10-Q 1 a2015-q210q_03312015.htm 10-Q 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 2015
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 No. 0-19424
 
 
 
 
EZCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware
74-2540145
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
2500 Bee Cave Road, Building 1, Suite 200
Rollingwood, Texas
78746
(Address of principal executive offices)
(Zip Code)
(512) 314-3400
Registrant’s telephone number, including area code:
 
 
 
 
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  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x

Accelerated filer
¨
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
APPLICABLE ONLY TO CORPORATE ISSUERS:
The only class of voting securities of the registrant issued and outstanding is the Class B Voting Common Stock, par value $.01 per share, all of which is owned by an affiliate of the registrant. There is no trading market for the Class B Voting Common Stock.
As of March 31, 2015, 51,849,933 shares of the registrant’s Class A Non-voting Common Stock including redeemable common stock, par value $.01 per share, and 2,970,171 shares of the registrant’s Class B Voting Common Stock, par value $.01 per share, were outstanding.



EZCORP, Inc.
INDEX TO FORM 10-Q

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



EXPLANATORY NOTE
Delayed Filing
We delayed the filing of this Quarterly Report on Form 10-Q for the second quarter of fiscal 2015 (ended March 31, 2015) pending the completion of a review and analysis of certain accounting issues relating to our Grupo Finmart loan portfolio. As a result of that review, we have restated our financial statements for the fiscal years ended September 30, 2014, 2013 and 2012 (including the quarterly periods within those years, other than the first quarter of fiscal 2012) and for the first quarter of fiscal 2015 in order to correct certain accounting errors related to our Grupo Finmart loan portfolio.
For discussion of the Grupo Finmart portfolio review, the accounting errors identified and the restatement adjustments applicable to fiscal 2014 and periods prior to September 30, 2014, see “Part II, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Grupo Finmart Portfolio Review and Restatement” and Notes 2 and 19 of Notes to Consolidated Financial Statements included in "Part II, Item 8 — Financial Statements and Supplementary Data” in our Amended Annual Report on Form 10-K/A for the fiscal year ended September 30, 2014 (the "Amended FY14 Annual Report").
For a description of the restatement adjustments applicable to the first quarter of fiscal 2015, see "Part I, Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Grupo Finmart Portfolio Review and Restatement" and Note 2 of Notes to Interim Condensed Consolidated Financial Statements included in "Part I, Item 1 — Financial Statements" in our Amended Quarterly Report on Form 10-Q/A for the quarter ended December 31, 2014 (the Amended Q115 Quarterly Report").
Internal Control over Financial Reporting
Management reassessed its evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2014, and concluded that a number of deficiencies in the design and operating effectiveness of our internal controls, collectively, represent material weaknesses in our internal control over financial reporting and, therefore, that we did not maintain effective internal control over financial reporting as of September 30, 2014, September 30, 2013 and September 30, 2012. For a description of the material weaknesses identified by management and management’s plan to remediate those material weaknesses, see “Part II, Item 9A — Controls and Procedures” in the Amended FY14 Annual Report.
The information in this Report pertaining to the second quarter and first six months of fiscal 2014 (ended March 31, 2014) and as of September 30, 2014 reflects the restated financial statements for such periods, as set forth in the Amended FY14 Annual Report. The information in this Report pertaining to the first six months of fiscal 2015 reflects the restated financial statements for the first quarter of fiscal 2015, as set forth in the Amended Q115 Quarterly Report.




PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
EZCORP, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
March 31,
2015
 
March 31,
2014
 
September 30,
2014
 
 
 
 
 
 
 
(Unaudited)
 
 
Assets:
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
138,173

 
$
32,328

 
$
55,325

Restricted cash
47,909

 
27,244

 
63,495

Pawn loans
127,929

 
128,683

 
162,444

Consumer loans, net
55,529

 
57,447

 
63,995

Pawn service charges receivable, net
24,909

 
24,733

 
31,044

Consumer loan fees and interest receivable, net
13,063

 
15,870

 
12,647

Inventory, net
116,144

 
128,094

 
138,175

Deferred tax asset
24,428

 
15,302

 
17,572

Prepaid income taxes
52,234

 
35,134

 
57,069

Receivables, prepaid expenses and other current assets
32,383

 
38,364

 
33,097

Total current assets
632,701

 
503,199

 
634,863

Investment in unconsolidated affiliate
94,510

 
88,685

 
91,781

Property and equipment, net
102,252

 
111,419

 
105,900

Restricted cash, non-current
2,880

 
3,309

 
5,070

Goodwill
344,931

 
435,048

 
346,577

Intangible assets, net
61,107

 
68,873

 
66,086

Non-current consumer loans, net
79,860

 
83,325

 
85,004

Deferred tax asset
10,785

 
9,642

 
12,142

Other assets, net
60,041

 
29,644

 
63,121

Total assets (1)(3)
$
1,389,067

 
$
1,333,144

 
$
1,410,544

 
 
 
 
 
 
Liabilities, temporary equity and stockholders’ equity:
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Current maturities of long-term debt
$
71,471

 
$
20,889

 
$
36,111

Current capital lease obligations
93

 
533

 
418

Accounts payable and other accrued expenses
89,711

 
70,643

 
94,993

Other current liabilities
6,230

 
12,121

 
8,595

Customer layaway deposits
10,484

 
8,986

 
8,097

Total current liabilities
177,989

 
113,172

 
148,214

Long-term debt, less current maturities
356,393

 
224,379

 
392,054

Long-term capital lease obligations

 
106

 

Deferred gains and other long-term liabilities
7,673

 
21,810

 
15,172

Total liabilities (2)(4)
542,055

 
359,467

 
555,440

Commitments and contingencies


 


 


Temporary equity:
 
 
 
 
 
Class A Non-voting Common Stock, subject to possible redemption at $10.06 per share; 1,168,456 shares issued and outstanding at redemption value as of March 31, 2015; and none as of March 31, 2014 and September 30, 2014
11,696

 

 

Redeemable noncontrolling interest
16,827

 
43,717

 
22,800

Total temporary equity
28,523

 
43,717

 
22,800

Stockholders’ equity:
 
 
 
 
 
Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million as of March 31, 2015 and 2014 and September 30, 2014; issued and outstanding: 50,681,477 as of March 31, 2015; 51,411,973 as of March 31, 2014; and 50,614,767 as of September 30, 2014
506

 
513

 
506

Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; issued and outstanding: 2,970,171
30

 
30

 
30

Additional paid-in capital
329,973

 
327,066

 
332,264

Retained earnings
522,541

 
606,120

 
509,586

Accumulated other comprehensive loss
(34,561
)
 
(3,769
)
 
(10,082
)
EZCORP, Inc. stockholders’ equity
818,489

 
929,960

 
832,304

Total liabilities, temporary equity and stockholders’ equity
$
1,389,067

 
$
1,333,144

 
$
1,410,544

See accompanying notes to interim condensed consolidated financial statements.

