- Published: 23 January 2009
- Written by Editor
EZCORP Announces Fiscal 2009 First Quarter Results
EZCORP, Inc. (Nasdaq: EZPW) announced today results for its fiscal first quarter, which ended December 31, 2008.
For the quarter ended December 31, 2008, EZCORP's net income increased 18% to $14,828,000 ($0.33 per share) compared to $12,555,000 ($0.29 per share) for the quarter ended December 31, 2007. Included in the quarter is an unusual pre-tax charge of $1,110,000 ($0.02 per share) related to a 1998 stock option grant, as described below. Excluding this charge, the Company earned $0.35 per share compared to $0.29 in the prior year quarter, an increase of 21%.
In the quarter, EZCORP completed two acquisitions. On November 13, 2008, the Company acquired eleven Las Vegas pawn stores for $34,388,000, comprised of the issuance of approximately 1,117,000 shares of EZCORP Class A Non-voting Common Stock and $17,138,000 of cash and transaction costs.
On December 31, 2008, the Company acquired 67 stores from Value Financial Services for $107,812,000. The total purchase price was comprised of the issuance of approximately 4,072,000 shares of EZCORP's Class A Non-voting Common Stock valued at $64,830,000, $13,384,000 of cash paid to Value Financial shareholders, the assumption of $28,975,000 of debt net of cash acquired, and transaction costs of $623,000. These amounts exclude any contingent consideration payable under the terms of the acquisition, which depends on the price Value Financial shareholders sell their EZCORP shares, should they choose to sell, in the 125 days following the acquisition.
Commenting on the quarter's results, President and Chief Executive Officer, Joe Rotunda, stated, "Our first quarter was a good quarter for the Company and represents our 26th consecutive quarter of year over year earnings improvement. Not reflected in the quarter's results is the earnings impact of the 67 Value Pawn stores acquired on December 31, 2008."
Rotunda continued, "With the closing of our acquisition of Value Pawn, we also closed on a new credit facility with a $40 million term loan and an $80 million revolving line of credit. Following the acquisition, the $80 million revolving line of credit remains untouched. This unused revolving credit line, combined with our non operating cash balance and ongoing operating cash flow, provides us with significant capital to continue investing in our business and to pursue other high quality acquisition opportunities."
Rotunda concluded, "We anticipate another solid result in our March quarter, with earnings growth in same stores as well as contributions from the two acquisitions we completed in the December quarter. For the March quarter, we expect earnings per share of approximately $0.36, compared to $0.30 for the same period a year ago. For our 2009 fiscal year ending September 30, we expect earnings per share of approximately $1.52 per share, including the benefit of the two acquisitions. Excluding the unusual charge in the December quarter, our annual guidance is at the upper end of our previously provided guidance. For the full year, we believe we are still on target to open approximately 30-35 new EZMONEY locations and 30-35 Empeno Facil pawn locations in Mexico."
EZCORP is primarily a lender or provider of credit services to individuals who do not have cash resources or access to credit to meet their short-term cash needs. In its pawnshops, the Company offers non-recourse loans collateralized by tangible personal property, commonly known as pawn loans. At these locations, the Company also sells merchandise, primarily collateral forfeited from its pawn lending operations, to consumers looking for good value. In its signature loan stores and some pawnshops, the Company offers short-term non-collateralized loans, often referred to as payday loans, or fee based credit services to customers seeking loans.
As of December 31, 2008, EZCORP operated a total of 889 locations in the U.S. and Mexico (including the locations acquired from Value Financial Services on December 31, 2008) consisting of 412 pawnshops in the U.S. (371) and Mexico (41) and 477 U.S. signature loan stores.
