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EX-31.2 - EXHIBIT 31.2 - EZCORP INCa2016-q310qxex312_6302016.htm
EX-32.1 - EXHIBIT 32.1 - EZCORP INCa2016-q310qxex321_6302016.htm
EX-31.1 - EXHIBIT 31.1 - EZCORP INCa2016-q310qxex311_6302016.htm

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 June 30, 2016
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, Bldg One, Suite 200, Rollingwood, Texas
78746
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (512) 314-3400
 
 
 
 
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
¨
Accelerated filer
x
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 August 5, 2016, 51,010,920 shares of the registrant’s Class A Non-voting 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EZCORP, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
June 30,
2016
 
June 30,
2015
 
September 30,
2015
 
 
 
 
 
 
 
(Unaudited)
 
 
Assets:
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
29,380

 
$
113,405

 
$
56,244

Restricted cash
5,000

 
218

 
144

Pawn loans
160,269

 
144,377

 
159,964

Pawn service charges receivable, net
29,643

 
26,989

 
30,852

Inventory, net
130,368

 
115,283

 
124,084

Income taxes receivable

 
2,745

 
40,657

Current assets held for sale (1)
156,587

 
82,845

 
72,858

Prepaid expenses and other current assets
20,734

 
57,644

 
24,933

Total current assets
531,981

 
543,506

 
509,736

Investment in unconsolidated affiliate
57,656

 
90,423

 
56,182

Property and equipment, net
61,201

 
99,353

 
73,938

Goodwill
254,273

 
249,174

 
251,646

Intangible assets, net
30,569

 
37,951

 
30,778

Deferred tax asset, net
33,386

 
39,569

 
24,405

Non-current assets held for sale (1)

 
231,977

 
226,623

Other assets, net
18,950

 
26,493

 
13,736

Total assets
$
988,016

 
$
1,318,446

 
$
1,187,044

 
 
 
 
 
 
Liabilities, temporary equity and equity:
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable, accrued expenses and other current liabilities
$
59,239

 
$
77,966

 
$
109,875

Current liabilities held for sale (2)
130,627

 
81,248

 
87,725

Customer layaway deposits
11,201

 
9,635

 
10,470

Income taxes payable
4,842

 

 

Total current liabilities
205,909

 
168,849

 
208,070

Long-term debt, net
211,421

 
207,925

 
197,976

Non-current liabilities held for sale (2)

 
125,378

 
101,644

Deferred gains and other long-term liabilities
3,321

 
4,752

 
3,703

Total liabilities
420,651

 
506,904

 
511,393

Commitments and contingencies (Note 11)


 


 


Temporary equity:
 
 
 
 
 
Class A Non-voting Common Stock, subject to possible redemption at $10.06 per share; none as of June 30, 2016 and 1,168,456 shares issued and outstanding at redemption value as of June 30, 2015 and September 30, 2015

 
11,696

 
11,696

Redeemable noncontrolling interest
(2,410
)
 
16,318

 
2,532

Total temporary equity
(2,410
)
 
28,014

 
14,228

Stockholders’ equity:
 
 
 
 
 
Class A Non-voting Common Stock, par value $.01 per share; shares authorized: 100 million as of June 30, 2016 and 2015 and September 30, 2015; issued and outstanding: 51,019,332 as of June 30, 2016; 50,681,477 as of June 30, 2015; and 50,726,289 as of September 30, 2015
510

 
506

 
507

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
313,607

 
327,018

 
307,080

Retained earnings
320,537

 
498,360

 
407,825

Accumulated other comprehensive loss
(64,703
)
 
(42,386
)
 
(54,019
)
EZCORP, Inc. stockholders’ equity
569,981

 
783,528

 
661,423

Noncontrolling interest
(206
)
 

 

Total equity
569,775

 
783,528

 
661,423

Total liabilities, temporary equity and equity
$
988,016

 
$
1,318,446

 
$
1,187,044

See accompanying notes to unaudited interim condensed consolidated financial statements.

1


(1)    These amounts include the following assets of our consolidated VIEs (see Note 2 and Note 16):
 
June 30,
2016
 
June 30,
2015
 
September 30,
2015
 
 
 
 
 
 
 
(in thousands)
Restricted cash
$
294

 
$
1,617

 
$
1,361

Consumer loans, net
5,212

 
13,207

 
5,846

Consumer loan fees and interest receivable, net
2,948

 
4,979

 
6,399

Non-current consumer loans, net
13,440

 
30,238

 
27,162

Total assets of consolidated VIEs
$
21,894

 
$
50,041

 
$
40,768

(2)    These amounts include the following liabilities of our consolidated VIEs (see Note 2 and Note 16):
 
June 30,
2016
 
June 30,
2015
 
September 30,
2015
 
 
 
 
 
 
 
 
 
(in thousands)
 
Current maturities of long-term debt
$
35,959

 
$
46,039

 
$
42,017

*
Accounts payable and other accrued expenses
1,272

 
3,988

 
4,313

 
Long-term debt, less current maturities
4,884

 
40,776

 
31,247

*
Total liabilities of consolidated VIEs
$
42,115

 
$
90,803

 
$
77,577

 
*
This amount has been revised from the originally filed amount due to an immaterial reclassification error between current and non-current amounts as of September 30, 2015. The consolidated amounts previously reported in the balance sheet were correct.
See accompanying notes to unaudited interim condensed consolidated financial statements.

2


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
(Unaudited)
 
(in thousands, except per share amounts)
Revenues:
 
 
 
 
 
 
 
Merchandise sales
$
94,014

 
$
93,137

 
$
311,941

 
$
310,628

Jewelry scrapping sales
11,230

 
10,588

 
33,631

 
47,521

Pawn service charges
62,473

 
57,599

 
193,197

 
181,996

Consumer loan fees and interest
2,201

 
2,708

 
6,603

 
7,517

Other revenues
232

 
587

 
548

 
2,047

Total revenues
170,150

 
164,619

 
545,920

 
549,709

Merchandise cost of goods sold
60,140

 
61,460

 
194,731

 
206,430

Jewelry scrapping cost of goods sold
9,110

 
8,580

 
28,271

 
37,609

Consumer loan bad debt
506

 
771

 
1,549

 
2,197

Net revenues
100,394

 
93,808

 
321,369

 
303,473

Operating expenses:


 


 


 


Operations
73,172

 
71,455

 
221,446

 
213,335

Administrative
14,481

 
16,860

 
50,085

 
44,212

Depreciation and amortization
6,274

 
7,537

 
20,422

 
22,448

(Gain) loss on sale or disposal of assets
(41
)
 
82

 
641

 
725

Restructuring

 
37

 
1,910

 
763

Total operating expenses
93,886

 
95,971

 
294,504

 
281,483

Operating income (loss)
6,508

 
(2,163
)
 
26,865

 
21,990

Interest expense
3,936

 
3,783

 
12,014

 
12,456

Interest income
(50
)
 
(84
)
 
(66
)
 
(223
)
Equity in net income of unconsolidated affiliate
(1,694
)
 
(1,822
)
 
(5,626
)
 
(338
)
Other expense (income)
500

 
(222
)
 
815

 
953

Income (loss) from continuing operations before income taxes
3,816

 
(3,818
)
 
19,728

 
9,142

Income tax expense (benefit)
1,038

 
(3,035
)
 
11,224

 
4,217

Income (loss) from continuing operations, net of tax
2,778

 
(783
)
 
8,504

 
4,925

Loss from discontinued operations, net of tax
(9,133
)
 
(9,454
)
 
(100,916
)
 