1


Assets and Liabilities of Consolidated Variable Interest Entities (See Note 17)
(1) Our consolidated assets as of March 31, 2015 and 2014 and September 30, 2014 include the following assets of our consolidated variable interest entities:

March 31,
2015
 
March 31,
2014
 
September 30,
2014
 
 
 
 
 
 
 
(Unaudited)
 
 

(in thousands)
Restricted cash
$
2,084

 
$
3

 
$
1,921

Consumer loans, net
14,826

 
5,702

 
16,465

Consumer loan fees and interest receivable, net
3,577

 
1,543

 
3,058

Non-current consumer loans, net
32,511

 
12,941

 
35,780

Total assets
$
52,998

 
$
20,189

 
$
57,224

(2) Our consolidated liabilities as of March 31, 2015 and 2014 and September 30, 2014 include the following liabilities of our consolidated variable interest entities:
 
March 31,
2015
 
March 31,
2014
 
September 30,
2014
 
 
 
 
 
 
 
(Unaudited)
 
 
 
(in thousands)
Accounts payable and other accrued expenses
$
3,153

 
$
632

 
$
2,105

Current maturities of long-term debt
48,246

 
6,661

 
25,438

Long-term debt, less current maturities
51,854

 
10,125

 
35,624

Total liabilities
$
103,253

 
$
17,418

 
$
63,167

Assets and Liabilities of Grupo Finmart Securitization Trust
(3) Our consolidated assets as of March 31, 2015 and 2014 and September 30, 2014 include the following assets of Grupo Finmart’s Securitization trust that can only be used to settle its liabilities:
 
March 31,
2015
 
March 31,
2014
 
September 30,
2014
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
(in thousands)
 
 
Restricted cash
$
21,835

 
$
17,813

 
$
23,592

Consumer loans, net
34,803

 
42,219

 
41,588

Consumer loan fees and interest receivable, net
5,182

 
6,178

 
5,489

Restricted cash, non-current
119

 
5,805

 
133

Other assets, net
2,310

 
2,430

 
2,847

Total assets
$
64,249

 
$
74,445

 
73,649

(4) Our consolidated liabilities as of March 31, 2015 and 2014 and September 30, 2014 include the following liabilities for which the creditors of Grupo Finmart’s securitization trust do not have recourse to the general credit of EZCORP, Inc.:
 
March 31,
2015
 
March 31,
2014
 
September 30,
2014
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
(in thousands)
 
 
Long-term debt, less current maturities
$
47,826

 
$
55,715

 
$
54,045

See accompanying notes to interim condensed consolidated financial statements.

2


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
(Unaudited)
 
(in thousands, except per share amounts)
Revenues:
 
 
 
 
 
 
 
Merchandise sales
$
107,852

 
$
103,454

 
$
217,491

 
$
209,041

Jewelry scrapping sales
18,399

 
26,193

 
36,933

 
53,896

Pawn service charges
59,470

 
59,162

 
124,397

 
123,295

Consumer loan fees and interest
54,441

 
54,777

 
113,288

 
109,981

Other revenues
1,195

 
1,545

 
2,066

 
2,674

Total revenues
241,357

 
245,131

 
494,175

 
498,887

Merchandise cost of goods sold
72,492

 
64,223

 
144,970

 
128,364

Jewelry scrapping cost of goods sold
14,354

 
20,111

 
29,029

 
40,131

Consumer loan bad debt
12,106

 
10,876

 
34,156

 
29,064

Net revenues
142,405

 
149,921

 
286,020

 
301,328

Operating expenses (income):
 
 
 
 
 
 
 
Operations
100,290

 
101,107

 
203,984

 
206,468

Administrative
10,849

 
19,996

 
19,201

 
35,720

Depreciation
7,699

 
7,414

 
15,272

 
14,754

Amortization
1,368

 
1,393

 
2,825

 
2,758

Loss (gain) on sale or disposal of assets
626

 
87

 
885

 
(6,203
)
Restructuring
726

 

 
726

 

Total operating expenses
121,558


129,997


242,893


253,497

Operating income
20,847

 
19,924

 
43,127

 
47,831

Interest expense
11,296

 
6,114

 
23,330

 
11,165

Interest income
(514
)
 
(155
)
 
(1,046
)
 
(352
)
Equity in net loss (income) of unconsolidated affiliates
3,678

 
(492
)
 
1,484

 
(1,763
)
Impairment of investments

 
7,940

 

 
7,940

Other expense
1,859

 
442

 
2,618

 
274

Income from continuing operations before income taxes
4,528

 
6,075

 
16,741

 
30,567

Income tax expense
1,327

 
852

 
4,905

 
5,675

Income from continuing operations, net of tax
3,201

 
5,223

 
11,836

 
24,892

Loss from discontinued operations, net of tax
(2,764
)
 
(634
)
 
(1,721
)
 
(3,369
)
Net income
437

 
4,589

 
10,115

 
21,523

Net loss from continuing operations attributable to redeemable noncontrolling interest
(906
)
 
(1,553
)
 
(2,840
)
 
(3,349
)
Net income attributable to EZCORP, Inc.
$
1,343


$
6,142


$
12,955


$
24,872

 
 
 
 
 
 
 
 
Basic (loss) earnings per share attributable to EZCORP, Inc.:
 
 
 
 
 
 
 
Continuing operations
$
0.08

 
$
0.12

 
$
0.27

 
$
0.52

Discontinued operations
(0.05
)
 
(0.01
)
 
(0.03
)
 
(0.06
)
Basic earnings per share
$
0.03

 
$
0.11

 
$
0.24

 
$
0.46

 
 
 
 