Explanation of Unusual Charge & Reconciliation of non-GAAP to GAAP earnings per share:
The $1,110,000 unusual pretax charge in the quarter relates to a 1998 stock option grant to two executives. EZCORP will realize cash tax savings of $1,110,000 with the exercise of the options. Stock option accounting rules require this savings be recorded as an addition to stockholders' equity rather than a reduction to income tax expense. Terms of the grant require the company to pay a cash bonus to the executives equal to the cash tax savings realized by the company (no other stock option grants contain this term). The December quarter includes the $1,110,000 pre-tax charge to administrative expense for this cash bonus. While the tax savings and bonus are cash neutral to the Company, the required accounting reduced after-tax income by $748,000, or $0.02 per share. Non-GAAP earnings per share, excluding the impact of the bonus, were $0.35.
Included in the statements above is a non-GAAP earnings per share figure removing the effect of a bonus based on tax savings not recognized in income. The Company believes this to be a meaningful number as the cash income tax savings and cash bonus equal to the cash tax savings are recorded differently, resulting in a net income decrease of $748,000 although they are cash neutral. Below is a reconciliation of the non-GAAP earnings per share figure to the GAAP-basis earnings per share figure:
Pre-tax bonus due based on cash tax savings to EZCORP $1,110,000
Tax benefit related to cash bonus 362,000
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Reduction of net income resulting from cash bonus $748,000
========
Reduction of EPS related to bonus $0.02
GAAP-basis diluted EPS reported 0.33
----
Non-GAAP diluted EPS presented above $0.35
=====
Weighted average diluted shares outstanding 44,692,000
This announcement contains certain forward-looking statements regarding the Company's expected performance for future periods including, but not limited to, new store expansion, anticipated benefits of acquisitions, capital availability and expected future earnings. Actual results for these periods may materially differ from these statements. Such forward-looking statements involve risks and uncertainties such as changing market conditions in the overall economy and the industry, consumer demand for the Company's services and merchandise, changes in the regulatory environment, and other factors periodically discussed in the Company's annual, quarterly and other reports filed with the Securities and Exchange Commission.
You are invited to listen to a conference call discussing these results on January 22, 2009 at 3:30pm Central Time. The conference call can be accessed over the Internet or replayed at your convenience at the following address.
http://www.videonewswire.com/event.asp?id=54992
For additional information, contact Dan Tonissen at (512) 314-2289.
EZCORP, Inc.
Highlights of Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
-------------------------------------
Three Months
Ended December 31,
-----------------
2008 2007
---- ----
1 Revenues:
2 Merchandise sales $44,795 $40,499
3 Jewelry scrapping sales 19,785 15,008
4 Pawn service charges 26,381 22,908
5 Signature loan fees 36,000 33,528
6 Auto title loan fees 221 -
7 Other 1,433 363
----- ---
8 Total revenues 128,615 112,306
9 Cost of goods sold:
10 Cost of merchandise sales 27,166 24,251
11 Cost of jewelry scrapping sales 13,259 9,290
------ -----
12 Total cost of goods sold 40,425 33,541
13 Bad debt:
14 Signature loan bad debt 9,484 9,670
15 Auto title loan bad debt 7 -
- -
16 Total bad debt 9,491 9,670
----- -----
17 Net revenue 78,699 69,095
18
19 Operations expense 43,494 38,536
20 Administrative expense 10,411 8,440
21 Depreciation and amortization 3,066 2,827
22 (Gain) / Loss on sale/disposal of assets (284) 162
---- ---
23 Operating income 22,012 19,130
24
25 Interest income (126) (57)
26 Interest expense 165 81
27 Equity in net income of unconsolidated affiliate (941) (1,047)
28 Other 25 -
-- -
29 Income before income taxes 22,889 20,153
30 Income tax expense 8,061 7,598
----- -----
31 Net income $14,828 $12,555
======= =======
32
----- -----
33 Net income per share, diluted $0.33 $0.29
===== =====
34
35 Weighted average shares, diluted 44,692 43,273
EZCORP, Inc.