(5,047
)
Net loss
(6,355
)
 
(10,237
)
 
(92,412
)
 
(122
)
Net loss attributable to noncontrolling interest
(666
)
 
(390
)
 
(5,124
)
 
(3,230
)
Net (loss) income attributable to EZCORP, Inc.
$
(5,689
)
 
$
(9,847
)
 
$
(87,288
)
 
$
3,108

 
 
 
 
 
 
 
 
Basic earnings per share attributable to EZCORP, Inc.  continuing operations
$
0.05

 
$
(0.01
)
 
$
0.16

 
$
0.11

Diluted earnings per share attributable to EZCORP, Inc.  continuing operations
$
0.05

 
$
(0.01
)
 
$
0.16

 
$
0.11

 
 
 
 
 
 
 
 
Weighted-average basic shares outstanding
53,980

 
54,820

 
54,574

 
54,216

 
 
 
 
 
 
 
 
Net income (loss) from continuing operations attributable to EZCORP, Inc.
$
2,904

 
$
(683
)
 
$
8,954

 
$
5,807

Net loss from discontinued operations attributable to EZCORP, Inc.
(8,593
)
 
(9,164
)
 
(96,242
)
 
(2,699
)
Net (loss) income attributable to EZCORP, Inc.
$
(5,689
)
 
$
(9,847
)
 
$
(87,288
)
 
$
3,108

See accompanying notes to unaudited interim condensed consolidated financial statements.

3


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
(Unaudited)
 
(in thousands)
Net loss
$
(6,355
)
 
$
(10,237
)
 
$
(92,412
)
 
$
(122
)
Other comprehensive loss:
 
 
 
 
 
 
 
Foreign currency translation loss, net of income tax (expense) benefit for our investment in unconsolidated affiliate of ($799) and $1,052 for the three and nine-months ended June 30, 2016, respectively, and $1,370 and $1,590 for the three and nine-months ended June 30, 2015, respectively
(1,832
)
 
(8,477
)
 
(10,976
)
 
(36,476
)
Cash flow hedges:
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive loss

 
35

 
22

 
422

Other comprehensive loss, net of tax
(1,832
)
 
(8,442
)
 
(10,954
)
 
(36,054
)
Comprehensive loss
$
(8,187
)
 
$
(18,679
)
 
$
(103,366
)
 
$
(36,176
)
Attributable to noncontrolling interest:
 
 
 
 
 
 
 
Net loss
(666
)
 
(390
)
 
(5,124
)
 
(3,230
)
Foreign currency translation loss
66

 
(626
)
 
(271
)
 
(3,853
)
Amounts reclassified from accumulated other comprehensive loss

 
9

 
1

 
103

Comprehensive loss attributable to noncontrolling interest
(600
)

(1,007
)
 
(5,394
)

(6,980
)
Comprehensive loss attributable to EZCORP, Inc.
$
(7,587
)
 
$
(17,672
)
 
$
(97,972
)
 
$
(29,196
)
See accompanying notes to unaudited interim condensed consolidated financial statements.

4


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended June 30,
 
2016
 
2015
 
 
 
 
 
(Unaudited)
 
(in thousands)
Operating activities:
 
 
 
Net loss
$
(92,412
)
 
$
(122
)
Loss from discontinued operations*
100,172

 
7,819

Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
20,422

 
25,316

Amortization of debt discount and consumer loan premium, net
6,574

 
6,099

Consumer loan loss provision
278

 
18,652

Deferred income taxes
(321
)
 
(5,742
)
Impairment of goodwill

 
10,550

Amortization of deferred financing costs
1,318

 
1,213

Other adjustments
961

 
1,348

Loss on sale or disposal of assets
641

 
956

Stock compensation expense (benefit)
3,206

 
(1,319
)
Income from investment in unconsolidated affiliate
(5,626
)
 
(338
)
Changes in operating assets and liabilities, net of business acquisitions:
 
 
 
Service charges and fees receivable
1,838

 
5,329

Inventory
(1,349
)
 
926

Prepaid expenses, other current assets and other assets
(1,038
)
 
(5,124
)
Accounts payable and other, deferred gains and other long-term liabilities
(22,902
)
 
(13,029
)
Customer layaway deposits
781

 
1,127

Restricted cash
(4,861
)
 
(459
)
Income taxes receivable
45,499

 
17,459

Payments of restructuring charges
(8,367
)
 
(3,668
)
Dividends from unconsolidated affiliate
2,197

 
4,842

Net cash provided by operating activities  continuing operations
47,011

 
71,835

Net cash provided by (used in) operating activities  discontinued operations*
10,926

 
(21,523
)
Investing activities:
 
 
 
Loans made
(469,133
)
 
(575,038
)
Loans repaid
291,704

 
409,793

Recovery of pawn loan principal through sale of forfeited collateral
173,710

 
191,170

Additions to property and equipment
(6,408
)
 
(21,914
)
Acquisitions, net of cash acquired
(6,000
)
 
(4,120
)
Investment in unconsolidated affiliate

 
(12,140
)
Net cash used in investing activities  continuing operations
(16,127
)
 
(12,249
)
Net cash provided by (used in) investing activities  discontinued operations*
4,590

 
(1,894
)
Financing activities:
 
 
 
Payout of deferred consideration
(14,875
)
 
(6,000
)
Repurchase of redeemable common stock issued due to acquisitions
(11,750
)
 

Purchase of subsidiary shares from noncontrolling interest

 
(2,774
)
Payments on capital lease obligations
(48
)
 
(355
)
Net cash used in financing activities  continuing operations
(26,673
)
 
(9,129
)
Net cash (used in) provided by financing activities  discontinued operations*
(41,237
)
 
37,713

Effect of exchange rate changes on cash and cash equivalents
(6,506
)
 
(5,691
)
Net (decrease) increase in cash and cash equivalents
(28,016
)
 
59,062

Cash and cash equivalents at beginning of period, excluding held for sale
56,244

 
52,294

Cash and cash equivalents held for sale at beginning of period
2,880

 
3,031

Cash and cash equivalents at end of period
31,108

 
114,387


5


EZCORP, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Less: cash and cash equivalents held for sale at end of period
(1,728
)
 
(982
)
Cash and cash equivalents at end of period, excluding held for sale
$
29,380

 
$
113,405

 
 
 
 
Non-cash investing and financing activities:
 
 
 
Pawn loans forfeited and transferred to inventory
$
179,394

 
$
170,185

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

 
11,696

Deferred consideration

 
124

Payable to purchase additional shares of noncontrolling interest

 
322

*
See Note 1 for discussion of operations discontinued subsequent to the adoption of ASU 2014-08. Amounts are exclusive of intercompany loans.
See accompanying notes to unaudited 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
 
EZCORP, Inc.
Stockholders’
Equity
 
Shares
 
Par Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited, except balances as of September 30, 2015 and 2014)
 
(in thousands)
Balances as of September 30, 2014
53,585

 
$
536

 
$
332,264

 
$
495,252

 
$
(10,082
)
 
$
817,970

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

 

 

 

 

 

Stock compensation

 

 
(1,319
)
 

 

 
(1,319
)
Purchase of subsidiary shares from noncontrolling interest

 

 
(3,564
)
 

 
(72
)
 
(3,636
)
Release of restricted stock
66

 

 

 

 

 

Excess tax deficiency from stock compensation

 

 
(167
)
 

 

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

 

 
(196
)
 

 

 
(196
)
Amounts reclassified from accumulated other comprehensive loss

 

 

 

 
319

 
319

Foreign currency translation adjustment

 

 

 

 
(32,551
)
 
(32,551
)
Net income attributable to EZCORP, Inc.