 
 
 
 
Diluted (loss) earnings per share attributable to EZCORP, Inc.:
 
 
 
 
 
 
 
Continuing operations
$
0.08

 
$
0.12

 
$
0.27

 
$
0.52

Discontinued operations
(0.05
)
 
(0.01
)
 
(0.03
)
 
(0.06
)
Diluted earnings per share
$
0.03

 
$
0.11

 
$
0.24

 
$
0.46

 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
 
 
Basic
54,184

 
54,374

 
53,915

 
54,353

Diluted
54,212

 
54,586

 
53,972

 
54,583

 
 
 
 
 
 
 
 
Net income from continuing operations attributable to EZCORP, Inc.
$
4,107

 
$
6,776

 
$
14,676

 
$
28,241

Loss from discontinued operations attributable to EZCORP, Inc.
(2,764
)
 
(634
)
 
(1,721
)
 
(3,369
)
Net income attributable to EZCORP, Inc.
$
1,343

 
$
6,142

 
$
12,955

 
$
24,872

See accompanying notes to interim condensed consolidated financial statements.

3


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
(Unaudited)
 
(in thousands)
Net income
$
437

 
$
4,589

 
$
10,115

 
$
21,523

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Foreign currency translation (loss) gain
(6,698
)
 
(2,142
)
 
(28,219
)
 
2,423

Foreign currency translation reclassification adjustment realized upon impairment

 
375

 

 
375

Cash flow hedges:
 
 
 
 
 
 
 
Unrealized loss before reclassifications

 
(326
)
 

 
(672
)
Amounts reclassified from accumulated other comprehensive loss
35

 
297

 
387

 
542

Unrealized holding gain on available-for-sale arising during period

 
626

 

 
617

Income tax (expense) benefit
(199
)
 
480

 
220

 
(383
)
Other comprehensive (loss) income, net of tax
(6,862
)
 
(690
)
 
(27,612
)
 
2,902

Comprehensive (loss) income
$
(6,425
)
 
$
3,899

 
$
(17,497
)
 
$
24,425

Attributable to redeemable noncontrolling interest:
 
 
 
 
 
 
 
Net loss
(906
)
 
(1,553
)
 
(2,840
)
 
(3,349
)
Foreign currency translation (loss) gain
(825
)
 
(46
)
 
(3,227
)
 
278

Amounts reclassified from accumulated other comprehensive loss (income)
8

 
(52
)
 
94

 
(52
)
Comprehensive loss attributable to redeemable noncontrolling interest
(1,723
)

(1,651
)
 
(5,973
)

(3,123
)
Comprehensive (loss) income attributable to EZCORP, Inc.
$
(4,702
)
 
$
5,550

 
$
(11,524
)
 
$
27,548

See accompanying notes to interim condensed consolidated financial statements.

4


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Six Months Ended March 31,
 
2015
 
2014
 
 
 
 
 
(Unaudited)
 
(in thousands)
Operating activities:
 
 
 
Net income
$
10,115

 
$
21,523

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
18,097

 
18,886

Amortization (accretion) of debt discount (premium) and consumer loan premium (discount), net
4,229

 
(170
)
Consumer loan loss provision
14,023

 
18,562

Deferred income taxes
(5,536
)
 
(1,624
)
Restructuring
726

 

Amortization of deferred financing costs
2,625

 
2,550

Amortization of prepaid commissions
6,200

 
5,144

Other adjustments
380

 
(789
)
Loss (gain) on sale or disposal of assets
950

 
(6,081
)
Stock compensation (benefit) expense
(1,928
)
 
8,189

Loss (income) from investments in unconsolidated affiliates
1,484

 
(1,763
)
Impairment of investments

 
7,940

Changes in operating assets and liabilities, net of business acquisitions:
 
 
 
Service charges and fees receivable
2,542

 
9,501

Inventory
2,499

 
2,696

Receivables, prepaid expenses, other current assets and other assets
(16,949
)
 
(20,990
)
Accounts payable and other accrued expenses and deferred gains and other long-term liabilities
(6,651
)
 
(11,517
)
Customer layaway deposits
1,947

 
353

Restricted cash
(835
)
 

Prepaid income taxes
4,623

 
(11,410
)
Payments of restructuring charges
(2,962
)
 

Dividends from unconsolidated affiliates
2,407

 
2,597

Net cash provided by operating activities
37,986

 
43,597

Investing activities:
 
 
 
Loans made
(417,014
)
 
(448,159
)
Loans repaid
334,888

 
336,970

Recovery of pawn loan principal through sale of forfeited collateral
138,885

 
130,359

Additions to property and equipment
(15,934
)
 
(10,643
)
Acquisitions, net of cash acquired
(4,750
)
 
(10,282
)
Investments in unconsolidated affiliates
(12,140
)
 

Proceeds from sale of assets

 
10,631

Other investing activities

 
94

Net cash provided by (used in) investing activities
23,935

 
8,970


5


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Financing activities:
 
 
 
Taxes paid related to net share settlement of equity awards
(196
)
 
(629
)
Debt issuance costs

 
(5,176
)
Payout of deferred and contingent consideration
(6,000
)
 
(23,000
)
Purchase of subsidiary shares from noncontrolling interest

 
(1,082
)
Proceeds from settlement of forward currency contracts
2,313

 

Change in restricted cash
11,476

 
(17,756
)
Proceeds from revolving line of credit

 
217,493

Payments on revolving line of credit

 
(273,070
)
Proceeds from borrowings
69,384

 
105,769

Payments on borrowings and capital lease obligations
(51,677
)
 
(51,819
)
Net cash provided by (used in) financing activities
25,300

 
(49,270
)
Effect of exchange rate changes on cash and cash equivalents
(4,373
)
 
(69
)
Net increase in cash and cash equivalents
82,848

 
3,228

Cash and cash equivalents at beginning of period
55,325

 
29,100

Cash and cash equivalents at end of period
$
138,173

 
$
32,328

 
 
 
 
Non-cash investing and financing activities:
 
 
 
Pawn loans forfeited and transferred to inventory
$
119,028

 
$
118,050

Issuance of common stock, subject to possible redemption, due to acquisition
11,696

 

Deferred consideration
250

 
5,331

Change in accrued additions to property and equipment

 
122

Purchase of shares from noncontrolling interest

 
619

Note receivable from sale of assets

 
15,903

See accompanying notes to interim condensed consolidated financial statements.

