UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

EZCORP, Inc.

(Exact name of registrant as specified in its charter)

Delaware		0-19424		74-2540145
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

1901 Capital Parkway, Austin, Texas 78746
(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code: (512) 314-3400

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02 — Results of Operations and Financial Condition

On July 21, 2011, EZCORP, Inc. issued a press release announcing its results of operations and financial condition for the third fiscal quarter and nine month period ended June 30, 2011. A copy of that press release is attached as Exhibit 99.1.

As used herein, “GAAP” refers to accounting principles generally accepted in the United States.

The press release furnished in Exhibit 99.1 presents the financial results in accordance with GAAP. In addition, net income, consolidated operating income and earnings per share for the third fiscal quarter and nine month period ended June 30, 2011 are also presented on a non-GAAP basis, as well as expected earnings per share for the fiscal 2011. Information sufficient to reconcile the non-GAAP measure to the GAAP measure is also presented. This non-GAAP financial measure is not meant to be considered in isolation or as a substitute for the corresponding GAAP measure.

As noted in the press release, the only difference between the presented non-GAAP measures and the GAAP measures is the exclusion of the affect of a one-time charge related to the retirement of the Company’s former Chief Executive Officer and related tax benefit. The Company believes that excluding this one-time charge from the Company’s current period GAAP results as well as expected GAAP results allows management and investors to better understand the Company’s financial performance from period to period and in relation to the Company’s operating results. Management does not believe that the excluded one-time charge is reflective of underlying operating performance. The presentation of these non-GAAP financial measures facilitates an enhanced understanding of the Company’s actual and expected performance and enables more meaningful period-to-period comparisons.

The information set forth under this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference in any filing made by EZCORP under the Securities Act of 1933 or the Securities Exchange Act of 1934.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

99.1		Press Release, dated July 21, 2011, announcing EZCORP, Inc.’s results of operations and financial condition for the third fiscal quarter and nine month period ended June 30, 2011.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX

Exhibit
No.		Description of Exhibit
99.1		Press Release, dated July 21, 2011, announcing EZCORP, Inc.’s results of operations and financial condition for the third fiscal quarter and nine month period ended June 30, 2011.

Exhibit 99.1

EZCORP THIRD QUARTER NET INCOME INCREASES 33%

AUSTIN, Texas (July 21, 2011) — EZCORP, Inc. (Nasdaq: EZPW), a leading provider of specialty consumer financial services, today announced financial results for its third fiscal quarter ended June 30, 2011.

Commenting on the results, President and Chief Executive Officer, Paul Rothamel, said, “EZCORP generated another quarter of exceptional results, with net income and EPS growing 33% and 32%, respectively. This growth was driven by strong performance throughout our diverse product portfolio in all of our geographic markets. We remain on track to deliver another outstanding year, including 30% EPS growth in fiscal 2011.”

Highlights for the quarter include:

Financials — Three months ended June 30, 2011 versus the prior year quarter

	•		Net income of $26.5 million, up 33%.
	•		Diluted earnings per share of $0.53, an increase of 32%.
	•		Total revenues of $203.2 million, up 17%, with same store revenue up 7%.
	•		Net revenues of $123.0 million, up 17%.
	•		Store level operating income of $56.2 million, up 20%, with margins improving 100 bps to 46%.
	•		Consolidated operating income increased 29% to $37.0 million, with operating margin improving 260 bps to 30%.
	•		Contribution from strategic affiliates of $4.1 million, an increase of 40%.

Key Operating Metrics — Three months ended June 30, 2011 versus the prior year quarter

•

US Pawn:

	•		Total revenue increased 16% to $149.4 million.
	•		Same store revenue growth of 6% driven by same store growth in merchandise sales, scrap sales and pawn service charges of 8%, 1% and 9%, respectively.
	•		Store level operating income increased 24% to $43.0 million with a 230 bps margin improvement to 49%.

•

Empeño Fácil (Mexico pawn):

•

Total revenue increased 87% to $15.2 million.

	•		Same store revenue growth of 32%, driven by same store growth in merchandise sales, scrap sales and pawn service charges of 29%, 32% and 43%, respectively.
	•		Store level operating income increased 94% to $2.5 million with a 200 bps improvement in margin to 32%, despite the impact from opening 56 new stores in the past 12 months.

