Discontinued Operations

3 Months Ended

Dec. 31, 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 (all of which were in operation at December 31, 2012) in a variety of locations. These stores were generally older, smaller stores that did not fit our future growth profile.

Store closures as discontinued operations included:

▪ 57 stores in Mexico, 52 of which were small, jewelry-only asset group formats. We will continue to operate our full-service store-within-a-store ("SWS") locations under the Empeño Fácil brand, and expect to continue our storefront growth in Mexico.

▪ 29 stores in Canada, where we were in the process of transitioning to an integrated buy/sell and financial services model under the Cash Converters brand. The affected asset group consisted of stores that were 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 exited both locations primarily due to onerous regulatory requirements.

▪ One jewelry-only concept store, which was our only jewelry-only store in the United States.

Due to discontinued operations, we incurred charges in the fiscal year ended September 30, 2013 for lease termination costs, asset and inventory write-downs to net realizable liquidation value, uncollectible receivables, and employee severance costs. During the first quarter ended December 31, 2013, we recorded $2.6 million of pre-tax gains related to these termination costs, primarily lease terminations of $1.8 million, as negotiated amounts were lower than the initial lease buyout estimates recorded in the prior year, and inventory write-downs of $0.6 million. These gains have been recorded as part of income from discontinued operations in our first quarter ended December 31, 2013 condensed consolidated statement of operations.

As of December 31, 2013 accrued severance and lease termination costs related to discontinued operations were $3.8 million. This amount is included in accounts payable and accrued liabilities in our condensed consolidated balance sheets. During the first quarter ended December 31, 2013, $1.7 million in cash payments were made with regard to the recorded termination costs.

Discontinued operations in the three-month periods ended December 31, 2013 and 2012 include $2.6 million and $4.5 million of total revenues, respectively.

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

	Three Months Ended December 31,
	2013			2012
	(in thousands)
U.S. & Canada
Net revenues	$	185		$	1,514
Operating expenses	287			3,133
Operating loss from discontinued operations before taxes	(102		)	(1,619		)
Total termination gain related to the reorganization	(640		)	—
Income (loss) from discontinued operations before taxes	538			(1,619		)
Income tax benefit	111			105
Income (loss) from discontinued operations, net of tax	$	649		$	(1,514	)
Latin America
Net revenues	$	(335	)	$	948
Operating expenses	390			1,222
Operating loss from discontinued operations before taxes	(725		)	(274		)
Total termination gain related to the reorganization	(1,917		)	—
Income (loss) from discontinued operations before taxes	1,192			(274		)
Income tax (provision) benefit	(359		)	82
Income (loss) from discontinued operations, net of tax	$	833		$	(192	)
Consolidated
Net revenues	$	(150	)	$	2,462
Operating expenses	677			4,355
Operating loss from discontinued operations before taxes	(827		)	(1,893		)
Total termination gain related to the reorganization	(2,557		)	—
Income (loss) from discontinued operations before taxes	1,730			(1,893		)
Income tax (provision) benefit	(248		)	187
Income (loss) from discontinued operations, net of tax	$	1,482		$	(1,706	)

All revenue, expense and income reported in these condensed consolidated financial statements have been adjusted to reflect reclassification of all discontinued operations.