6


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
Common Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive (Loss) Income
 
EZCORP, Inc.
Stockholders’
Equity
 
Shares
 
Par Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited, except balances as of September 30, 2014 and 2013)
 
(in thousands)
Balances as of September 30, 2013
54,240

 
$
543

 
$
320,537

 
$
581,248

 
$
(6,445
)
 
$
895,883

Stock compensation

 

 
8,197

 

 

 
8,197

Issuance of common stock due to purchase of subsidiary shares from noncontrolling interest

 

 
(619
)
 

 
(15
)
 
(634
)
Release of restricted stock
142

 

 

 

 

 

Tax deficiency of stock compensation

 

 
(420
)
 

 

 
(420
)
Taxes paid related to net share settlement of equity awards

 

 
(629
)
 

 

 
(629
)
Effective portion of cash flow hedge

 

 

 

 
(78
)
 
(78
)
Unrealized loss on available-for-sale securities

 

 

 

 
401

 
401

Foreign currency translation adjustment

 

 

 

 
1,993

 
1,993

Foreign currency translation reclassification adjustment realized upon impairment

 

 

 

 
375

 
375

Net income attributable to EZCORP, Inc.

 

 

 
24,872

 

 
24,872

Balances as of March 31, 2014
54,382

 
$
543

 
$
327,066

 
$
606,120

 
$
(3,769
)
 
$
929,960

 
 
 
 
 
 
 
 
 
 
 
 
Balances as of September 30, 2014
53,585

 
$
536

 
$
332,264

 
$
509,586

 
$
(10,082
)
 
$
832,304

Issuance of common stock related to 401(k) match
1

 

 

 

 

 

Stock compensation benefit

 

 
(1,928
)
 

 

 
(1,928
)
Release of restricted stock
66

 
1

 

 

 

 
1

Tax deficiency of stock compensation

 

 
(167
)
 

 

 
(167
)
Taxes paid related to net share settlement of equity awards

 

 
(196
)
 

 

 
(196
)
Amounts reclassified from accumulated other comprehensive loss

 

 

 

 
293

 
293

Foreign currency translation adjustment

 

 

 

 
(24,773
)
 
(24,773
)
Net income attributable to EZCORP, Inc.

 

 

 
12,955

 

 
12,955

Balances as of March 31, 2015
53,652

 
$
537

 
$
329,973

 
$
522,541

 
$
(34,562
)
 
$
818,489

See accompanying notes to interim condensed consolidated financial statements.

7


EZCORP, Inc.
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)
March 31, 2015
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
We are a leading provider of specialty consumer financial services. With approximately 7,100 teammates and 1,350 locations and branches, we provide collateralized, non-recourse loans, commonly known as pawn loans, and a variety of short-term and long-term consumer loans including single-payment and multiple-payment unsecured loans and single-payment and multiple-payment auto title loans, or fee-based credit services to customers seeking loans in the United States, Mexico and Canada. Subsequent to March 31, 2015, we discontinued our consumer loan operations in the United States.
We also own approximately 32% of Cash Converters International Limited ("Cash Converters International"), which is based in Australia and franchises and operates a worldwide network of over 750 locations that provide financial services and buy and sell second-hand goods.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Our management has included all adjustments it considers necessary for a fair presentation. These adjustments are of a normal, recurring nature except for those related to discontinued operations (described in Note 2). Furthermore, certain reclassifications of prior period amounts have been made to conform to the current period presentation. These reclassifications did not have a material impact on our financial position, results of operations or cash flows.
The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes included in our Amended Annual Report on Form 10-K/A for the year ended September 30, 2014 (the "Amended FY14 Annual Report"). The balance sheet as of September 30, 2014 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Our business is subject to seasonal variations, and operating results for the three and six-months ended March 31, 2015 (the "current quarter" and "current six-month period") are not necessarily indicative of the results of operations for the full fiscal year.
These condensed consolidated financial statements include the accounts of EZCORP, Inc. ("EZCORP") and its consolidated subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. As of March 31, 2015, we owned 76% of the outstanding equity interests in Prestaciones Finmart, S.A.P.I. de C.V., SOFOM, E.N.R. ("Grupo Finmart"), doing business under the brands "Crediamigo" and "Adex," and 59% of Renueva Comercial S.A.P.I. de C.V. ("TUYO"), and therefore, include their results in our condensed consolidated financial statements.
To determine if we hold a controlling financial interest in an entity, we first evaluate if we are required to apply the variable interest entity (“VIE”) model to the entity; otherwise, the entity is evaluated under the voting interest model. Where we hold current or potential rights that give us the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance combined with a variable interest that gives us the right to receive potentially significant benefits or the obligation to absorb potentially significant losses, we have a controlling financial interest in that VIE. Rights held by others to remove the party with power over the VIE are not considered unless one party can exercise those rights unilaterally. Grupo Finmart has completed several transfers of consumer loans to various securitization trusts. We consolidate those securitization trusts under the VIE model. See Note 17.
We account for our investment in Cash Converters International using the equity method.
Use of Estimates and Assumptions
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory, loan loss allowances, long-lived and intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience, observable trends and various other assumptions that we believe are reasonable under the circumstances. We use this

