purchased debt.


(3)	Represents the non-cash expense related to option grants of Parent’s equity granted to certain employees, directors and branch office owners.


(4)	Consistent with the covenant calculations within our revolving credit facility, other includes, as applicable, branch office note reserves, lease breakup costs, certain consulting fees, management fees paid to KRG Capital Management, L.P., certain transaction expenses, recruiting expense, severance expense, and certain non-recurring items.

Reconciliation of Net Cash Used in Operating Activities to Adjusted EBITDA

The table below reconciles net cash used in operating activities to Adjusted EBITDA for the periods presented:



Reconciliation of Net Cash Used in Operating Activities to Adjusted EBITDA	Nine Months Ended September 30,
	2015			2014
Net cash used in operating activities	$	(46,357	)	$	(27,047	)
Proceeds applied to purchased debt principal(1)	125,452			133,720
Interest expense to be paid in cash(2)	30,982			30,931
Interest income	(125		)	(101		)
Amortization of prepaid and other non-cash expenses	(4,631		)	(3,252		)
Changes in operating assets and liabilities and deferred taxes:
Restricted cash(3)	17,010			18,333
Other operating assets and liabilities and deferred taxes(4)	(2,331		)	(2,543		)
Income tax expense	3,169			4,807
Other(5)	1,412			950
Adjusted EBITDA	$	124,581		$	155,798


(1)	Cash proceeds applied to purchased debt principal are shown in the investing activities section of the condensed consolidated statements of cash flows.


(2)	Represents interest expense, excluding non-cash amortization of loan origination fees and debt discount.


(3)	Represents the change in restricted cash balances for the period due to the timing of payments on our line of credit and semi-annual interest payments on our Senior Second Lien Notes.


(4)	The amount represents timing differences due to the recognition of certain expenses and revenue items on a cash versus accrual basis.


(5)	Consistent with the covenant calculations within our revolving credit facility, other includes, as applicable, branch office note reserves, lease breakup costs, certain consulting fees, management fees paid to KRG Capital Management, L.P., certain transaction expenses, recruiting expense, severance expense, and certain non-recurring items

SquareTwo Financial Corp 10-Q