 

 

 
3,108

 

 
3,108

Balances as of June 30, 2015
53,652

 
$
536

 
$
327,018

 
$
498,360

 
$
(42,386
)
 
$
783,528

 
 
 
 
 
 
 
 
 
 
 
 
Balances as of September 30, 2015
53,696

 
$
537

 
$
307,080

 
$
407,825

 
$
(54,019
)
 
$
661,423

Stock compensation

 

 
7,012

 

 

 
7,012

Release of restricted stock
294

 
3

 

 

 

 
3

Excess tax deficiency from stock compensation

 

 
(336
)
 

 

 
(336
)
Taxes paid related to net share settlement of equity awards

 

 
(149
)
 

 

 
(149
)
Amounts reclassified from accumulated other comprehensive loss

 

 

 

 
21

 
21

Foreign currency translation adjustment

 

 

 

 
(10,705
)
 
(10,705
)
Net loss attributable to EZCORP, Inc.

 

 

 
(87,288
)
 

 
(87,288
)
Balances as of June 30, 2016
53,990

 
$
540

 
$
313,607

 
$
320,537

 
$
(64,703
)
 
$
569,981

See accompanying notes to unaudited interim condensed consolidated financial statements.

7


EZCORP, Inc.
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)
June 30, 2016
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
When used in this report, the terms “we,” “us,” “our,” “EZCORP” and the “Company” mean EZCORP, Inc. and its consolidated subsidiaries, collectively.
We are a leading provider of pawn loans in the United States and Mexico. In the United States and Mexico, we offer pawn loans, which are non-recourse loans collateralized by tangible property, and we sell merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers.
As further discussed in Note 2, we have classified all of the assets and liabilities of our 94%-owned subsidiary, Prestaciones Finmart, S.A.P.I. de C.V., SOFOM, E.N.R. ("Grupo Finmart"), as held for sale and recast all results of operations as discontinued operations.
We also own approximately 31% of Cash Converters International Limited ("Cash Converters International"), based in Australia and publicly-traded on the Australian Stock Exchange, which franchises and operates a worldwide network of over 700 locations that provide pawn loans, short-term unsecured loans and other consumer finance products, and buy and sell second-hand goods, with significant store concentration in Australia and the United Kingdom.
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. All intercompany accounts and transactions have been eliminated in consolidation.
The accompanying financial statements should be read in conjunction with the condensed consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended September 30, 2015. The balance sheet as of September 30, 2015 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 nine-months ended June 30, 2016 (the "current quarter" and "current nine-months," respectively) are not necessarily indicative of the results of operations for the full fiscal year.
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 entities under the VIE model as described in Note 16. As further discussed in Note 2, we have classified all of the assets and liabilities of these VIEs as held for sale and recast all results of operations as discontinued operations.
We account for our investment in our unconsolidated affiliate Cash Converters International using the equity method.
There have been no changes in significant accounting policies as described in our Annual Report on Form 10-K for the year ended September 30, 2015, other than those described below.
Revision to Prior Period Financial Statements
During the third quarter of fiscal 2016, we identified an overstatement of our recorded net tax assets. The impact of these overstatements was a $14.3 million decrease to our retained earnings balance as of September 30, 2014. Our analysis of the overstatement indicates that the underlying errors originated in periods prior to fiscal 2013 and relate primarily to the deferred tax balances associated with equity method investments, stock compensation and foreign acquisitions. We have evaluated the errors and have determined that their impact is not material to our results of operations, financial position or cash flows in

8


previously reported periods. Consequently, we have retrospectively revised the financial statements presented herein to reflect the correction of these errors. The impact of this revision on the consolidated balance sheets as of June 30 and September 30, 2015 is as follows:
 
June 30, 2015
 
As Previously Reported
 
Adjustments
 
As Revised
 
 
 
 
 
 
 
(in thousands)
Income taxes receivable
$
25,535

 
$
(22,790
)
 
$
2,745

Income taxes receivable, goodwill and deferred tax asset, net included in assets held for sale
102,126

 
4,256

 
106,382

Deferred tax asset, net
35,412

 
4,157

 
39,569

Redeemable noncontrolling interest
16,361

 
(43
)
 
16,318

Retained earnings
512,694

 
(14,334
)
 
498,360

 
September 30, 2015
 
As Previously Reported
 
Adjustments
 
As Revised
 
 
 
 
 
 
 
(in thousands)
Income taxes receivable
$
42,057

 
$
(1,400
)
 
$
40,657

Income taxes receivable, goodwill and deferred tax asset, net included in assets held for sale
114,861

 
(5,828
)
 
109,033

Deferred tax asset, net
33,192

 
(8,787
)
 
24,405

Redeemable noncontrolling interest
3,235

 
(703
)
 
2,532

Retained earnings
423,137

 
(15,312
)
 
407,825

Recasting of Certain Prior Period Information
Certain reclassifications of prior period amounts have been made to conform to the current period presentation. These reclassifications, other than those pertaining to the recasting of prior period segment information and discontinued operations discussed in our Annual Report on Form 10-K for the year ended September 30, 2015 and in Note 2 and the adoption of Financial Accounting Standards Board ("FASB") Accounting Standards Updates ("ASU") discussed below, primarily include the following:
Reclassification of "Consumer loans, net" and "Consumer loan fees and interest receivable, net," exclusive of Grupo Finmart amounts presented in Note 2, which are solely attributable to our Other International segment, to "Prepaid expenses and other current assets." The total historical amounts that were reclassified were $25.6 million and $5.4 million as of June 30 and September 30, 2015, respectively. These changes had no net impact on our consolidated financial position, results of operations or cash flows.
Removal of historical corporate overhead allocations totaling $4.3 million and $12.4 million (inclusive of historical Grupo Finmart allocations) for the three and nine-months ended June 30, 2015, respectively, from segment level "Operations" expense and inclusion in corporate "Administrative" expense. These allocations were reclassified to provide greater clarity into the results of our segment operations. These changes primarily impacted Note 12 with no net impact on our consolidated financial position, results of operations or cash flows.
Reclassification of "Prepaid income taxes" to "Income taxes receivable" of $4.8 million as of September 30, 2015, exclusive of Grupo Finmart amounts presented in Note 2, to conform to current period presentation.
Reclassification of "Other current liabilities" to "Accounts payable, accrued expenses and other current liabilities" of $6.1 million and $15.4 million as of June 30 and September 30, 2015, respectively and exclusive of Grupo Finmart amounts presented in Note 2, to conform to current period presentation.