8


information to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from the estimates under different assumptions or conditions.
There have been no changes in significant accounting policies as described in our Amended FY14 Annual Report, other than those described below.
Recently Adopted Accounting Policies
Common Stock, Subject to Possible Redemption
We account for shares subject to possible redemption in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 480 Distinguishing Liabilities from Equity. Under this standard, shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value and conditionally redeemable common shares (including shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares are classified as stockholders’ equity. The EZCORP common stock subject to possible redemption features certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly as of March 31, 2015, the shares subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed consolidated balance sheets.
Recently Issued Accounting Pronouncements
In September 2015, the FASB issued Accounting Standards Update ("ASU") 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This ASU requires reporting entities to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Measurement period adjustments were previously required to be retrospectively adjusted as of the acquisition date. The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity should apply the amendment prospectively. We do not anticipate that the adoption of ASU 2015-16 will have a material effect on our financial position, results of operations or cash flows.
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This ASU requires reporting entities measuring inventories under the first-in, first-out or average cost methods to measure inventory at the lower of cost or net realizable value, where net realizable value is "estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation." Inventory was previously required to be measured at the lower of cost or market value, where the measurement of market value had several potential outcomes. The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted provided that presentation is applied to the beginning of the fiscal year of adoption. A reporting entity may apply the amendment prospectively. We have not completed the process of evaluating the impact that will result from adopting ASU 2015-11. Therefore we are unable to disclose the impact that adopting ASU 2015-11 will have on our financial position, results of operations and cash flows when such statement is adopted.
In April 2015, the FASB issued ASU 2015-05, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity may apply the amendment prospectively or retrospectively. We do not anticipate that the adoption of ASU 2015-05 will have a material effect on our financial position, results of operations or cash flows.
In April 2015, the FASB issued ASU 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This ASU requires reporting entities to record costs paid to third parties that are directly related to issuing debt, and that otherwise would not be incurred, as a deduction to the corresponding debt for presentation purposes. The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. A reporting entity must apply the amendment retrospectively, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The adoption of ASU 2015-03 as of March 31, 2015 would have resulted in the reclassification of unamortized debt issuance costs of $11.4 million, $7.7 million and $15.1 million as of March 31, 2015 and 2014 and September 30, 2014,

9


respectively, from intangible assets, net to long-term debt within the condensed consolidated balance sheets. Other than this reclassification, the adoption of ASU 2015-03 would not have an impact on our financial position, results of operations or cash flows.
In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. This ASU provides guidance for reporting entities that are required to evaluate whether they should consolidate certain legal entities. The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, provided that presentation is applied to the beginning of the fiscal year of adoption. A reporting entity may apply the amendment retrospectively or using a modified retrospective approach. We do not anticipate that the adoption of ASU 2015-02 will have a material effect on our financial position, results of operations or cash flows.
In November 2014, the FASB issued ASU 2014-16, Derivatives and Hedging (Topic 815): Determining Whether a Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity. This ASU requires reporting entities to determine the nature of a hybrid financial instrument host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances. The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, provided that presentation is applied to the beginning of the fiscal year of adoption. We do not anticipate that the adoption of ASU 2014-16 will have a material effect on our financial position, results of operations or cash flows.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) to defer the effective date to December 15, 2017 for annual reporting periods beginning after that date. The FASB also permitted early adoption of the standard, but not before the original effective date of December 15, 2016. We have not completed the process of evaluating the impact that will result from adopting ASU 2014-09. Therefore we are unable to disclose the impact that adopting ASU 2014-09 will have on our financial position, results of operations and cash flows when such statement is adopted.
NOTE 2: DISCONTINUED OPERATIONS AND RESTRUCTURING
Discontinued Operations
During the fourth quarter of fiscal 2014, we implemented a plan to exit our online lending businesses in the United States and the United Kingdom. As a result of this plan, our online lending operations in the United States (EZOnline) and in the United Kingdom (Cash Genie) have been included as discontinued operations.
During the third quarter of fiscal 2013, we implemented a plan to close 107 legacy stores (57 in Mexico, 29 in Canada and 21 in the U.S.). These stores were generally older, smaller stores that did not fit our future growth profile.
See Note 18 for discussion of discontinued operations and restructuring actions subsequent to March 31, 2015.

10


Accrued lease termination costs, severance costs and other costs related to discontinued operations are included under "Accounts payable and other accrued expenses" in our condensed consolidated balance sheets. Changes in these amounts during the three and six-month periods ended March 31, 2015 and 2014 are summarized as follows:
 
Three Months Ended March 31, 2015
 
Six Months Ended March 31, 2015
 
 
 
 
 
(in millions)
Beginning balance
$
7.8

 
$
8.9

Charged to expense*
4.0

 
4.0

Cash payments
(0.7
)
 
(1.4
)
Other**
(0.9
)
 
(1.3
)
Balance as of March 31, 2015
$
10.2

 
$
10.2

* We recorded additional one-time charges of $3.3 million related to Cash Genie regulatory compliance and $0.7 million related to severance costs during the three and six-month periods ended March 31, 2015.
** This balance consists of adjustments due to foreign currency effects and other individually immaterial adjustments.
 
Three Months Ended March 31, 2014
 
Six Months Ended March 31, 2014
 
 
 
 
 
(in millions)
Beginning balance
$
3.8

 
$
7.1

Charged to expense

 

Cash payments
(1.2
)
 
(2.9
)
Other*
(0.4
)
 
(2.0
)
Balance as of March 31, 2014
$
2.2

 
$
2.2

* This balance consists of adjustments due to foreign currency effects and other individually immaterial adjustments.
Discontinued operations for the three-month periods ended March 31, 2015 and 2014 include $0.3 million and $9.2 million of total revenues, respectively. Discontinued operations for the six-month periods ended March 31, 2015 and 2014 include $1.6 million and $18.1 million of total revenues, respectively.
All revenue, expense and income reported in these condensed consolidated financial statements have been adjusted to reflect reclassification of all discontinued operations.
Restructuring
During the fourth quarter of fiscal 2014, we conducted a company-wide operational review to realign our organization to streamline operations and create synergies and efficiencies. The operational review resulted in the reduction of non-customer-facing overhead. Changes in the balance of restructuring costs during the three and six-month periods ended March 31, 2015 resulting from this initiative are summarized as follows:
 
Three Months Ended March 31, 2015
 
Six Months Ended March 31, 2015
 
 
 
 
 
(in thousands)
Beginning balance
$
3,858

 
$
6,121

Charged to expense
726

 
726

Cash payments
(699
)
 
(2,962
)
Balance as of March 31, 2015
$
3,885

 
$
3,885

The accrual for restructuring costs as of March 31, 2015 represents the amounts to be paid related to severance for employees that have been terminated or identified for termination as a result of the initiatives described above. We estimate we will make a portion of the remaining payments during fiscal 2015, at which time this initiative will be substantially complete. We continue to review the impact of these actions and will determine if, based on future operating results, additional actions to reduce operating expenses are necessary. The amount of any potential future charges for such actions will depend upon the nature, timing and extent of those actions.

