SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
AMENDMENT #1
(Mark One)
[x]QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO
FEE REQUIRED]
For the transition period from ______________ to
_____________
Commission File Number 0-19424
_______________________________
EZCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2540145
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1901 Capital Parkway
Austin, Texas 78746
(Address of principal executive offices)
(Zip Code)
(512) 314-3400
(Registrant's telephone number, including area code)
NA
(Former name, former address and former fiscal year,
if changed since last report)
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__
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, 100% of which is owned by two
record holders. There is no trading market for the Class B
Voting Common Stock.
As of June 30, 1997, 10,515,530 shares of the
registrant's Class A Non-Voting Common Stock, par value $.01
per share and 1,480,301 shares of the registrant's Class B
Voting Common Stock, par value $.01 per share were
outstanding.
<PAGE>
EZCORP, INC.
INDEX TO FORM 10-Q/A
AMENDMENT #1
REGISTRANT IS FILING THIS AMENDED FORM 10-Q FOR THE PURPOSE
OF REVISING THE CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS ON PAGE THREE AND THE LANGUAGE IN THE THIRD PARAGRAPH
ON PAGE FIVE AND THE SECOND PARAGRAPH ON PAGE ELEVEN. THE
CHANGES TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS APPEAR IN THE INVESTING ACTIVITIES SECTION AND CHANGES
THE PAWN LOANS FORFEITED AND TRANSFERRED TO INVENTORIES,
PAWN LOANS MADE AND PAWN LOANS REPAID FOR THE 1997 NINE
MONTH PERIOD.
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
June 30, 1997 and September 30, 1996 1
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended June 30, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended June 30, 1997 and 1996 3
Notes to Interim Condensed Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION 11
SIGNATURE 13
<PAGE>
PART I
Item 1. Financial Statements (Unaudited)
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
<TABLE> June 30, September 30,
<CAPTION> 1997 1996
--------- -------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 1,241 $ 1,419
Pawn loans receivable 40,693 34,636
Service charge receivable 11,954 10,262
Inventories (net) 32,568 35,834
Other 4,738 5,138
------- -------
Total current assets 91,194 87,289
Property and equipment, net 32,785 34,266
Other assets:
Excess purchase price over
net assets acquired 12,650 13,099
Other 5,490 5,712
------- -------
Total assets $142,119 $140,366
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current maturities of
long-term debt $ 9 $ 172
Accounts payable and accrued
expenses 7,733 8,183
Other 2,491 2,776
------- -------
Total current liabilities 10,233 11,131
Long-term debt less current
maturities 13,136 16,244
Stockholders' equity:
Preferred stock, par value $.01
a share - Authorized 5,000,000
shares; none issued and
outstanding - -
Class A Non-voting common stock,
par value $.01 a share -
Authorized 40,000,000 shares;
10,524,563 shares issued
and 10,515,530 shares outstanding
at June 30, 1997 (9,728,904
issued and 9,719,871 outstanding
at September 30, 1996) 105 97
Class B Voting Common stock,
par value $.01 a share -
Authorized 2,274,969 shares;
1,480,301 shares issued and
outstanding at June 30, 1997
(2,270,863 shares issued and
outstanding at September 30, 1996) 15 23
Additional paid-in capital 114,338 114,301
Retained earnings 5,056 (666)
------- -------
119,514 113,755
Other (764) (764)
------- -------
Total stockholders' equity 118,750 112,991
------- -------
Total liabilities and
stockholders' equity $142,119 $140,366
======= =======
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements
(unaudited).