Highlights of Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data and store counts)
------------------------------------------------------
As of December 31,
2008 2007
---- ----
1 Assets:
2 Current assets:
3 Cash and cash equivalents $41,595 $13,651
4 Pawn loans 93,789 63,270
5 Payday loans, net 8,246 6,169
6 Pawn service charges receivable, net 16,888 10,710
7 Auto title loans, net 1,174 -
8 Auto title loan finance charges receivable, net 92 -
9 Signature loan fees receivable, net 5,968 7,217
10 Inventory, net 64,563 41,788
11 Deferred tax asset 15,773 9,005
12 Prepaid expenses and other assets 12,284 8,121
------ -----
13 Total current assets 260,372 159,931
14
15 Investment in unconsolidated affiliate 37,873 37,294
16 Property and equipment, net 46,674 37,308
17 Deferred tax asset, non-current 7,754 5,023
18 Goodwill 98,300 24,591
19 Other assets, net 18,693 5,089
------ -----
20 Total assets $469,666 $269,236
======== ========
21 Liabilities and stockholders' equity:
22 Current liabilities:
23 Current maturities of long-term debt $10,000 $-
24 Accounts payable and other accrued expenses 48,534 25,164
25 Customer layaway deposits 2,879 2,144
26 Federal income taxes payable 3,186 9,063
----- -----
27 Total current liabilities 64,599 36,371
28
29 Long-term debt 30,337 -
30 Deferred gains and other long-term liabilities 3,566 3,096
31 Total stockholders' equity 371,164 229,769
------- -------
32 Total liabilities and stockholders' equity $469,666 $269,236
======== ========
33
34 Pawn loan balance per ending pawn store $228 $198
35 Inventory per ending pawn store $157 $131
36 Book value per share $7.67 $5.56
37 Tangible book value per share $5.28 $4.87
38 Pawn store count - end of period 412 319
39 Signature loan store count - end of period 477 448
40 Shares outstanding - end of period 48,417 41,343
EZCORP, Inc.
Operating Segment Results (Unaudited)
(in thousands, except store counts)
EZPAWN Empeno
Three months ended United States Facil EZMONEY
December 31, 2008: Operations Operations Operations Consolidated
---------- ---------- ---------- ------------
1 Revenues:
2 Sales $62,167 $2,413 $- $64,580
Pawn service
3 charges 24,884 1,497 - 26,381
Signature loan
4 fees 686 - 35,314 36,000
Auto title loan
5 fees 210 - 11 221
6 Other 1,433 - - 1,433
----- ----- ----- -----
7 Total revenues 89,380 3,910 35,325 128,615
8
9 Cost of goods sold 38,938 1,487 - 40,425
10 Signature loan bad
debt 236 - 9,248 9,484
11 Auto title loan bad
debt 6 - 1 7
----- ----- ----- -----
12 Net revenues 50,200 2,423 26,076 78,699
13
14 Operations expense 26,678 1,284 15,532 43,494
------ ----- ------ ------
15 Store operating
income $23,522 $1,139 $10,544 $35,205
======= ====== ======= =======
16
17 Pawn store count -
end of period 371 41 - 412
18 Signature loan store
count - end of period 6 - 471 477
19
20 Three months ended
December 31, 2007:
21 Revenues:
22 Sales $54,200 $1,307 $- $55,507
Pawn service
23 charges 21,990 918 - 22,908
Signature loan
24 fees 809 - 32,719 33,528
Auto title loan
25 fees - - - -
26 Other 361 2 - 363
---- ----- ----- -----
27 Total revenues 77,360 2,227 32,719 112,306
28
29 Cost of goods sold 32,768 773 - 33,541
30 Signature loan bad
debt 372 - 9,298 9,670
31 Auto title loan bad
debt - - - -
------ ------ ------ ------
32 Net revenues 44,220 1,454 23,421 69,095
33
34 Operations expense 24,019 844 13,673 38,536
------ --- ------ ------
35 Store operating
income $20,201 $610 $9,748 $30,559
======= ==== ====== =======
36
37 Pawn store count -
end of period 294 25 - 319
38 Signature loan store
count - end of period 6 - 442 448