11


NOTE 3: ACQUISITIONS
On February 19, 2015, we completed the acquisition of 12 pawn stores in Central Texas doing business under the "Cash Pawn" brand. The aggregate purchase price for the acquisition was $16.5 million, comprised of $5.0 million cash and 1,168,456 shares of our Class A Non-voting Common Stock (the "Shares"), valued at $10.01 per share less a $0.2 million Holding Period Adjustment discussed below. The Shares were issued in an unregistered private placement transaction pursuant to Section 4(a)(2) of the Securities Act of 1933 to a small number of related individuals and entities (the "Sellers") who were either "accredited investors" or "sophisticated investors." We have concluded that this acquisition was immaterial to our overall consolidated financial results and, therefore, have omitted the information required by ASC 805-10-50-2(h).
On the first anniversary of the closing date, the Sellers have the right to require us to repurchase the Shares for an aggregate price of $11.8 million (the "Put Option"). The Sellers may terminate the Put Option, in whole or in part, at any time. The Sellers are required to hold the Shares for a period of six months following the termination of the Put Option or such later date when we are in compliance with Rule 144(c) (the "Holding Period"). If the trading price of the Class A Non-voting Common Stock at the end of the Holding Period is less than $10.06 per share (the average closing sales price of the stock on The Nasdaq Stock Market for the five trading days immediately preceding the closing), then we will make an additional cash payment to the Sellers equal to the aggregate deficit, but such payment will not exceed $1.0 million. If the trading price of the Class A Non-voting Common Stock at the end of the Holding Period is more than $10.06 per share, then we will receive from the Sellers (either in cash or by returning a portion of the Shares) an amount equal to 50% of the aggregate excess, but such payment will not exceed $1.0 million (the "Holding Period Adjustment"). As of March 31, 2015, the Sellers had not terminated the Put Option in whole or in part.
The Put Option is not accounted for separately from the Shares and does not require bifurcation. The Shares are accounted for as common stock, subject to possible redemption under FASB ASC 480 Distinguishing Liabilities from Equity and are included in temporary equity in our condensed consolidated balance sheet as of March 31, 2015. The Holding Period Adjustment is accounted for as a contingent consideration asset under FASB ASC 805 Business Combinations, will be adjusted to fair value in subsequent reporting periods, and is recorded in our condensed consolidated balance sheet at its estimated fair value under "Other assets, net" as of March 31, 2015. See Note 14 for additional information regarding the Holding Period Adjustment.
See Note 18 for discussion of acquisitions subsequent to March 31, 2015.
NOTE 4: EARNINGS PER SHARE
The two-class method is utilized for the computation of earnings per share. The two-class method requires a portion of net income to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends or dividend equivalents, if declared. Income allocated to these participating securities is excluded from net earnings allocated to common shares. There were no participating securities outstanding during the three and six-month periods ended March 31, 2015 and 2014.
We compute basic earnings per share on the basis of the weighted-average number of shares of common stock outstanding during the period. We compute diluted earnings per share on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include restricted stock awards and warrants.
Potential common shares are required to be excluded from the computation of diluted earnings per share if the assumed proceeds upon exercise or vest, as defined by FASB ASC 718-10-25, are greater than the cost to re-acquire the same number of shares at the average market price, and therefore the effect would be anti-dilutive.

12


Components of basic and diluted earnings per share and excluded anti-dilutive potential common shares are as follows: 
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
(in thousands, except per share amounts)
Net income from continuing operations attributable to EZCORP (A)
$
4,107

 
$
6,776

 
$
14,676

 
$
28,241

Loss from discontinued operations, net of tax (B)
(2,764
)
 
(634
)
 
(1,721
)
 
(3,369
)
Net income attributable to EZCORP (C)
$
1,343

 
$
6,142

 
$
12,955

 
$
24,872

 
 
 
 
 
 
 
 
Weighted-average outstanding shares of common stock (D)
54,184

 
54,374

 
53,915

 
54,353

Dilutive effect of restricted stock
28

 
212

 
57

 
230

Weighted-average common stock and common stock equivalents (E)
54,212


54,586


53,972


54,583

 
 
 
 
 
 
 
 
Basic earnings (loss) per share attributable to EZCORP:
 
 
 
 
 
 
 
Continuing operations (A / D)
$
0.08

 
$
0.12

 
$
0.27

 
$
0.52

Discontinued operations (B / D)
(0.05
)
 
(0.01
)
 
(0.03
)
 
(0.06
)
Basic earnings per share (C / D)
$
0.03

 
$
0.11

 
$
0.24

 
$
0.46

 
 
 
 
 
 
 
 
Diluted earnings (loss) per share attributable to EZCORP:
 
 
 
 
 
 
 
Continuing operations (A / E)
$
0.08

 
$
0.12

 
$
0.27

 
$
0.52

Discontinued operations (B / E)
(0.05
)
 
(0.01
)
 
(0.03
)
 
(0.06
)
Diluted earnings per share (C / E)
$
0.03

 
$
0.11

 
$
0.24

 
$
0.46

 
 
 
 
 
 
 
 
Potential common shares excluded from the calculation of diluted earnings per share:
 
 
 
 
 
 
 
Restricted stock
245

 
544

 
6

 
236

Warrants
14,317

 

 
14,317

 

Total potential common shares excluded
14,562

 
544

 
14,323

 
236

NOTE 5: STRATEGIC INVESTMENTS
Cash Converters International Limited
As of March 31, 2015, we owned 151,948,000 shares, or approximately 32%, of Cash Converters International, a company headquartered in Perth, Australia and publicly traded on the Australian Stock Exchange. Cash Converters International franchises and operates a worldwide network of over 750 specialty financial services and retail stores, with significant store concentrations in Australia and the United Kingdom, that buy and sell second-hand goods and provide pawn loans, short-term unsecured loans and other consumer finance products. Our initial total investment in Cash Converters International was acquired between November 2009 and November 2012 for approximately $68.8 million. An additional 15,100,000 shares were acquired in December 2014 for approximately $12.1 million in connection with a non-underwritten placement of 47,400,000 shares by Cash Converters International.
We account for our investment in Cash Converters International using the equity method. Since Cash Converters International’s fiscal year ends three-months prior to ours, we report the income from this investment on a three-month lag. Cash Converters International files semi-annual financial reports with the Australian Securities & Investments Commission for its fiscal periods ending December 31 and June 30. Due to the three-month lag, income reported for our six-month periods ended March 31, 2015 and 2014 represents our percentage interest in the results of Cash Converters International’s operations from July 1, 2014 to December 31, 2014 and July 1, 2013 to December 31, 2013, respectively.
During the three and six-month periods ended March 31, 2015, our equity in Cash Converters International’s net loss was $3.7 million and $1.5 million, respectively. During the three and six-month periods ended March 31, 2014 our equity in Cash Converters International’s net income was $0.5 million and $2.9 million, respectively.