<PAGE>
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE> Three Months Ended Nine Months Ended
<CAPTION> June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 22,938 $ 22,238 $ 78,147 $ 83,076
Pawn service charges 19,467 15,891 56,396 52,004
------- ------- ------- -------
Total revenues 42,405 38,129 134,543 135,080
Cost of goods sold 18,578 18,578 64,109 71,410
------- ------- ------- -------
Net revenues 23,827 19,551 70,434 63,670
Operating expenses:
Operations 15,178 13,463 45,624 45,232
Administrative 3,391 2,234 9,575 7,907
Depreciation and amortization 1,902 1,945 5,618 5,688
------- ------- ------- -------
Total operating expenses 20,471 17,642 60,817 58,827
------- ------- ------- -------
Operating income 3,356 1,909 9,617 4,843
Interest expense 153 319 675 1,602
------- ------- ------- -------
Income before income taxes 3,203 1,590 8,942 3,241
Income tax expense 1,153 563 3,220 1,171
------- ------- ------- -------
Net income $ 2,050 $ 1,027 $ 5,722 $ 2,070
======= ======= ======= =======
Earnings per share
Primary $ 0.17 $ 0.09 $ 0.48 $ 0.17
======= ======= ======= =======
Fully diluted $ 0.17 $ 0.09 $ 0.48 $ 0.17
======= ======= ======= =======
Weighted average shares outstanding
Primary 11,995,832 11,990,734 11,994,786 11,987,393
========== ========== ========== ==========
Fully diluted 12,003,692 11,990,734 12,002,842 11,987,393
========== ========== ========== ==========
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements
(unaudited).
<PAGE>
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
<TABLE> Nine Months Ended
<CAPTION> June 30,
-----------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,722 $ 2,070
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for store closings 493 -
Depreciation and amortization 5,618 5,688
Deferred income taxes (103) -
Gain on sale of assets - (262)
Changes in operating assets and
liabilities:
(Increase)/decrease in service
charge receivable (1,692) 2,153
Decrease in inventories 3,266 7,739
Decrease in accounts payable and
accrued expenses (413) (2,283)
Increase/(decrease) in customer
layaway deposits (193) 250
Decrease in income taxes payable (90) -
Decrease in income taxes recoverable - 4,236
Other 446 1,033
-------- --------
Net cash provided by operating activities 13,054 20,624
INVESTING ACTIVITIES:
Pawn loans forfeited and transferred
to inventories 36,720 38,749
Pawn loans made (123,936)(111,689)
Pawn loans repaid 81,159 80,789
-------- --------
Net (increase)/decrease in loans (6,057) 7,849
Additions to property, plant, and equipment (3,904) (4,650)
Sale of assets - 2,143
-------- --------
Net cash provided/(used) in
investing activities (9,961) 5,342
FINANCING ACTIVITIES:
Proceeds from bank borrowings 9,000 3,000
Payments on borrowings (12,271) (29,628)
-------- --------
Net cash used by financing activities (3,271) (26,628)
-------- --------
Decrease in cash and cash equivalents (178) (662)
Cash and cash equivalents at beginning of period 1,419 4,593
-------- --------
Cash and cash equivalents at end of period $ 1,241 $ 3,931
======== =======
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock to 401(k) Plan $ 37 $ 65
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements
(unaudited).
<PAGE>
EZCORP, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1997
Note A - Basis of Presentation
The accompanying unaudited
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 of the information and
footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring entries) considered necessary for a fair
presentation have been included. The accompanying financial
statements should be read with the Notes to Consolidated
Financial Statements included in the Company's Annual Report
on Form 10-K for the year ended September 30, 1996.
The Company's business is subject to seasonal
variations, and operating results for the three- and nine-
month periods ended June 30, 1997 are not necessarily
indicative of the results of operations for the full fiscal
year.
Note B - Accounting Principles and Practices
The provision for federal income taxes has been
calculated based on the Company's estimate of its effective
tax rate for the full fiscal year.
The Company provides inventory reserves for shrinkage
and cost in excess of market value. The Company estimates
these reserves using analysis of sales trends, inventory
aging, sales margins and shrinkage on inventory. As of June
30, 1997, inventory reserves were $6.9 million.
In October 1995, the Financial Accounting Standards
Board issued Statement No. 123, "Accounting for Stock Based
Compensation" which prescribes accounting and reporting
standards for all stock-based compensation plans. The
Company has determined it will continue to account for its
stock based compensation plans in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." The Company will not expense the fair
value of stock based compensation, but will provide proforma
footnote disclosures in the annual report of what net income
would have been had the Company adopted the new fair value
method for recognition purposes.
Note C - Earnings Per Share
Earnings per share calculations assume exercise of all
outstanding stock options and warrants using the treasury
stock method of calculation. The per share calculation
includes these common equivalent shares for both primary and
fully diluted weighted average shares outstanding.
In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings per Share" which
is required to be adopted on December 31, 1997. At that
time, the Company will be required to change the method
currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact of Statement
128 will not materially change the current calculation of
primary and fully diluted earnings per share as these stock
options are immaterial.