•

EZMONEY (US and Canada financial services):

	•		Total revenue increased 6% to $38.6 million.
	•		Same store revenue growth of 4% driven by increases in signature loan fees and auto title loan fees of 4% and 2%, respectively.
	•		Bad debt as a percentage of fees increased to 28%, compared with 26% in the prior year quarter, primarily due to the transition from mature payday loan products to new installment loan products across a number of states.
	•		Store level operating income decreased 2% to $10.7 million primarily due to higher bad debt noted above and increased competitive pressures in Texas. These factors were partially offset by improved expense control in the US and stronger performance in Canada.

•

Balance Sheet and Liquidity:

	•		Combined pawn, signature and auto title loan balances (including CSO) at June 30 were $175.4 million, an increase of 15%.
	•		At June 30, cash and cash equivalents were $27.5 million, with debt outstanding of $26.5 million, compared with debt less cash of $12.6 million a year ago.
	•		During the quarter, the Company closed on a four-year $175 million senior secured revolving credit facility.

Strategic Initiatives

	•		The previously announced strategic alliance with Cash Converters International Limited — designed to develop and introduce a suite of innovative financial services products under the “Cash Converters” brand — is progressing and is expected to close in the first quarter of fiscal 2012. Separately, in April the Company acquired the Cash Converters franchise rights for Canada, including rights to receive fees from 13 stores operated by franchisees. The Company plans to convert its 59 CASHMAX stores into the Cash Converters brand and add the Cash Converters buy / sell model to its existing non-collateralized loan model.
	•		During the quarter, the Company acquired 23 pawn stores for a total cost of $31.6 million. These acquisitions included 11 stores in Iowa, seven in Utah, three in Wisconsin, and one in each of Florida and Illinois. Including the five greenfield stores opened and the nine stores acquired in the first half of the fiscal

year, the total US Pawn store count at June 30, 2011 was 432, compared to 389 at June 30, 2010.

	•		Empeño Fácil opened eight greenfield stores in the third quarter. Including the 32 greenfield stores opened in the first half of the fiscal year, the total Empeño Fácil store count at June 30, 2011 was 155 compared to 99 at June 30, 2010. In July, Empeño Fácil acquired six additional stores in the states of Hidalgo and Tlaxcala.
	•		Following successful market tests in Colorado and Wisconsin, EZCORP’s “Change” card — the Company’s general purpose integrated and reloadable debit card — was successfully rolled into the Company’s Texas stores, both US Pawn and EZMONEY, in the third quarter. As of June 30, 2011, approximately 69,000 Change cards had been issued to EZCORP customers.

Rothamel added, “Overall, we are pleased with our third quarter results as well as the progress we made toward improving both our near- and long-term competitive position. We also expect our quarterly performance in the US EZMONEY division to improve steadily as we respond to competitive pressures and continue the roll out of our new products. Our customers are under pressure on multiple fronts today and have many choices in the marketplace. We are committed to being the preferred option across all of our businesses and will continue to enhance our offering in order to meet their short-term cash needs.”

Outlook for fiscal 2011

The Company reaffirmed that it expects fiscal 2011 earnings per share, excluding the first quarter one-time charge related to the retirement of the former Chief Executive Officer, to increase 30% year-over-year to $2.55 ($2.41 on a GAAP basis).

About EZCORP

EZCORP is a leading provider of specialty consumer financial services. It provides collateralized non-recourse loans, commonly known as pawn loans, and a variety of short-term consumer loans, including payday loans, installment loans and auto title loans, or fee-based credit services to customers seeking loans. At its pawn stores, the company also sells merchandise, primarily collateral forfeited from its pawn lending operations.

EZCORP operates more than 1,000 stores, including over 500 pawn stores in the U.S. and Mexico and over 500 short-term consumer loan stores in the U.S. and Canada. The company also has significant investments in Cash Converters International Limited (CCV.L and CCV.ASX), which franchises and operates a worldwide network of over 600 stores in 21 countries that provide financial services and sell pre-owned merchandise, and Albemarle & Bond Holdings PLC (ABM.L), one of the U.K.’s largest pawnbroking businesses with over 140 stores.

Special Note Regarding Forward-Looking Statements

This announcement contains certain forward-looking statements regarding the Company’s expected operating and financial performance for future periods, including expected future earnings. These statements are based on the Company’s current expectations. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors, including changes in the regulatory environment, changing market conditions in the overall economy and the industry, consumer demand for the Company’s services and merchandise, and actions of third parties who offer services and products in the Company’s locations. For a discussion of these and other factors affecting the Company’s business and prospects, see the Company’s annual, quarterly and other reports filed with the Securities and Exchange Commission.