9


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 ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory, loan loss allowances, long-lived and intangible assets, share-based compensation, 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 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 these estimates under different assumptions or conditions.
Recently Adopted Accounting Policies
Simplification of Adjustments to Provisional Amounts Identified During a Measurement Period
In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805). 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, with the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at 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 to adjustments to provisional amounts that occur after the date of adoption. We early adopted ASU 2015-16 during the three-months ended March 31, 2016 to reduce the cost and complexity of accounting for and reporting business combinations. There was no material impact of adopting ASU 2015-16 on our consolidated financial position, results of operations or cash flows.
Share-Based Awards with Performance Targets that could be Achieved after the Requisite Service Period
In June 2014, the FASB issued ASU 2014-12, Compensation — Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires reporting entities to recognize compensation costs for share-based awards with performance targets in the period in which it becomes probable that the performance targets will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. 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 early adopted ASU 2015-16 during the three-months ended March 31, 2016 and applied the amendments prospectively to all awards granted or modified after the effective date. There was no material impact of adopting ASU 2014-12 on our consolidated financial position, results of operations or cash flows.
Classification of Deferred Tax Assets
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This ASU requires reporting entities to classify deferred income taxes as non-current on the condensed consolidated balance sheets. Deferred income taxes were previously required to be classified as current or non-current on the condensed consolidated balance sheets. 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 may apply the amendment prospectively or retrospectively. We early adopted ASU 2015-17 during the three-months ended December 31, 2015 on a retrospective basis. The impact of adopting ASU 2015-17 on our current period condensed consolidated financial statements was the classification of all deferred tax assets as non-current in addition to the reclassification of current "Deferred tax asset, net" to non-current "Deferred tax asset, net" as of June 30, 2015 and September 30, 2015 of $24.4 million and $44.1 million, respectively, within the condensed consolidated balance sheets to conform to the current period presentation. Other than these reclassifications, the adoption of ASU 2015-17 did not have an impact on our consolidated financial position, results of operations or cash flows.
Presentation of Debt Issuance Costs
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. In addition, in August 2015, FASB issued ASU 2015-15, Interest — Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements-Amendments to SEC Paragraphs Pursuant to Staff Announcement at the June 18, 2015 Emerging Issues Task Force ("EITF") Meeting. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, ASU 2015-15 states the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement,

10


regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The provisions of each ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted for each. A reporting entity should apply each amendment retrospectively. We early adopted ASU 2015-03 during the three-months ended December 31, 2015 on a retrospective basis. The impact of adopting ASU 2015-03 on our current period condensed consolidated financial statements was the classification of all deferred financing costs as a deduction to the corresponding debt in addition to the reclassification of deferred financing costs in "Intangible assets, net" to "Long-term debt less current maturities, net" as of June 30, 2015 and September 30, 2015 of $10.4 million and $9.2 million, respectively, within the condensed consolidated balance sheets to conform to the current period presentation. Other than these reclassifications and additional disclosures, the adoption of ASU 2015-03 did not have an impact on our consolidated financial position, results of operations or cash flows.
Reporting Discontinued Operations
In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) — Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU provides guidance for the reporting of discontinued operations if (1) a component or group of components of an entity meets the criteria in FASB Accounting Standards Codification ("ASC") Paragraph 205-20-45-1E to be classified as held for sale; (2) the component of an entity or group of components of an entity is disposed of by sale; or (3) the component of an entity or group of components of an entity is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spinoff). Among other disclosures, ASU 2014-08 requires an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position. ASU 2014-08 is effective prospectively for (1) all disposals of components that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years; and (2) all businesses or nonprofit activities that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. There was no impact of adopting ASU 2014-08 on our consolidated financial position, results of operations or cash flows, however subsequent to adoption we have classified our Grupo Finmart segment as held for sale.
We have presented our Grupo Finmart segment classified as a discontinued operation as held for sale under ASU 2014-08, including separate presentation of assets and liabilities held for sale in our condensed consolidated balance sheets and separate presentation of cash flows from discontinued operations in our condensed consolidated statements of cash flows, with historical amounts recast to conform to current period presentation. We have presented our operations discontinued prior to adoption of ASU 2014-08 during the three-months ended December 31, 2015 including our U.S. financial services business ("USFS") and our online lending businesses in the United States ("EZOnline") and the United Kingdom ("Cash Genie") under the accounting guidance in effect before the adoption of ASU 2014-08.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires financial assets (or groups of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected, among other provisions. The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted as of fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A reporting entity should generally apply the amendment on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting periods in which the amendment is effective. We are in the process of evaluating the impact of adopting ASU 2016-13 on our consolidated financial position, results of operations and cash flows.
In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. 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 should apply the amendment using transition guidance for each aspect of the ASU. We are in the process of evaluating the impact of adopting ASU 2016-09 on our consolidated financial position, results of operations and cash flows.
In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments a consensus of the FASB Emerging Issues Task Force. This ASU clarifies what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. 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 should apply the amendment modified retrospective basis to existing debt

11


instruments as of the beginning of the fiscal year for which the amendments are effective. We are in the process of evaluating the impact of adopting ASU 2016-06 on our consolidated financial position, results of operations and cash flows.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted based upon guidance issued within the ASU. We are in the process of evaluating the impact of adopting ASU 2016-02 on our consolidated financial position, results of operations and cash flows.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU makes targeted improvements to the accounting for, and presentation and disclosure of, financial assets and liabilities. The ASU further requires separate presentation of financial assets and financial liabilities by measurement category on the balance sheet or the accompanying notes to the financial statements. The provisions of this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted based upon guidance issued within the ASU. A reporting entity should apply the amendment prospectively, with a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We are in the process of evaluating the impact of adopting ASU 2016-01 on our consolidated financial position, results of operations and 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. The amendments in ASU 2014-09 will be added to the Accounting Standards Codification as Topic 606, Revenue from Contracts with Customers, and will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, as well as some cost guidance in Subtopic 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. Notably, the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer (e.g., assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles — Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement in ASU 2014-09. The new standard allows for two methods of adoption: (a) full retrospective adoption, meaning the standard is applied to all periods presented, or (b) modified retrospective adoption, meaning the cumulative effect of applying the new standard is recognized as an adjustment to the fiscal 2017 opening retained earnings balance. In March 2016 through May 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Consensuses of the FASB Emerging Issues Task Force and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU 2016-08, 2016-10 and 2016-12 clarify implementation guidance and introduce practical expedients, and are effective upon adoption of ASU 2014-09. We are evaluating the impact that will result from adopting ASU 2014-09 and related ASUs on our consolidated financial position, results of operations, and cash flows.

12


NOTE 2: DISCONTINUED OPERATIONS AND RESTRUCTURING
Fiscal 2016
On February 8, 2016 in conjunction with ongoing evaluation of our strategic direction, we announced that we were conducting a comprehensive review of strategic options for Grupo Finmart to be completed by the end of the third quarter of fiscal 2016. In April 2016, a special committee of our board of directors comprised entirely of independent directors, after reviewing a variety of strategic alternatives with management and the company's financial advisors, concluded that a sale of the business was the preferred alternative and authorized management to proceed with a process to solicit proposals from interested buyers. See Note 18 for discussion of the definitive agreement to sell the business entered into effective July 1, 2016.
As a result of the decision to sell the Grupo Finmart business, the Company has classified Grupo Finmart as held for sale as of June 30, 2016 and recast all segment operations of Grupo Finmart as discontinued operations. We recognized no loss on classification as held for sale during the three-months ended June 30, 2016. All assets and liabilities of Grupo Finmart have been presented as current as of June 30, 2016 due to anticipated sale within one year. All historical assets and liabilities of Grupo Finmart have been presented as current or non-current based on their historical presentation. We have ceased depreciation and amortization of all long-lived assets classified as held for sale under FASB ASC 350-10-35-43 as of April 2016.
The following table presents the reconciliation of the major line items constituting "Loss from discontinued operations, net of tax" of Grupo Finmart that are presented in the condensed consolidated statements of operations:
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
(in thousands)
Revenues
$
11,762

 
$
17,015

 
$
36,345

 
$
49,826

Consumer loan bad debt
(6,200
)
 
(2,835
)
 
(26,444
)
 
(14,685
)
Operations expense
(9,506
)
 
(8,205
)
 
(27,120
)
 
(23,602
)
Impairment of goodwill

 

 
(73,921
)
 

Interest expense, net
(3,944
)
 
(5,617
)
 
(13,255
)
 
(19,370
)
Depreciation, amortization and other expenses
(4,580
)
 