<PAGE>
EZCORP, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1997
Note D - Litigation
The Company is involved in litigation relating to
claims that arise from time to time from normal business
operations. Currently, the Company is a defendant in
several lawsuits. Some of these lawsuits involve claims for
substantial amounts. While the ultimate outcome of these
lawsuits involving the Company cannot be ascertained, after
consultation with counsel, it is management's opinion that
the resolution of these suits will not have a material
adverse effect on the Company's financial condition or
results of operations; however, there can be no assurance as
to the ultimate outcome of these matters.
On July 28, 1995, the Company terminated the
Employment Agreement of Courtland L. Logue, Jr., the
Company's former Chairman and Chief Executive Officer, and
an owner of approximately 19% of the Company's outstanding
voting securities (Class B Voting Common Stock). Since Mr.
Logue's termination, the Company has had ongoing discussions
with him concerning certain equipment leases and other
matters of dispute between Mr. Logue and the Company, as
well as the application of provisions to Mr. Logue's
Employment Agreement and Stock Purchase Agreement with the
Company. On March 8, 1996, the Company filed a lawsuit
styled EZCORP, Inc. v. Courtland L. Logue, Jr. in the 201st
District Court of Travis County, Texas to declare Mr.
Logue's employment contract terminated and, as a result, to
permit the Company to recover approximately $2.7 million in
damages pursuant to the terms of Mr. Logue's Stock Purchase
Agreement. Mr. Logue filed counter-claims to recover
monetary damages relating to the Employment Agreement and
certain equipment leases and notes entered into between Mr.
Logue and the Company. The trial court has ruled that the
Company may not recover from Mr. Logue, under the terms of
the performance right provision, as that provision,
according to the trial court, represents an unenforceable
penalty and not, as the Company believes, an enforceable
liquidated damage provision. However, the Company has
asserted other claims against Mr. Logue for the recovery of
significant monetary damages. The case is in the discovery
phase, with a trial expected later in 1997.
The Company is also the nominal defendant in a lawsuit
filed July 18, 1997 by a holder of thirty-nine (39) shares
of Company stock styled for the benefit of the Company
against certain directors of the Company in the Castle
County Court of Chancery in the State of Delaware. The suit
alleges the defendants breached their fiduciary duties to
the Company in approving certain management incentive
compensation arrangements and an affiliate's financial
advisory services contract with the Company. The suit seeks
recision of the subject agreements, unspecified damages and
expenses, including plaintiff's legal fees. The
defendants have filed a motion to dismiss which is pending
before the court.
Note E - Bank Credit Agreement
On May 9, 1997 the Company amended its November 29,
1994 revolving line of credit. The amended revolving line
of credit matures January 30, 2000. Terms of the amended
agreement require, among other things, that the Company meet
certain financial covenants. Borrowings under the line are
unsecured and bear interest at the bank's Eurodollar rate
plus 0.75% to 1.5%. The amount which the Company can borrow
is based on a percentage of its inventory levels and
outstanding pawn loan balance, up to $50 million.
<PAGE>
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations
Third Quarter Ended June 30, 1997 vs. Third Quarter Ended
June 30, 1996
The discussion in this section of this report contains
forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not
limited to, those discussed in this section and those
discussed elsewhere in this report.
The following table sets forth selected, unaudited,
consolidated financial data with respect to the Company for
the three months ended June 30, 1997 and 1996.
Three Months Ended % or
<TABLE> June 30,(a) Point
<CAPTION> 1997 1996 Change(b)
------------------- ---------
<S> <C> <C> <C>
Net Revenues:
Sales $ 22,938 $ 22,238 3.1%
Pawn service charges 19,467 15,891 22.5%
------- -------
Total revenues 42,405 38,129 11.2%
Cost goods sold 18,578 18,578 0.0%
------- -------
Net revenues $ 23,827 $ 19,551 21.9%
======= =======
Other Data:
Gross profit as a
percent of sales 19.0% 16.5% 2.5 pts.
Average annual
inventory turnover 2.4x 2.1x 0.3x
Average inventory balance
per location as of the
end of the quarter $131 $140 (6.4)%
Average loan balance per
location as of the end
of the quarter $164 $132 24.2%
Average yield on loan
portfolio 212% 212% 0.0 pt.