Change to Presentation and Reclassification of Prior Year Comparatives

The Company has historically included fees from its Product Protection Plan and Jewelry VIP Program as well as layaway fees in “Other revenue” in its Consolidated Statements of Operations and its Operating Segment Results. Beginning in the second fiscal quarter of 2011 the Company has included these fees in “Merchandise sales” on the basis that fees from these products are incidental to sales of merchandise. Prior year figures have been reclassified to conform to this presentation and margins have been recalculated accordingly.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company has provided non-GAAP net income and non-GAAP earnings per share for the nine-month period ended June 30, 2011, as well as non-GAAP expected earnings per share for fiscal 2011. The only difference between the presented non-GAAP measures and the most closely comparable GAAP measures is the exclusion of a one-time charge related to the retirement of the Company’s former Chief Executive Officer and the related tax benefit included in the quarter ended December 31, 2011. The Company’s management uses these non-GAAP financial measures to understand its financial performance from period to period. Management does not believe that the excluded one-time charge is reflective of underlying operating performance. The non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the corresponding GAAP measures, but rather are provided to facilitate an enhanced understanding of the Company’s actual and expected performance and to enable more meaningful period-to-period comparisons. A reconciliation of the non-GAAP financial measures to the most closely comparable GAAP financial measures is provided in the accompanying financial schedules.

EZCORP Investor Relations
(512) 314-2220

EZCORP, Inc.
Highlights of Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data and percents)

		Three Months Ended June 30,								Nine Months Ended June 30,
		2011				2010				2011				2010
Revenues:
Merchandise sales		$	64,574			$	53,278			$	214,227			$	184,202
Jewelry scrapping sales			50,771				43,773				149,431				117,443
Pawn service charges			48,365				39,424				144,944				118,527
Signature loan fees			34,195				32,296				109,364				102,616
Auto title loan fees			4,675				4,658				16,288				11,716
Other			572				113				978				373
Total revenues			203,152				173,542				635,232				534,877
Cost of goods sold:
Cost of merchandise sales			36,691				29,710				122,641				108,055
Cost of jewelry scrapping sales			32,437				29,275				96,617				75,662
Total cost of goods sold			69,128				58,985				219,258				183,717
Bad debt:
Signature loan bad debt			10,491				8,917				25,975				22,104
Auto title loan bad debt			536				836				1,820				1,616
Total bad debt			11,027				9,753				27,795				23,720
Net revenue			122,997				104,804				388,179				327,440
Operations expense			66,753				57,952				197,302				174,338
Administrative expense			14,379				13,576				56,250				39,356
Depreciation and amortization			4,679				3,759				13,324				10,688
(Gain) / loss on sales / disposal of assets			169				734				(2	)			1,301
Operating income			37,017				28,783				121,305				101,757
Interest income			(21	)			(135	)			(35	)			(151	)
Interest expense			586				311				1,186				1,071
Equity in net income of unconsolidated affiliates			(4,099	)			(2,930	)			(12,157	)			(7,519	)
Other			(103	)			(100	)			(160	)			(103	)
Income before income taxes			40,654				31,637				132,471				108,459
Income tax expense			14,127				11,675				46,677				39,017
Net income		$	26,527			$	19,962			$	85,794			$	69,442
Net income per share, diluted		$	0.53			$	0.40			$	1.71			$	1.40
Weighted average shares, diluted			50,385				49,640				50,292				49,541
OTHER DATA:
Gross margin on merchandise sales			43.2	%			44.2	%			42.8	%			41.3	%
Gross margin on jewelry scrapping sales			36.1	%			33.1	%			35.3	%			35.6	%
Gross margin on total sales			40.1	%			39.2	%			39.7	%			39.1	%
Signature loan bad debt as percent of fees			30.7	%			27.6	%			23.8	%			21.5	%
Auto title loan bad debt as percent of fees			11.5	%			17.9	%			11.2	%			13.8	%

EZCORP, Inc.
Highlights of Consolidated Balance Sheets
(in thousands)