(1,488
)
 
(6,216
)
 
(4,126
)
Loss from discontinued operations before income taxes of Grupo Finmart
$
(12,468
)
 
$
(1,130
)
 
$
(110,611
)
 
$
(11,957
)
Income tax benefit
2,746

 
512

 
10,439

 
4,138

Income (loss) from discontinued operations, net of tax of operations discontinued prior to the adoption of ASU 2014-08
589

 
(8,836
)
 
(744
)
 
2,772

Loss from discontinued operations, net of tax
$
(9,133
)
 
$
(9,454
)
 
$
(100,916
)
 
$
(5,047
)
 
 
 
 
 
 
 
 
Loss from discontinued operations, net of tax of Grupo Finmart
$
(9,722
)
 
$
(618
)
 
$
(100,172
)
 
$
(7,819
)
Loss from discontinued operations, net of tax of Grupo Finmart attributable to noncontrolling interest
540

 
290

 
4,674

 
2,348

Loss from discontinued operations, net of tax of Grupo Finmart attributable to EZCORP, Inc.
$
(9,182
)
 
$
(328
)
 
$
(95,498
)
 
$
(5,471
)

13


The following table presents the reconciliation of the carrying amounts of major classes of assets and liabilities of Grupo Finmart that are classified as held for sale presented in the condensed consolidated balance sheets:
 
June 30, 2016
 
June 30, 2015
 
September 30, 2015
 
 
 
 
 
 
 
(in thousands)
Cash and cash equivalents
$
1,728

 
$
982

 
$
2,880

Restricted cash (1)
11,654

 
27,797

 
14,993

Consumer loans, net (1)
19,905

 
36,719

 
31,824

Consumer loan fees and interest receivable, net (1)
11,390

 
13,595

 
19,105

Prepaid expenses, income taxes and other current assets
5,004

 
3,752

 
4,056

Restricted cash, non-current (1)
2,226

 
2,978

 
2,883

Goodwill, intangible assets, and property and equipment, net
10,304

 
101,083

 
92,391

Non-current consumer loans, net (1)
51,504

 
82,739

 
75,824

Deferred tax and other assets, net
42,872

 
45,177

 
55,525

Total assets classified as held for sale
$
156,587

 
$
314,822

 
$
299,481

 
 
 
 
 
 
Current maturities of long-term debt
$
80,248

 
$
69,054

 
$
74,345

Accounts payable, accrued expenses and other current liabilities
14,098

 
12,194

 
13,380

Long-term debt, less current maturities, net and other long-term liabilities (2)
36,281

 
125,378

 
101,644

Total liabilities classified as held for sale
$
130,627

 
$
206,626

 
$
189,369

(1)    These amounts include the following assets of Grupo Finmart's securitization trust that can only be used to settle its liabilities (see Note 16):
 
June 30,
2016
 
June 30,
2015
 
September 30,
2015
 
 
 
 
 
 
 
(in thousands)
Restricted cash
$
5,505

 
$
17,398

 
$
12,033

Consumer loans*
32,472

 
37,288

 
36,845

Consumer loan fees and interest receivable, net
6,974

 
5,614

 
6,067

Restricted cash, non-current
182

 
117

 
197

Total assets of Grupo Finmart's securitization trust
$
45,133

 
$
60,417

 
$
55,142

*
These amounts include the current and non-current portions of active consumer loans considered to be performing under the terms of the Grupo Finmart securitization trust. These balances, which represent the total collateral that can be used to settle the liabilities of the securitization trust, exclude loan loss allowances as described in Note 13, and are presented on a net basis in the condensed consolidated balance sheets including allowances.
(2)    This amount includes the following liabilities for which the creditors of Grupo Finmart's securitization trust do not have recourse to the general credit of EZCORP, Inc. (see Note 16):
 
June 30,
2016
 
June 30,
2015
 
September 30,
2015
 
 
 
 
 
 
 
(in thousands)
Long-term debt, less current maturities
$
25,669

 
$
43,900

 
$
40,493

Assets and liabilities classified as held for sale and presented above are exclusive of net intercompany liabilities totaling $49.2 million, $3.4 million and $19.9 million as of June 30, 2016 and 2015 and September 30, 2015, respectively.
Fiscal 2015
During the fourth quarter of fiscal 2015, in the context of a transformational change in strategy following an intensive six-month review of all Company activities, we implemented a plan that included exiting our U.S. financial services business ("USFS"). We further streamlined our structure and operating model to improve overall efficiency and reduce costs. The costs of streamlining our structure and operating model are included under "Restructuring" expenses in our condensed consolidated statements of operations and are allocated to certain of our segments as presented in Note 12.
Total revenue included in "Loss from discontinued operations, net of tax" in our condensed consolidated statements of operations for the three and nine-months ended June 30, 2016, exclusive of Grupo Finmart revenue presented in our fiscal 2016

14


action above, was nil and $2.1 million, respectively, and $31.5 million and $109.3 million, respectively, for the three and nine-months ended June 30, 2015. All revenue, expense and income reported in these condensed consolidated financial statements have been adjusted to reflect reclassification of all discontinued operations.
The following table summarizes the pre-tax restructuring charges of the fiscal 2015 restructuring action, inclusive of the charges presented in the changes in the balance of restructuring costs rollforward below:
 
Three Months Ended June 30, 2016
 
Nine Months Ended June 30, 2016
 
 
 
 
 
(in thousands)
Other (a)
$

 
$
768

Asset disposals

 
323

Lease termination costs

 
819

 
$

 
$
1,910

(a)
Includes costs related to employee severance and other.
Accrued lease termination costs, severance costs and other costs related to restructuring are included under "Accounts payable, accrued expenses and other current liabilities" in our condensed consolidated balance sheets. Changes in these amounts attributable to the fiscal 2015 restructuring action during the three and nine-months ended June 30, 2016 are summarized as follows:
 
Three Months Ended June 30, 2016
 
Nine Months Ended June 30, 2016
 
 
 
 
 
(in thousands)
Beginning balance
$
5,178

 
$
8,076

Charged to expense

 
1,594

Cash payments
(1,666
)
 
(5,466
)
Other (a)
1,716

 
1,024

Ending balance
$
5,228

 
$
5,228

(a)
Includes other individually immaterial adjustments as well as adjustments to our estimate of lease termination costs.
The above ending balance includes accrued lease termination costs of $5.1 million that we expect to be partially offset by future sublease payments through 2029. The remaining other amounts accrued are expected to be paid during fiscal 2016.
Fiscal 2014
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. Restructuring charges related to this action were considered corporate costs and therefore are not allocated to specific segments. Changes in these amounts during the three and nine-months ended June 30, 2016 and 2015 are summarized as follows:
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
(in thousands)
Beginning balance
$

 
$
3,885

 
$
2,901

 
$
6,121

Charged to expense

 
37

 

 
763

Cash payments

 
(706
)
 
(2,901
)
 
(3,668
)
Ending Balance
$

 
$
3,216

 
$

 
$
3,216

NOTE 3: ACQUISITIONS
On February 1, 2016, we acquired six pawn stores in the Houston, Texas area doing business under the "Pawn One" brand. The aggregate purchase price was $6.2 million in cash, inclusive of all ancillary arrangements, of which $3.2 million was recorded as goodwill in the U.S. Pawn segment. 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 acquisition. These benefits include a greater presence in the Houston area, as well as the