Redemption rate 80% 80% 0.0 pt.
Expenses as a Percent of Total Revenues:
Operating 35.8% 35.3% 0.5 pt.
Administrative 8.0% 5.9% 2.1 pts.
Depreciation and
amortization 4.5% 5.1% (0.6) pt.
Interest, net 0.4% 0.8% (0.4) pt.
Locations in Operation:
Beginning of period 247 240
Acquired - -
Established 1 2
Sold, combined or closed - -
----- -----
End of period 248 242
===== =====
Average locations in operation
during the period(c) 247.5 241.0
===== =====
</TABLE>
- -----------------------------------------------
a Figures in thousands, except percentages, inventory
turnover and store count.
b In comparing the period differences between dollar
amounts or store counts, a percentage change is used.
In comparing the period differences between two
percentages, a percentage point (pt.) change is used.
c Average locations in operation during the period is
calculated based on the average of the stores operating
at the beginning and end of such period.
<PAGE>
Nine Months Ended June 30, 1997 vs. Nine Months Ended June
30, 1996
The discussion in this section of this report contains
forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not
limited to, those discussed in this section and those
discussed elsewhere in this report.
The following table sets forth selected, unaudited,
consolidated financial data with respect to the Company for
the nine months ended June 30, 1997 and 1996.
Nine Months Ended % or
<TABLE> June 30,(a) Point
<CAPTION> 1997 1996 Change(b)
------------------ ---------
<S> <C> <C> <C>
Net Revenues:
Sales $ 78,147 $ 83,076 (5.9)%
Pawn service charges 56,396 52,004 8.4%
------- -------
Total revenues 134,543 135,080 (0.4)%
Cost of goods sold 64,109 71,410 (10.2)%
------- -------
Net revenues $ 70,434 $ 63,670 10.6%
======= =======
Other Data:
Gross profit as a
percent of sales 18.0% 14.0% 4.0 pts.
Average annual
inventory turnover 2.5x 2.4x 0.1x
Average inventory balance
per location as of the
end of the quarter $131 $140 (6.4)%
Average loan balance
per location as of the end
of the quarter $164 $132 24.2%
Average yield on
loan portfolio 211% 208% 3.0 pts.
Redemption rate 79% 78% 1.0 pts.
Expenses as a Percent of Total Revenues:
Operating 33.9% 33.5% 0.4 pt.
Administrative 7.1% 5.9% 1.2 pts.
Depreciation and
amortization 4.2% 4.2% 0.0 pt.
Interest, net 0.5% 1.2% (0.7) pt.
Locations in Operation:
Beginning of period 246 261
Acquired - -
Established 4 6
Sold, combined or closed (2) (25)
----- -----
End of period 248 242
===== =====
Average locations in operation
during the period(c) 247.0 251.5
===== =====
</TABLE>
- ------------------------------------------------
a Figures in thousands, except percentages, inventory
turnover and store count.
b In comparing the period differences between dollar
amounts or store counts, a percentage change is used.
In comparing the period differences between two
percentages, a percentage point (pt.) change is used.
c Average locations in operation during the period is
calculated based on the average of the stores operating
at the beginning and end of such period.
<PAGE>
Results of Operations
The following discussion compares results for the three-
and nine-month periods ended June 30, 1997 ("Fiscal 1997
Periods") to the three- and nine-month periods ended June 30,
1996 ("Fiscal 1996 Periods"). The discussion should be read
in conjunction with the accompanying financial statements and
related notes.
During the three-month Fiscal 1997 Period, the Company
opened one (1) newly established store and made the decision
to close two (2) underperforming stores. During the twelve
(12) months ended June 30, 1997, the Company opened nine (9)
newly established stores and closed three (3) stores. The
two stores identified to be closed during the three-month
Fiscal 1997 Period were the result of the Company's ongoing
review of its store portfolio. The actual closings are
expected to occur during the next twelve (12) months.
This decision resulted in a $0.4 million charge to operating
expense and is primarily for the write-down of fixed and
intangible assets. At June 30, 1997, the Company operated
248 stores in twelve (12) states.
The Company's primary activity is the making of small,
non-recourse loans secured by tangible personal property.