		June 30, (unaudited)								September 30,
		2011				2010				2010
Assets:
Current assets:
Cash and cash equivalents		$	27,492			$	14,912			$	25,854
Pawn loans			134,633				112,807				121,201
Signature loans, net			12,089				8,915				10,775
Auto title loans, net			2,348				2,802				3,145
Pawn service charges receivable, net			24,372				19,899				21,626
Signature loan fees receivable, net			5,646				5,493				5,818
Auto title loan fees receivable, net			1,238				1,314				1,616
Inventory, net			79,031				61,027				71,502
Deferred tax asset			16,150				15,857				23,208
Federal income taxes receivable			3,099				10,655				—
Prepaid expenses and other assets			21,932				15,179				17,427
Total current assets			328,030				268,860				302,172
Investments in unconsolidated affiliates			114,777				99,773				101,386
Property and equipment, net			75,049				59,045				62,293
Deferred tax asset, non-current			—				5,472				60
Goodwill			167,017				115,570				117,305
Other assets, net			28,748				22,663				23,196
Total assets		$	713,621			$	571,383			$	606,412
Liabilities and stockholders’ equity:
Current liabilities:
Current maturities of long term debt			—				10,000				10,000
Accounts payable and other accrued expenses			53,242				44,194				49,663
Customer lay away deposits			6,131				5,404				6,109
Federal income taxes payable			—				—				3,687
Total current liabilities			59,373				59,598				69,459
Long-term debt, less current maturities			26,500				17,500				15,000
Deferred tax liability			1,237				—				—
Deferred gains and other long-term liabilities			2,209				2,630				2,525
Total stockholders’ equity			624,302				491,655				519,428
Total liabilities and stockholders’ equity		$	713,621			$	571,383			$	606,412
Other Data:
Pawn loan balance per ending pawn store		$	232			$	234			$	240
Inventory per ending pawn store		$	136			$	127			$	142
Book value per share		$	12.50			$	10.00			$	10.55

EZCORP, Inc.
Operating Segment Results (Unaudited)
(in thousands, except percents)

		Three Months Ended June 30,
		US Pawn								Empeño Fácil								EZMONEY
		2011				2010				2011				2010				2011				2010
Revenues:
Merchandise sales		$	58,168			$	49,749			$	6,401			$	3,529			$	5			$	—
Scrap sales			46,157				41,423				4,257				2,181				357				169
Pawn service charges			43,846				37,014				4,519				2,410				—				—
Signature loan fees			691				455				—				—				33,504				31,841
Auto title loan fees			352				359				—				—				4,323				4,299
Other			161				105				6				—				405				8
Total revenues			149,375				129,105				15,183				8,120				38,594				36,317
Merchandise cost of goods sold			32,911				27,749				3,767				1,961				13				—
Scrap cost of goods sold			28,754				27,328				3,486				1,862				197				85
Signature loan bad debt			325				159				—				—				10,166				8,758
Auto title loan bad debt			69				44				—				—				467				792
Net revenue			87,316				73,825				7,930				4,297				27,751				26,682
Operations expense			44,280				39,148				5,406				2,999				17,067				15,805
Store operating income		$	43,036			$	34,677			$	2,524			$	1,298			$	10,684			$	10,877
OTHER DATA
Gross margin on merchandise sales			43.4	%			44.2	%			41.1	%			44.4	%			N/A				N/A
Gross margin on scrap sales			37.7	%			34.0	%			18.1	%			14.6	%			44.8	%			53.8	%
Gross margin on total sales			40.9	%			39.6	%			31.9	%			33.0	%			42.0	%			49.7	%
Signature loan bad debt as a percent of fees			47.0	%			34.9	%			N/A				N/A				30.3	%			27.5	%
Auto title loan bad debt as percent of fees			19.6	%			12.3	%			N/A				N/A				10.8	%			18.4	%
Operating income margin			49.3	%			47.0	%			31.8	%			30.2	%			38.5	%			40.8	%

