Discontinued Operations

12 Months Ended

Sep. 30, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

NOTE 2: DISCONTINUED OPERATIONS

During the third quarter of fiscal 2013, we implemented a plan to close 107 legacy stores (102 and 94 of which were in operation at September 30, 2012 and 2011, respectively) in a variety of locations. These stores are generally older, smaller stores that do not fit our future growth profile.

Store closures as discontinued operations include:

▪ 57 stores in Mexico, 52 of which are small, jewelry-only asset group formats. We will continue to operate our full-service SWS stores under the Empeño Fácil brand, and expect to continue our storefront growth in Mexico.

▪ 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 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 due to onerous regulatory requirements. In addition, one jewelry-only concept store will be closed, which was our only jewelry-only store in the United States.

Due to discontinued operations, 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 $22.2 million of pre-tax charges related to discontinued operations during fiscal 2013. The following table summarizes these costs, which have been recorded as part of loss from discontinued operations in our fiscal 2013 consolidated statement of operations:

	Fiscal Year Ended
	September 30, 2013
	(in thousands)
Lease termination costs	$	8,608
Employee severance	896
Inventory write-down to liquidation value	7,081
Fixed asset write-down to liquidation value	5,605
Total termination costs related to the reorganization	$	22,190

As of September 30, 2013, $1.6 million in cash payments had been made with regard to the recorded termination costs.

As of September 30, 2013 accrued severance and lease termination costs related to discontinued operations were $7.1 million. This amount is included in “Accounts payable and accrued liabilities” in our consolidated balance sheets and in “Loss from discontinued operations, net of tax” in the consolidated statements of operations.

Discontinued operations in fiscal 2013, 2012, and 2011 include $15.1 million, $17.3 million, and $16.5 million, respectively, of revenues and $27.2 million, $4.8 million, and $1.5 million, respectively, of pre-tax operating losses from stores being closed.

The table below summarizes the operating income (losses) from discontinued operations by operating segment:

	Fiscal Year Ended September 30,
	2013			2012			2011
	(in thousands)
U.S. & Canada
Net revenues	$	4,308		$	6,183		$	5,495
Operations expense	10,090			10,031			5,891
Operating loss from discontinued operations before taxes	(5,782		)	(3,848		)	(396		)
Total termination costs related to the reorganization	13,049			—			—
Loss from discontinued operations before taxes	(18,831		)	(3,848		)	(396		)
Income tax (benefit) provision	(1,392		)	77			404
Loss from discontinued operations, net of tax	$	(17,439	)	$	(3,925	)	$	(800	)
Latin America
Net revenues	$	5,215		$	3,645		$	3,138
Operations expense	4,461			4,560			4,220
Operating income (loss) from discontinued operations before taxes	754			(915		)	(1,082		)
Total termination costs related to the reorganization	9,141			—			—
Loss from discontinued operations before taxes	(8,387		)	(915		)	(1,082		)
Income tax benefit	(2,516		)	(307		)	(324		)
Loss from discontinued operations, net of tax	$	(5,871	)	$	(608	)	$	(758	)
Consolidated
Net revenues	$	9,523		$	9,828		$	8,633
Operations expense	14,551			14,591			10,111
Operating loss from discontinued operations before taxes	(5,028		)	(4,763		)	(1,478		)
Total termination costs related to the reorganization	22,190			—			—
Loss from discontinued operations before taxes	(27,218		)	(4,763		)	(1,478		)
Income tax (benefit) provision	(3,908		)	(230		)	80
Loss from discontinued operations, net of tax	$	(23,310	)	$	(4,533	)	$	(1,558	)

The following tables present stores by segment:

	Fiscal Year Ended September 30, 2013
	Company-owned Stores
	U.S. & Canada	Latin America	Other International	Consolidated	Franchises
Stores in operation:
Beginning of period	987	275	—	1262	10
De novo	84	73	—	157	—
Acquired	12	26	—	38	—
Sold, combined, or closed	(3)	(5)	—	(8)	(2	)
Discontinued operations	(50)	(57)	—	(107)	—
End of period	1,030	312	—	1,342	8