13


Additionally, during the six-month periods ended March 31, 2015 and 2014, we received dividends of $2.4 million and $2.6 million, respectively. We received no dividends during the three-month periods ended March 31, 2015 and 2014.
The following table presents summary financial information for Cash Converters International’s most recently reported results as of March 31, 2015 after translation to U.S. dollars (using the exchange rate as of December 31 of each year for balance sheet items and average exchange rates for the income statement items for the periods indicated):
 
December 31,
2014
 
December 31,
2013
 
 
 
 
 
(in thousands)
Current assets
$
200,682

 
$
202,735

Non-current assets
157,737

 
148,011

Total assets
$
358,419

 
$
350,746

 
 
 
 
Current liabilities
$
75,700

 
$
77,263

Non-current liabilities
54,256

 
52,522

Shareholders’ equity:
 
 
 
Equity attributable to owners of the parent
228,462

 
224,026

Noncontrolling interest
1

 
(3,065
)
Total liabilities and shareholders’ equity
$
358,419

 
$
350,746

 
Six Months Ended December 31,
 
2014
 
2013
 
 
 
 
 
(in thousands)
Gross revenues
$
167,206

 
$
143,517

Gross profit
104,852

 
91,605

(Loss) profit for the period attributable to:
 
 
 
Owners of the parent
$
(4,717
)
 
$
9,103

Noncontrolling interest
(179
)
 
(2,417
)
(Loss) profit for the year — net (loss) income
$
(4,896
)

$
6,686

Cash Converters International’s total assets increased 2% from December 31, 2013 to December 31, 2014. Cash Converters International's (loss) profit for the period attributable to the owners of the parent decreased from a $9.1 million profit in the six-month period ended December 31, 2013 to a loss of $4.7 million loss in the six-month period ended December 31, 2014. The loss is due to a charge that Cash Converters International incurred in December 2014 in connection with the termination of agency agreements with certain development agents. See Note 18 for further discussion of events impacting Cash Converters International's financial information subsequent to March 31, 2015.
Albemarle & Bond Holdings, PLC
Prior to the quarter ended March 31, 2014, we held an investment in Albemarle & Bond Holdings, PLC ("Albemarle & Bond"). Albemarle & Bond was primarily engaged in pawnbroking, retail jewelry sales, check cashing and lending in the United Kingdom. We accounted for this investment using the equity method.
In March 2014, Albemarle & Bond entered into bankruptcy reorganization in the United Kingdom, and on April 15, 2014 Albemarle & Bond announced that the majority of its business and assets had been sold. As a result, we recognized an other-than-temporary impairment of $7.9 million ($5.4 million, net of taxes) during the quarter ended March 31, 2014, which brought our carrying value of this investment to zero.
Fair Value Measurements
The fair value for Cash Converters International as of March 31, 2015 and 2014 and September 30, 2014 was considered a Level 1 estimate within the fair value hierarchy of FASB ASC 820-10-50, and was calculated as (a) the quoted stock price on the Australian Stock Exchange as of March 31, 2015 and 2014 and September 30, 2014 multiplied by (b) the number of shares we owned as of March 31, 2015 and 2014 and September 30, 2014 multiplied by (c) the applicable foreign currency exchange

14


rate as of March 31, 2015 and 2014 and September 30, 2014. We included no control premium for owning a large percentage of outstanding shares.
The table below summarizes the carrying amount and fair value of Cash Converters International as of the dates indicated:
 
March 31,
2015
 
March 31,
2014
 
September 30,
2014
 
 
 
 
 
 
 
(in thousands of U.S. dollars)
Recorded value
$
94,510

 
$
88,685

 
$
91,781

Fair value
105,150

 
121,478

 
128,956


15


NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS
The following table presents the balance of goodwill and each major class of intangible assets as of the specified dates:
 
March 31,
2015
 
March 31,
2014
 
September 30,
2014
 
 
 
 
 
 
 
(in thousands)
Goodwill
$
344,931

 
$
435,048

 
$
346,577

 
 
 
 
 
 
Indefinite-lived intangible assets, net:
 
 
 
 
 
Pawn licenses
$
8,836

 
$
8,836

 
$
8,836

Trade names
6,746

 
8,238

 
6,990

Domain name
13

 
215

 
13

Total indefinite-lived intangible assets, net
$
15,595

 
$
17,289

 
$
15,839

 
 
 
 
 
 
Definite-lived intangible assets, net:
 
 
 
 
 
Real estate finders’ fees
$
670

 
$
866

 
$
787

Non-compete agreements
336

 
479

 
391

Favorable lease
472

 
565

 
517

Franchise rights
1,052

 
1,263

 
1,222

Contractual relationship
10,995

 
14,394

 
13,222

Internally developed software
20,361

 
26,121

 
18,759

Deferred financing costs
11,433

 
7,678

 
15,143

Other
193

 
218

 
206

Total definite-lived intangible assets, net
$
45,512

 
$
51,584

 
$
50,247

 
 
 
 
 
 
Intangible assets, net
$
61,107

 
$
68,873

 
$
66,086

The following tables present the changes in the carrying value of goodwill during the periods presented:
 
U.S. &
Canada
 
Latin
America
 
Other
International
 
Consolidated
 
 
 
 
 
 
 
 
 
(in thousands)
Balances as of September 30, 2014
$
239,179

 
$
107,398

 
$

 
$
346,577

Acquisitions
10,710

 

 

 
10,710

Effect of foreign currency translation changes

 
(12,356
)
 

 
(12,356
)
Balances as of March 31, 2015
$
249,889

 
$
95,042

 
$

 
$
344,931

 
U.S. &
Canada
 
Latin
America
 
Other
International
 
Consolidated
 
 
 
 
 
 
 
 
 
(in thousands)
Balances as of September 30, 2013
$
283,199

 
$
110,209

 
$
39,892

 
$
433,300

Effect of foreign currency translation changes

 
513

 
1,235

 
1,748

Balances as of March 31, 2014
$
283,199

 
$
110,722

 
$
41,127

 
$
435,048

On February 19, 2015, we completed the acquisition of 12 pawn stores in Central Texas doing business under the "Cash Pawn" brand. We recorded $10.7 million in goodwill pertaining to this acquisition. The acquisition was made as part of our continuing strategy to enhance our earnings over the long-term. The factors contributing to the recognition of goodwill were based on several strategic and synergistic benefits we expect to realize from the acquisitions. These benefits include a greater presence in the Central Texas market, as well as the ability to further leverage our expense structure through increased scale. See Note 3 for additional information regarding the acquisition. See Note 18 for discussion of an additional acquisition completed subsequent to March 31, 2015.