		Nine Months Ended June 30,
		US Pawn								Empeño Fácil								EZMONEY
		2011				2010				2011				2010				2011				2010
Revenues:
Merchandise sales		$	196,893			$	174,060			$	17,329			$	10,142			$	5			$	—
Scrap sales			137,221				112,660				11,363				4,550				847				233
Pawn service charges			133,355				112,211				11,589				6,316				—				—
Signature loan fees			1,607				1,442				—				—				107,757				101,174
Auto title loan fees			1,092				1,261				—				—				15,196				10,455
Other			420				365				34				—				524				8
Total revenues			470,588				401,999				40,315				21,008				124,329				111,870
Merchandise cost of goods sold			112,592				101,713				10,036				6,342				13				—
Scrap cost of goods sold			86,979				71,635				9,201				3,911				437				116
Signature loan bad debt			583				446				—				—				25,392				21,658
Auto title loan bad debt			110				166				—				—				1,710				1,450
Net revenue			270,324				228,039				21,078				10,755				96,777				88,646
Operations expense			131,293				119,259				14,533				7,736				51,476				47,343
Store operating income		$	139,031			$	108,780			$	6,545			$	3,019			$	45,301			$	41,303
OTHER DATA
Gross margin on merchandise sales			42.8	%			41.6	%			42.1	%			37.5	%			N/A				N/A
Gross margin on scrap sales			36.6	%			36.4	%			19.0	%			14.0	%			48.4	%			50.2	%
Gross margin on total sales			40.3	%			39.5	%			33.0	%			30.2	%			47.2	%			50.2	%
Signature loan bad debt as percent of fees			36.3	%			30.9	%			N/A				N/A				23.6	%			21.4	%
Auto title loan bad debt as percent of fees			10.1	%			13.2	%			N/A				N/A				11.3	%			13.9	%
Operating income margin			51.4	%			47.7	%			31.1	%			28.1	%			46.8	%			46.6	%

EZCORP, Inc.

Store Count Activity

		Three Months Ended June 30, 2011
		Company-owned Stores
		US Pawn				Empeño Fácil				EZMONEY				Consolidated				Franchises
Beginning of period			409				147				501				1,057				—
New openings			—				8				1				9				—
Acquired			23				—				—				23				13
Sold, combined or closed			—				—				(6	)			(6	)			—
End of period			432				155				496				1,083				13

		Nine Months Ended June 30, 2011
		Company-owned Stores
		US Pawn				Empeño Fácil				EZMONEY				Consolidated				Franchises
Beginning of period			396				115				495				1,006				—
New openings			5				40				11				56				—
Acquired			32				—				—				32				13
Sold, combined or closed			(1	)			—				(10	)			(11	)			—
End of period			432				155				496				1,083				13

Reconciliation of GAAP to Non-GAAP Results (Unaudited)
(in thousands, except per share data)

The following tables provide a reconciliation of the differences between the reported or projected non-GAAP financial measures for the periods indicated and the most comparable GAAP financial measures. The non-GAAP financial measures presented may not be directly comparable to similarly titled measures reported by other companies and their usefulness for such purposes are therefore limited. EZCORP management believes presentation of the non-GAAP financial measures enhances investors’ ability to analyze the Company’s operating results. However, non-GAAP financial measures are not an alternative to GAAP financial measures and should be read only in conjunction with financial measures presented on a GAAP basis.

		Three Months Ended June 30, 2011												Nine Months Ended June 30, 2011
						Non-GAAP												Non-GAAP
		GAAP				Adjustments				Non-GAAP				GAAP				Adjustments				Non-GAAP
Net revenue		$	122,997				—			$	122,997			$	388,179				—			$	388,179
Operations expense			66,753				—				66,753				197,302				—				197,302
Administrative expense			14,379				—				14,379				56,250				(10,945	)			45,305
Depreciation and amortization			4,679				—				4,679				13,324				—				13,324
(Gain) / loss on sale/disposal of assets			169				—				169				(2	)			—				(2	)
Operating income			37,017				—				37,017				121,305				10,945				132,250
Interest income			(21	)			—				(21	)			(35	)			—				(35	)
Interest expense			586				—				586				1,186				—				1,186
Equity in net income of unconsolidated affiliates			(4,099	)			—				(4,099	)			(12,157	)			—				(12,157	)
Other			(103	)			—				(103	)			(160	)			—				(160	)
Income before income taxes			40,654				—				40,654				132,471				10,945				143,416
Income tax expense			14,127				—				14,127				46,677				3,831				50,508
Net income		$	26,527			$	—			$	26,527			$	85,794			$	7,114			$	92,908
Net income per share, diluted		$	0.53			$	—			$	0.53			$	1.71			$	0.14			$	1.85
Weighted average shares, diluted			50,385				—				50,385				50,292				—				50,292

		Projected Year Ending September 30, 2011
		Projected				Non-GAAP				Projected
		GAAP				Adjustments				Non-GAAP
Net income per share, diluted		$	2.41			$	0.14			$	2.55