Discontinued Operations

9 Months Ended

Jun. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

NOTE 2: DISCONTINUED OPERATIONS

During the third quarter of fiscal 2013, our Board of Directors approved a plan to close 107 legacy stores in a variety of locations (the “Reorganization”). These stores are generally older, smaller stores that do not fit our future growth profile. We will continue to execute our growth plan by adding approximately 15 new stores during our fourth fiscal quarter, broadening our online selling and lending channels, and adding numerous new products across the portfolio of companies in order to better serve our customers in the formats they desire and with the products and services they want.

The Reorganization includes:

▪ 57 stores in Mexico, 52 of which are small, jewelry-only asset group formats. We will continue to operate 235 full-service SWS stores under the Empeño Fácil brand, and expect to continue our rapid storefront growth in Mexico, ending fiscal year 2013 with approximately 245 locations. Neither Empeño Fácil, TUYO, nor Grupo Finmart are gold dependent and together they make up Latin America, our fastest growing segment.

▪ 29 stores in Canada, where we are in the process of transitioning to an integrated buy/sell and financial services model under the Cash Converters brand. The affected asset group consists of stores that are not optimal for that model because of location or size. We will continue to operate 46 full-service buy/sell and financial services center stores under the Cash Converters brand in Canada and the United States.

▪ 20 financial services stores in Dallas, Texas and the State of Florida, where we are exiting both locations primarily to onerous regulatory requirements. After the Reorganization we will continue to operate 472 financial services stores in the United States. In addition, one jewelry-only concept store will be closed, which was our only jewelry-only store in the United States.

In connection with the Reorganization, we incurred charges for lease termination costs, asset and inventory write-down to net realizable liquidation value, uncollectible receivables, and employee severance costs. We recognized $23.8 million of pre-tax charges related to the Reorganization during the third quarter ended June 30, 2013. These exit costs have been recorded as part of loss from discontinued operations in our condensed consolidated statements of operations.

The following table summarizes the termination costs recognized in our third quarter ended June 30, 2013 financial statements related to the Reorganization:

	Three Months Ended June 30, 2013
	(in thousands)
Lease termination costs	$	9,099
Employee severance	1,023
Inventory write-down to liquidation value	7,801
Fixed asset write-down to liquidation value	5,840
Total termination costs related to the reorganization	$	23,763

As of June 30, 2013, no cash payments had been made with regard to the recorded termination costs.

The accrued Reorganization charges are included in “Accounts payable and accrued liabilities” in our consolidated balance sheets and in “Loss from discontinued operations, net of tax” in the condensed consolidated statements of operations.

Discontinued operations in the three-month periods ended June 30, 2013 and 2012 include $3.2 million and $4.4 million of revenues and $1.8 million and $1.4 million pre-tax operating losses from stores being closed respectively. The nine-month periods ended June 30, 2013 and 2012 include $11.6 million and $12.9 million of revenues and $5.5 million and $3.2 of pre-tax operating losses from stores being closed.

The table below summarizes the pre-tax operating losses by operating segment:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2013			2012			2013			2012
	(in thousands)
U.S. & Canada
Net revenues	$	1,495		$	1,510		$	4,519		$	4,667
Operating expenses	2,942			2,576			8,980			7,334
Operating loss from discontinued operations before taxes	(1,447		)	(1,066		)	(4,461		)	(2,667		)
Total termination costs related to the reorganization	13,427			—			13,427			—
Loss from discontinued operations before taxes	(14,874		)	(1,066		)	(17,888		)	(2,667		)
Income tax benefit (provision)	839			33			1,010			(107		)
Loss from discontinued operations, net of tax	$	(14,035	)	$	(1,033	)	$	(16,878	)	$	(2,774	)
Latin America
Net revenues	$	752		$	821		$	2,483		$	2,775
Operating expenses	1,076			1,128			3,482			3,337
Operating loss from discontinued operations before taxes	(324		)	(307		)	(999		)	(562		)
Total termination costs related to the reorganization	10,336			—			10,336			—
Loss from discontinued operations before taxes	(10,660		)	(307		)	(11,335		)	(562		)
Income tax benefit	3,198			92			3,400			169
Loss from discontinued operations, net of tax	$	(7,462	)	$	(215	)	$	(7,935	)	$	(393	)
Consolidated
Net revenues	$	2,247		$	2,331		$	7,002		$	7,442
Operating expenses	4,018			3,704			12,462			10,671
Operating loss from discontinued operations before taxes	(1,771		)	(1,373		)	(5,460		)	(3,229		)
Total termination costs related to the reorganization	23,763			—			23,763			—
Loss from discontinued operations before taxes	(25,534		)	(1,373		)	(29,223		)	(3,229		)
Income tax benefit	4,037			125			4,410			62
Loss from discontinued operations, net of tax	$	(21,497	)	$	(1,248	)	$	(24,813	)	$	(3,167	)