15


ability to further leverage our expense structure through increased scale. We expect no goodwill recorded as a result of the acquisition to be deductible for tax purposes. We have concluded that this acquisition was immaterial to our overall consolidated financial results and, therefore, have omitted the information that would otherwise be required by FASB ASC 805-10-50-2(h).
NOTE 4: EARNINGS PER SHARE
Components of basic and diluted (loss) earnings per share and excluded anti-dilutive potential common shares are as follows: 
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
(in thousands, except per share amounts)
Net income (loss) from continuing operations attributable to EZCORP (A)
$
2,904

 
$
(683
)
 
$
8,954

 
$
5,807

Loss from discontinued operations, net of tax (B)
(8,593
)
 
(9,164
)
 
(96,242
)
 
(2,699
)
Net (loss) income attributable to EZCORP (C)
$
(5,689
)
 
$
(9,847
)
 
$
(87,288
)
 
$
3,108

 
 
 
 
 
 
 
 
Weighted-average outstanding shares of common stock (D)
53,980

 
54,820

 
54,574

 
54,216

Dilutive effect of restricted stock*
212

 

 
116

 
64

Weighted-average common stock and common stock equivalents (E)
54,192


54,820


54,690


54,280

 
 
 
 
 
 
 
 
Basic (loss) earnings per share attributable to EZCORP:
 
 
 
 
 
 
 
Continuing operations (A / D)
$
0.05

 
$
(0.01
)
 
$
0.16

 
$
0.11

Discontinued operations (B / D)
(0.16
)
 
(0.16
)
 
(1.76
)
 
(0.06
)
Basic (loss) earnings per share (C / D)
$
(0.11
)
 
$
(0.17
)
 
$
(1.60
)
 
$
0.05

 
 
 
 
 
 
 
 
Diluted (loss) earnings per share attributable to EZCORP:
 
 
 
 
 
 
 
Continuing operations (A / E)
$
0.05

 
$
(0.01
)
 
$
0.16

 
$
0.11

Discontinued operations (B / E)
(0.16
)
 
(0.16
)
 
(1.76
)
 
(0.06
)
Diluted (loss) earnings per share (C / E)
$
(0.11
)
 
$
(0.17
)
 
$
(1.60
)
 
$
0.05

 
 
 
 
 
 
 
 
Potential unweighted common shares excluded from the calculation of diluted (loss) earnings per share above:
 
 
 
 
 
 
 
Restricted stock**
2,109

 
428

 
1,259

 

Warrants***
14,317

 
14,317

 
14,317

 
14,317

Total potential common shares excluded
16,426

 
14,745

 
15,576

 
14,317

*
As required by FASB ASC 260-10-45-19, amount excludes all potential common shares for periods when there is a loss from continuing operations.
**
Includes antidilutive share-based awards as well as performance-based and market conditioned share-based awards that are contingently issuable, but for which the condition for issuance has not been met as of the end of the reporting period.
***
See Note 7 for discussion of the terms and conditions of these potential common shares.
Weighted-average outstanding shares of common stock for the three and nine-months ended June 30, 2016 include the impact of redeemable common stock repurchased as discussed in Note 9.

16


NOTE 5: STRATEGIC INVESTMENTS
As of June 30, 2016, we owned 151,948,000 shares, or approximately 31%, of our unconsolidated affiliate Cash Converters International, including a nominal reduction in ownership interest during the three-months ended June 30, 2016 as a result of the issuance of additional Cash Converters International shares. The following tables present summary financial information for Cash Converters International’s most recently reported results as of June 30, 2016 after translation to U.S. dollars:
 
December 31,
 
2015
 
2014
 
 
 
 
 
(in thousands)
Current assets
$
176,105

 
$
200,682

Non-current assets
143,466

 
157,737

Total assets
$
319,571

 
$
358,419

 
 
 
 
Current liabilities
$
68,857

 
$
75,700

Non-current liabilities
48,263

 
54,256

Shareholders’ equity:
 
 
 
Equity attributable to owners of the parent
202,450

 
228,462

Noncontrolling interest
1

 
1

Total liabilities and shareholders’ equity
$
319,571

 
$
358,419

 
Half Year Ended December 31,
 
2015
 
2014
 
 
 
 
 
(in thousands)
Gross revenues
$
143,575

 
$
167,206

Gross profit
93,573

 
104,852

Profit (loss) attributable to:
 
 
 
Owners of the parent
$
11,483

 
$
(4,717
)
Noncontrolling interest

 
(179
)
Profit (loss) for the year
$
11,483

 
$
(4,896
)
During the three-months ended June 30, 2016, the fair value of our investment in Cash Converters International declined below its carrying value. We considered the guidance in FASB ASC 320-10-S99-1 in evaluating whether the impairment was other-than-temporary and whether to measure and recognize any other-than-temporary impairment. We noted the primary factors in determining that the decline in fair value was not other-than-temporary were the length of time and the extent to which the market value has been less than cost as well as our intent and ability to hold our investment in Cash Converters International for a period of time sufficient to allow for any anticipated recovery in market value. We do not believe the decline in fair value is other-than-temporary as of June 30, 2016. We continue to monitor the fair value of our investment in Cash Converters International for other-than-temporary impairments in future reporting periods and may record an impairment charge should the fair value of our investment in Cash Converters International remain below its carrying value for an extended period of time. See Note 14 for the fair value and carrying value of our investment in Cash Converters International.
NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS
In accordance with FASB 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 three-months ended March 31, 2016, we evaluated such events and circumstances and concluded that there were indicators of impairment under FASB ASC 350-20-35-3C. These indicators of impairment primarily included a continued decline in our stock price, as well as negative developments in bad debt experience at our Grupo Finmart segment. We performed a quantitative Step 1 analysis as of February 29, 2016 under FASB ASC 350-20-35 and determined that the fair value of each of our reporting units exceeded their carrying value, with the exception of our Grupo Finmart reporting unit. The fair values of each reporting unit were determined based on a discounted cash flow approach using significant unobservable inputs (Level 3) developed using company-specific information. During the quarter ended March 31, 2016, there were no material changes in the fair values of our U.S. Pawn and Mexico Pawn reporting

17


units as compared to their carrying values. There is no goodwill attributable to our Other International reporting unit. We will further perform our required annual impairment test in the fourth quarter of our fiscal 2016.
The Step 1 analysis of our Grupo Finmart reporting unit yielded a valuation of $46.5 million. Under Step 2 of FASB ASC 350-20-35, we compared the fair value of the reporting unit to the fair value of the reporting unit's net assets and determined that all of the goodwill attributable to the Grupo Finmart reporting unit ($73.9 million) should be impaired. This impairment was included in "Loss from discontinued operations, net of tax" in the condensed consolidated statements of operations during the three-months ended March 31, 2016. No other assets held by Grupo Finmart were determined to be impaired as of March 31, 2016. Our Grupo Finmart reporting unit was classified as a discontinued operation held for sale during the three-months ended June 30, 2016 as discussed in Note 2.
See Note 3 for additional information regarding goodwill acquired in business combinations.