The income earned on this activity is pawn service charge
revenue. For the three month period ended June 30, 1997,
pawn service charge revenue increased $3.6 million to $19.5
million. This resulted from an increase in same store pawn
service charge revenue ($3.5 million) and the pawn service
charge revenue from new stores not open the full three-month
period ($0.1 million). At June 30, 1997, same store pawn
loan balances were 26% above June 30, 1996 and the
annualized yield on the average pawn loan balance was
unchanged at 212%.
For the nine-month period, pawn service charge revenue
increased $4.4 million to $56.4 million. This increase was
primarily due to an increase in same store pawn loans
outstanding ($3.4 million) and an increase in yield ($0.9
million). The annualized yield for the Fiscal 1997 Period
increased to 211% from 208% in the prior Fiscal 1996 Period.
Pawn service charge revenue of nine (9) stores that opened
during the preceding twelve (12) months ($0.4 million) was
largely offset by the stores that closed ($0.3 million).
A secondary, but related, activity of the Company is
the sale of merchandise, primarily collateral forfeited from
its lending activity. For the three-month Fiscal 1997
Period, merchandise sales increased approximately $0.7
million from the Fiscal 1996 Period to approximately $22.9
million. This resulted from an increase in same store
merchandise sales ($0.3 million) and new store sales ($0.6
million), partially offset by lower scrapping activity ($0.1
million) and closed store sales ($0.1 million). Same store
sales for the three-month Fiscal 1997 Period increased one
percent from the Fiscal 1996 Period while inventory levels
per store were 6% lower than the prior year (approximately
$131,000 at the end of the Fiscal 1997 Period as compared to
$140,000 at the end of the Fiscal 1996 Period).
For the nine-month Fiscal 1997 Period, merchandise
sales decreased approximately $4.9 million from the Fiscal
1996 Period to approximately $78.1 million. A decline in
same store merchandise sales ($2.7 million), merchandise
sales of the closed stores ($0.7 million), and the decrease
in scrap and wholesale jewelry sales ($3.7 million) were
partially offset by new store sales ($2.2 million). Same
store sales for the nine-month Fiscal 1997 Period declined
four percent from the Fiscal 1996 Period largely due to the
decline in per store inventory levels.
For the three- and nine-month Fiscal 1997 Periods,
respectively, gross profits as a percentage of merchandise
sales increased 2.5 and 4.0 percentage points, to 19% and
18%, from the Fiscal 1996 Periods. This increase results
from an improvement in margins on merchandise sales (1.6 and
1.7 percentage points), a reduction in inventory shrinkage
when measured as a percentage of merchandise sales (0.8 and
1.0 percentage points) and improved gross profit on
wholesale and scrap jewelry sales (0.1 and 1.3 percentage
points).
<PAGE>
The Company's gross margin level (gross profit as a
percentage of merchandise sales) results from, among other
factors, the composition, quality and age of its inventory.
For both periods, the Company's inventories consisted of
approximately 64 percent jewelry (e.g. ladies' and men's
rings, chains, bracelets, etc.) and 36 percent general
merchandise (e.g., televisions, VCRs, tools, sporting goods,
musical instruments, firearms, etc.). At June 30, 1997 and
1996, respectively, 83% and 75% of the jewelry was less than
twelve months old based on the Company's date of acquisition
(date of forfeiture for collateral or date of purchase) as
was approximately 92% and 86% of the general merchandise
inventory for both periods.
For the three-month Fiscal 1997 Period, operating
expenses as a percentage of total revenues increased 0.5
percentage point to 35.8% from the Fiscal 1996 Period. For
the nine-month Fiscal 1997 Period, operating expenses as a
percentage of total revenues increased 0.4 percentage point
to 33.9%. Excluding the impact of $0.4 million for the two
(2) underperforming stores to be closed, operating expenses
would have decreased 0.4 percentage point to 34.9% for the
three-month Fiscal 1997 Period and would have increased 0.1
percentage point to 33.6% for the nine-month Fiscal 1997
Period.
Administrative expenses increased 2.1 and 1.2
percentage points in the Fiscal 1997 Periods to 8.0% and
7.1%. These increases were primarily the result of higher
accrued management bonus expense, non-capitalized system
development costs and costs associated with employee
turnover. Based on the Company's performance, management
incentive bonuses are anticipated to be earned this year
whereas none were earned last year. The Company is making a
significant investment in both its store and home office
information systems; a portion of these expenditures (e.g.,
planning, quality assurance and training) are expensed as
incurred.