16


In accordance with ASC 350-20-35, Goodwill Subsequent Measurement, we test goodwill and intangible assets with an indefinite useful life for potential impairment annually, or more frequently when there are events or circumstances that indicate that it is more likely than not that an impairment exists. During the six-month period ended March 31, 2015, we evaluated such events and circumstances and concluded that it was not "more likely than not" that a goodwill or intangible asset impairment existed. We will continue to monitor if an interim triggering event is present in subsequent periods, and we will perform our required annual impairment test in the fourth quarter of our fiscal year. See Note 18 for discussion of goodwill and other long-term asset impairment that occurred subsequent to March 31, 2015.
The amortization of most definite-lived intangible assets is recorded as amortization expense. The favorable lease asset and other intangibles are amortized to operations expense (rent expense) over the related lease terms. The deferred financing costs are amortized to interest expense over the life of the related debt instruments.
The following table presents the amount and classification of amortization recognized as expense in each of the periods presented, without regard for any subsequent impairments of intangible assets:
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
(in thousands)
Amortization expense in continuing operations
$
1,368

 
$
1,393

 
$
2,825

 
$
2,758

Amortization expense in discontinued operations

 
582

 

 
1,157

Operations expense
26

 
31

 
52

 
61

Interest expense
992

 
1,660

 
2,625

 
2,550

Total expense from the amortization of definite-lived intangible assets
$
2,386

 
$
3,666

 
$
5,502

 
$
6,526

The following table presents our estimate of the amount and classification of future amortization expense for definite-lived intangible assets, without regard for any subsequent impairments of intangible assets:
Fiscal Years Ended September 30,
 
Amortization 
Expense
 
Operations
Expense
 
Interest
Expense
 
 
 
 
 
 
 
 
 
(in thousands)
2015
 
$
3,356

 
$
53

 
$
1,854

2016
 
6,400

 
106

 
3,223

2017
 
6,166

 
106

 
2,547

2018
 
5,209

 
106

 
2,391

2019
 
4,486

 
78

 
1,418

As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates.

17


NOTE 7: LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
The following table presents our long-term debt instruments and balances under capital lease obligations outstanding as of March 31, 2015 and 2014 and September 30, 2014. The non-recourse debt matures at various months in the years so indicated in the table below:
 
March 31, 2015
 
March 31, 2014
 
September 30, 2014
 
Carrying
Amount
 
Debt (Discount) Premium
 
Carrying
Amount
 
Debt Premium
 
Carrying
Amount
 
Debt (Discount) Premium
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Recourse to EZCORP:
 
 
 
 
 
 
 
 
 
 
 
Domestic line of credit up to $200 million due 2015
$

 
$

 
$
83,000

 
$

 
$

 
$

2.125% cash convertible senior notes due 2019
189,724

 
(40,276
)
 

 

 
185,693

 
(44,307
)
Cash convertible senior notes due 2019 embedded derivative
27,215

 

 

 

 
36,994

 

Capital lease obligations
93

 

 
639

 

 
418

 

Non-recourse to EZCORP:
 
 
 
 
 
 
 
 
 
 
 
Secured foreign currency debt up to $3 million due 2014

 

 
528

 
51

 
63

 
3

Secured foreign currency debt up to $9 million due 2014

 

 

 

 
86

 

Secured foreign currency debt up to $5 million due 2015

 

 
2,863

 

 

 

Secured foreign currency debt up to $19 million due 2015

 

 
2,616

 

 

 

Secured foreign currency debt up to $5 million due 2016

 

 
1,077

 

 

 

Secured foreign currency debt up to $16 million due 2016
2,495

 

 

 

 
4,796

 

Secured foreign currency debt up to $20 million due 2017
19,682

 

 
22,929

 

 
22,240

 

Consumer loans facility due 2019
47,826

 

 
55,715

 

 
54,045

 

10% unsecured notes due 2014

 

 
7,212

 

 
1,158

 

11% unsecured notes due 2014

 

 
110

 

 

 

9% unsecured notes due 2015
12,516

 

 
29,933

 

 
29,875

 

10% unsecured notes due 2015

 

 
696

 

 
943

 

11% unsecured notes due 2015
4,334

 

 

 

 
4,897

 

10% unsecured notes due 2016
844

 

 
121

 

 
118

 

13% unsecured notes due 2016
656

 

 

 

 

 

12% secured notes due 2016
2,691

 
67

 

 

 
3,881

 
174

12% secured notes due 2017

 

 
4,103

 
281

 

 

12% secured notes due 2019

 

 
17,579

 

 

 

12% secured notes due 2020
19,747

 

 

 

 
22,314

 

17% secured notes due 2015 consolidated from VIEs
937

 

 
6,850

 

 
3,207

 

15% secured notes due 2016 consolidated from VIEs
7,755

 

 
9,936

 

 
9,638

 

11% secured notes due 2017 consolidated from VIEs
66,139

 

 

 

 
14,982

 

11% secured notes due 2017 consolidated from VIEs
10,406

 

 

 

 
13,590

 

15% secured notes due 2017 consolidated from VIEs
14,897

 

 

 

 
19,645

 

Total
427,957

 
(40,209
)

245,907


332


428,583


(44,130
)
Less current portion
71,564

 
67

 
21,422

 
255

 
36,529

 
177

Total long-term debt and capital lease obligations
$
356,393

 
$
(40,276
)
 
$
224,485

 
$
77

 
$
392,054