18


NOTE 7: LONG-TERM DEBT
The following table presents our long-term debt instruments outstanding as of June 30, 2016 and 2015 and September 30, 2015:
 
June 30, 2016
 
June 30, 2015
 
September 30, 2015
 
Carrying
Amount
 
Debt (Discount) and (Issuance Costs)
 
Carrying
Amount
 
Debt (Discount) Premium and (Issuance Costs)
 
Carrying
Amount
 
Debt (Discount) and (Issuance Costs)
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Recourse to EZCORP:
 
 
 
 
 
 
 
 
 
 
 
2.125% Cash convertible senior notes due 2019
$
195,221

 
$
(34,779
)
 
$
184,765

 
$
(45,235
)
 
$
187,471

 
$
(42,529
)
Cash convertible senior notes due 2019 embedded derivative
16,200

 

 
23,160

 

 
10,505

 

Non-recourse to EZCORP*:
 
 
 
 
 
 
 
 
 
 
 
8.2% Secured foreign currency debt up to $14 million due 2016 (a) (b)
5

 
(47
)
 
1,445

 
(321
)
 
938

 
(204
)
14.5% Secured foreign currency debt up to $16 million due 2017 (a)
14,821

 

 
19,157

 

 
17,567

 

5.8% Consumer loans facility due 2019 (b)
25,669

 
(1,085
)
 
43,900

 
(2,652
)
 
40,493

 
(2,196
)
8.5% Unsecured notes due 2015

 

 
12,404

 
(114
)
 
12,330

 
(42
)
10% Unsecured notes due 2015

 

 

 

 
1,500

 

11% Unsecured notes due 2015

 

 
4,218

 

 
3,868

 

17% Secured notes due 2015 consolidated from VIEs

 

 
21

 

 

 

10% Unsecured notes due 2016
1,500

 

 
821

 

 
1,885

 

12% Secured notes due 2016

 

 
3,216

 
22

 
2,928

 

13% Unsecured notes due 2016

 

 
639

 


 
1,171

 

15% Unsecured notes due 2016
3,560

 

 

 

 
233

 

15% Secured notes due 2016 consolidated from VIEs
2,234

 

 
7,098

 

 
5,397

 

18% Unsecured notes due 2016
5,389

 

 

 

 

 

10% Unsecured notes due 2017
162

 

 

 

 

 

11% Secured notes due 2017 consolidated from VIEs (c)
29,959

 

 
66,121

 

 
56,113

 

12% Secured notes due 2017
2,021

 

 

 

 

 

13.5% Unsecured notes due 2017
4,940

 

 

 

 

 

14.5% Secured notes due 2017 consolidated from VIEs
8,650

 

 
13,575

 

 
11,754

 

15% Unsecured notes due 2017
2,114

 

 

 

 

 

12.4% Secured notes due 2020
16,047

 
(175
)
 
18,901

 
(320
)
 
17,358

 
(268
)
Total
328,492

 
(36,086
)

399,441


(48,620
)

371,511


(45,239
)
Less current portion
80,248

 

 
69,054

 
22

 
74,345

 

Total long-term debt
$
248,244

 
$
(36,086
)
 
$
330,387

 
$
(48,642
)
 
$
297,166

 
$
(45,239
)
*
Even though Grupo Finmart debt may be non-recourse to EZCORP, a default on more than $25 million of such debt could constitute an event of default under our Cash Convertible Notes (described below). See "Part II, Item 1A — Risk Factors." Additionally, as of June 30, 2016, Grupo Finmart was classified as held for sale in our condensed consolidated balance sheets. These amounts are included in "Current liabilities held for sale" and "Non-current liabilities held for sale" in our condensed consolidated balance sheets. For further discussion see Note 2.
(a)
Maximum amounts of debt are translated from Mexican pesos to United States dollars as of the most current period end date in which outstanding debt is presented.
(b)
Interest is charged at the Mexican Interbank Equilibrium rate (“TIIE”) plus an applicable margin. The rate presented is as of June 30, 2016.
(c)
Grupo Finmart has entered into foreign exchange forward contracts to mitigate the VIE's currency risk, as described in Notes 15 and 16, and EZCORP has guaranteed the future cash outflows of the forward contracts. See "Part II, Item 1A — Risk Factors."
2.125% Cash Convertible Senior Notes Due 2019
In June 2014 ("Original Issuance Date"), we issued $200 million aggregate principal amount of 2.125% Cash Convertible Senior Notes due 2019 (the “Cash Convertible Notes”). We granted the initial purchasers the option to purchase up to an additional $30 million aggregate principal amount of Cash Convertible Notes. That option was exercised in full on June 27,

19


2014, and we issued an additional $30 million principal amount of Cash Convertible Notes on July 2, 2014. All of the Cash Convertible Notes were issued pursuant to an indenture dated June 23, 2014 (the "Indenture") by and between us and Wells Fargo Bank, National Association, as the trustee. The Cash Convertible Notes were issued in a private offering and resold under Rule 144A under the Securities Act of 1933. The Cash Convertible Notes pay interest semi-annually in arrears at a rate of 2.125% per annum on June 15 and December 15 of each year, commencing December 15, 2014, and will mature on June 15, 2019 (the "Maturity Date").
Prior to December 15, 2018, the Cash Convertible Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time prior to the close of business on the second scheduled trading day immediately preceding the Maturity Date. At maturity, the holders of the Cash Convertible Notes will be entitled to receive cash equal to the principal amount of the Cash Convertible Notes plus unpaid accrued interest.
The Cash Convertible Notes are unsubordinated unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Cash Convertible Notes, equal in right of payment with all of our other unsecured unsubordinated indebtedness, and effectively junior to all debt or other obligations (including trade payables) of our wholly-owned subsidiaries. The Indenture governing the Cash Convertible Notes does not contain any financial covenants.
We incurred transaction costs of approximately $8.8 million related to the issuance of the Cash Convertible Notes, which we recorded as deferred financing costs and have included as a deduction to the corresponding debt liability. Deferred financing costs are being amortized to interest expense using the effective interest method over the expected term of the Cash Convertible Notes.
Under the terms of our Cash Convertible Notes, payment of dividends requires a conversion rate adjustment equal to the conversion rate in effect immediately prior to the open of business on the ex-dividend date for such dividend multiplied by the last reported sale price of the Class A Non-voting Common Stock (“Class A Common Stock”) on the trading day immediately preceding the ex-dividend date for such dividend, divided by the difference between the last reported sale price of the Class A Common Stock on the trading day immediately preceding the ex-dividend date for such dividend and the amount in cash per share we distribute to all or substantially all holders of Class A Common Stock. Should we pay dividends in the future, our certificate of incorporation provides that cash dividends on common stock, when declared, must be declared and paid at the same per share amounts on both classes of stock. Any future determination to pay cash dividends will be at the discretion of our Board of Directors.
Cash Convertible Notes Embedded Derivative
We account for the cash conversion feature of the Cash Convertible Notes as a separate derivative instrument (the “Cash Convertible Notes Embedded Derivative”), which had a fair value of $46.5 million on the issuance date that was recognized as the original issue discount of the Cash Convertible Notes. This original issue discount is being amortized to interest expense over the term of the Cash Convertible Notes using the effective interest method. As of June 30, 2016 and 2015 and September 30, 2015, the Cash Convertible Notes Embedded Derivative was recorded as a non-current liability under "Long-term debt, less current maturities" in our condensed consolidated balance sheets, and will be marked to market in subsequent reporting periods. The classification of the Cash Convertible Notes Embedded Derivative liability as current or non-current on the condensed consolidated balance sheets corresponds with the classification of the net balance of the Cash Convertible Notes as discussed below.
The Cash Convertible Notes are convertible into cash, subject to satisfaction of certain conditions and during the periods described below, based on an initial "Conversion Rate" of 62.2471 shares of Class A Common Stock per $1,000 principal amount of Cash Convertible Notes (equivalent to an initial "Conversion Price" of approximately $16.065 per share of our Class A Common Stock). Upon conversion of a note, we will pay cash based on a daily conversion value calculated on a proportionate basis for each trading day in the applicable 80 trading day observation period as described in the Indenture. The conversion rate will not be adjusted for any accrued and unpaid interest.
Holders may surrender their Cash Convertible Notes for conversion into cash prior to December 15, 2018 only under the following circumstances (the “Early Conversion Conditions”): (1) during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2014 (and only during such fiscal quarter), if the last reported sale price of our Class A Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price, as defined in the Indenture, per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A Common Stock and the conversion rate on such trading day; or (3) upon the occurrence of specified corporate events, as defined in the Indenture. On or