Depreciation and amortization expense as a percentage
of total revenues decreased 0.6 percentage point in the
three-month Fiscal 1997 Period and remained unchanged for
the nine-month Fiscal 1997 Period. Interest expense as a
percentage of total revenues was down 0.4 and 0.7 percentage
point in the Fiscal 1997 Periods compared to the prior year
period largely as a result of decreased borrowings under the
Company's bank line of credit.
The Company is evaluating the impact of Year 2000.
Since the Company plans to replace and upgrade its primary
hardware and software systems over the next two years for
business reasons, the Company believes that there is little
business risk attributable to the Year 2000 problem. As
costs are incurred relating to the Year 2000 issue, they
will be expensed in the same period. Currently, it is not
expected that this will have a material adverse effect on
future operating results.
Liquidity and Capital Resources
Net cash provided by operating activities for the
Fiscal 1997 Period was $13.1 million as compared to $20.6
million provided in the Fiscal 1996 Period. A portion of
the Fiscal 1996 net cash provided by operating activities is
the result of income tax refunds from the carryback of the
Company's Fiscal 1995 net operating loss and a decrease in
income taxes payable resulting from the carryforward of this
net operating loss. Net cash used by investing activities
was $10.0 million for the Fiscal 1997 Period compared to
$5.3 million provided in the Fiscal 1996 Period. The change
is primarily due to an increase in pawn loan balances in the
Fiscal 1997 Period compared to the decrease in the Fiscal
1996 Period.
In the Fiscal 1997 Period, the Company invested
approximately $3.9 million, including investments in
leasehold improvements and equipment for existing stores and
four (4) newly established stores. The Company funded these
expenditures largely from cash provided by operating
activities. The Company plans to open approximately five
(5) stores in the 1997 fiscal year, including the four
already opened. The Company anticipates that cash provided
by operating activities and funds available under its
existing bank line of credit should be adequate to fund
these capital expenditures and expected pawn loan growth
during the coming year.
<PAGE>
The Company's current revolving line of credit
agreement was amended on May 9, 1997 and matures January 30,
2000. That agreement requires, among other things, that the
Company meet certain financial covenants. Borrowings under
the line bear interest at the bank's Eurodollar rate plus
0.75% to 1.5%. The amount which the Company can borrow is
based on a percentage of its inventory levels and
outstanding pawn loan balance, up to $50.0 million. At June
30, 1997, the Company had approximately $13 million
outstanding on the credit facility and additional borrowing
capacity of approximately $30.9 million.
Seasonality
Historically, pawn service charge revenues are highest
in the fourth fiscal quarter (July, August and September)
due to higher loan demand during the summer months and
merchandise sales are highest in the first fiscal quarter
(October, November and December) due to the holiday season.
Forward-Looking Information
This Quarterly Report on Form 10-Q includes "forward-
looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements
other than statement of historical information provided
herein are forward-looking and may contain information about
financial results, economic conditions, trends and known
uncertainties. The Company cautions the reader that actual
results could differ materially from those expected by the
Company depending on the outcome of certain factors,
including without limitation (i) fluctuations in the
Company's inventory and loan balances, inventory turnover,
average yield on loan portfolio, redemption rates, labor and
employment matters, competition, operating risk, acquisition
and expansion risk, liquidity and capital requirements and
the effect of government and environmental regulations and
(ii) adverse changes in the market for the Company's
services. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligations to
release publicly the results of any revisions to these
forward-looking statements which may be made to reflect
events or circumstances after the date hereon, including
without limitation, changes in the Company's business
strategy or planned capital expenditures, or to reflect the
occurrence of unanticipated events.
<PAGE>
PART II
Item 1.Legal Proceedings
On July 28, 1995, the Company terminated the
Employment Agreement of Courtland L. Logue, Jr., the
Company's former Chairman and Chief Executive Officer, and
an owner of approximately 19% of the Company's outstanding
voting securities (Class B Voting Common Stock). Since Mr.
Logue's termination, the Company has had ongoing discussions
with him concerning certain equipment leases and other
matters of dispute between Mr. Logue and the Company, as
well as the application of provisions to Mr. Logue's
Employment Agreement and Stock Purchase Agreement with the
Company. On March 8, 1996, the Company filed a lawsuit
styled EZCORP, Inc. v. Courtland L. Logue, Jr. in the 201st
District Court of Travis County, Texas to declare Mr.
Logue's employment contract terminated and, as a result, to
permit the Company to recover approximately $2.7 million in
damages pursuant to the terms of Mr. Logue's Stock Purchase
Agreement. Mr. Logue filed counter-claims to recover
monetary damages relating to the Employment Agreement and
certain equipment leases and notes entered into between Mr.
Logue and the Company. The trial court has ruled that the
Company may not recover from Mr. Logue, under the terms of
the performance right provision, as that provision,
according to the trial court, represents an unenforceable
penalty and not, as the Company believes, an enforceable
liquidated damage provision. However, the Company has
asserted other claims against Mr. Logue for the recovery of
significant monetary damages. The case is in the discovery
phase, with a trial expected later in 1997.
The Company is also the nominal defendant in a lawsuit
filed July 18, 1997 by a holder of thirty-nine (39) shares
of Company stock styled for the benefit of the Company
against certain directors of the Company in the Castle
County Court of Chancery in the State of Delaware. The suit
alleges the defendants breached their fiduciary duties to
the Company in approving certain management incentive
compensation arrangements and an affiliate's financial
advisory services contract with the Company. The suit seeks
recision of the subject agreements, unspecified damages and
expenses, including plaintiff's legal fees. The
defendants have filed a motion to dismiss which is pending
before the court.
Item 2.Changes in Securities
Not Applicable
Item 3.Defaults Upon Senior Securities
Not Applicable
Item 4.Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5.Other Information
Not Applicable
<PAGE>
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits Incorporated by
Number Description Reference to
-------- ----------------------------- ---------------
Exhibit 11.1 Statement Regarding Computation
of Per Share Earnings Filed herewith
Exhibit 27 Financial Data Schedule Filed herewith
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K for the
quarter ended June 30, 1997.
<PAGE>
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 thereunto duly
authorized.
EZCORP, INC.
-------------------------------
(Registrant)
Date:October 15, 1997 By: /s/ DAN N. TONISSEN
-------------------------------
(Signature)
Dan N. Tonissen
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,241
<SECURITIES> 0
<RECEIVABLES> 52,647
<ALLOWANCES> 0
<INVENTORY> 32,568
<CURRENT-ASSETS> 91,194
<PP&E> 53,852
<DEPRECIATION> 21,067
<TOTAL-ASSETS> 142,119
<CURRENT-LIABILITIES> 10,233
<BONDS> 0
0
0
<COMMON> 120
<OTHER-SE> 118,630
<TOTAL-LIABILITY-AND-EQUITY> 142,119
<SALES> 78,147
<TOTAL-REVENUES> 134,543
<CGS> 64,109
<TOTAL-COSTS> 124,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 675
<INCOME-PRETAX> 8,942
<INCOME-TAX> 3,220
<INCOME-CONTINUING> 5,722
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,722
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
1
Exhibit 11.1
Statement Regarding Computation of Per Share Earnings
(Dollars and shares in thousands, except per share amounts)
<TABLE> Three Months Ended Nine Months Ended
<CAPTION> June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
--------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Primary:
Weighted average number
of common shares outstanding
during the period 11,996 11,991 11,995 11,987
Net effect of dilutive
stock options -
based on the treasury stock
method using overall market
price 0 0 0 0
------ ------ ------ ------
Total shares 11,996 11,991 11,995 11,987
====== ====== ====== ======
Net income $2,050 $1,027 $5,722 $2,070
====== ====== ====== ======
Earnings per share(a) $ 0.17 $ 0.09 $ 0.48 $ 0.17
====== ====== ====== ======
Fully diluted:
Weighted average number
of common shares outstanding
during the period 11,996 11,991 11,995 11,987
Net effect of dilutive
stock options -
based on the treasury
stock method using overall
market price 8 0 8 0
------ ------ ------ ------
Total shares 12,004 11,991 12,003 11,987
====== ====== ====== ======
Net income $2,050 $1,027 $5,722 $2,070
====== ====== ====== ======
Earnings per share(a) $ 0.17 $ 0.09 $ 0.48 $ 0.17
====== ====== ====== ======
</TABLE>
a Earnings per share calculations assume exercise of all
outstanding stock options and warrants using the treasury
stock method of calculation.