20


after December 15, 2018 until the close of business on the second scheduled trading day immediately preceding the Maturity Date, holders may convert their notes into cash at any time, regardless of the foregoing circumstances.
If a holder elects to convert its Cash Convertible Notes in connection with certain make-whole fundamental changes, as that term is defined in the Indenture, that occur prior to the Maturity Date, we will in certain circumstances increase the conversion rate for Cash Convertible Notes converted in connection with such make-whole fundamental changes by a specified number of shares of Class A Common Stock. In addition, the conversion rate is subject to customary anti-dilution adjustments (for example, certain dividend distributions or tender or exchange offer of our Class A Common Stock).
Upon the occurrence of a fundamental change, as defined in the Indenture, holders may require us to repurchase for cash all or any portion of the then outstanding Cash Convertible Notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest.
Impact of Early Conversion Conditions on Financial Statements
As of June 30, 2016, the Cash Convertible Notes were not convertible because the Early Conversion Conditions described above had not been met. Accordingly, the net balance of the Cash Convertible Notes was classified as a non-current liability in our condensed consolidated balance sheets as of June 30, 2016 and 2015 and September 30, 2015. The classification of the Cash Convertible Notes as current or non-current in the condensed consolidated balance sheets is evaluated at each balance sheet date and may change from time to time depending on whether any of the Early Conversion Conditions has been met.
If any of the Early Conversion Conditions is met in any future fiscal quarter, we would classify our net liability under the Cash Convertible Notes as a current liability in the condensed consolidated balance sheets as of the end of that fiscal quarter. If none of the Early Conversion Conditions have been met in a future fiscal quarter prior to the one year period immediately preceding the Maturity Date, we would classify our net liability under the Cash Convertible Notes as a non-current liability in the condensed consolidated balance sheets as of the end of that fiscal quarter. If the note holders elect to convert their Cash Convertible Notes prior to maturity, any unamortized discount and transaction costs will be expensed at the time of conversion. If the entire outstanding principal amount had been converted on June 30, 2016, we would have recorded an expense of $34.8 million associated with the conversion, comprised of $29.5 million of unamortized debt discount and $5.3 million of unamortized debt issuance costs. As of June 30, 2016, none of the note holders had elected to convert their Cash Convertible Notes.
Cash Convertible Notes Hedges
In connection with the issuance of the Cash Convertible Notes, we purchased cash-settled call options (the “Cash Convertible Notes Hedges”) in privately negotiated transactions with certain of the initial purchasers or their affiliates (in this capacity, the “Option Counterparties”). The Cash Convertible Notes Hedges provide us with the option to acquire, on a net settlement basis, approximately 14.3 million shares of our Class A Common Stock at a strike price of $16.065, which is equal to the number of shares of our Class A Common Stock that notionally underlie the Cash Convertible Notes and corresponds to the Conversion Price of the Cash Convertible Notes. The Cash Convertible Notes Hedges have an expiration date that is the same as the Maturity Date of the Cash Convertible Notes, subject to earlier exercise. The Cash Convertible Notes Hedges have customary anti-dilution provisions similar to the Cash Convertible Notes. If we exercise the Cash Convertible Notes Hedges, the aggregate amount of cash we will receive from the option counterparties to the Cash Convertible Notes Hedges will cover the aggregate amount of cash that we would be required to pay to the holders of the converted Cash Convertible Notes, less the principal amount thereof. As of June 30, 2016, we have not purchased any shares under the Cash Convertible Notes Hedges.
The aggregate cost of the Cash Convertible Notes Hedges was $46.5 million (or $21.3 million net of the total proceeds from the Warrants sold, as discussed below). The Cash Convertible Notes Hedges are accounted for as a derivative asset and are recorded in the condensed consolidated balance sheets at their estimated fair value under "Other assets, net." The Cash Convertible Notes Embedded Derivative liability and the Cash Convertible Notes Hedges asset will be adjusted to fair value each reporting period and unrealized gains and losses will be reflected in the condensed consolidated statements of operations. The Cash Convertible Notes Embedded Derivative and the Cash Convertible Notes Hedges are designed to have similar fair values. Accordingly, the changes in the fair values of these instruments are expected to offset and not have a net impact on the condensed consolidated statements of operations. See Note 14 for discussion of fair value of the Cash Convertible Notes Embedded Derivative liability and the Cash Convertible Notes Hedges asset.
The classification of the Cash Convertible Notes Hedges asset as current or long-term on the condensed consolidated balance sheets corresponds with the classification of the Cash Convertible Notes, which is evaluated at each balance sheet date and may change from time to time depending on whether any of the Early Conversion Conditions has been met.

21


Cash Convertible Notes Warrants
In connection with the issuance of the Cash Convertible Notes, we also sold net-share-settled warrants (the “Warrants”) in privately negotiated transactions with the Option Counterparties for the purchase of up to approximately 14.3 million shares of our Class A Common Stock at a strike price of $20.83 per share, for total proceeds of $25.1 million, net of issuance costs, which was recorded as an increase in stockholders' equity. The Warrants have customary anti-dilution provisions similar to the Cash Convertible Notes. As a result of the Warrants, we will experience dilution to our diluted earnings per share if our average closing stock price exceeds $20.83 for any fiscal quarter. The Warrants expire on various dates from September 2019 through February 2020 and must be settled in net shares of our Class A Common Stock. Therefore, upon expiration of the Warrants, we will issue shares of Class A Common Stock to the purchasers of the Warrants that represent the value by which the price of the Class A Common Stock exceeds the strike price stipulated within the particular warrant agreement. As of June 30, 2016, there were 14.3 million warrants outstanding.
Cash Convertible Notes Interest Expense
Total interest expense attributable to the Cash Convertible Notes for the three-months ended June 30, 2016 and 2015 was $3.9 million and $3.6 million, respectively, comprised of contractual interest expense of $1.2 million and $1.2 million, respectively, and debt discount and deferred financing cost amortization of $2.7 million and $2.4 million, respectively.
Total interest expense attributable to the Cash Convertible Notes for the nine-months ended June 30, 2016 and 2015 was $11.6 million and $11.0 million, respectively, comprised of contractual interest expense of $3.7 million and $3.7 million, respectively, and debt discount and deferred financing cost amortization of $7.9 million and $7.3 million, respectively. The effective interest rate approximates 8% after inclusion of deferred financing costs upon adoption of ASU 2015-03, from the effective interest rate of approximately 7% during fiscal 2015.
As of June 30, 2016, the remaining unamortized issuance discount and costs will be amortized over the next three years assuming no early conversion.
Non-Recourse Debt to EZCORP
Non-recourse debt amounts in the table above represent Grupo Finmart’s third-party debt, including secured notes consolidated from VIEs. Amounts due in Mexican pesos are translated each reporting period. Effective interest rates approximate stated rates. As of June 30, 2016, Grupo Finmart was classified as held for sale and all operations of Grupo Finmart were classified as discontinued operations. For further discussion see Note 2.
Secured Foreign Currency Debt, Secured Notes not Consolidated from VIEs and Unsecured Notes
Foreign currency debt and secured notes (not including secured notes consolidated from VIEs, which are discussed below) are secured by Grupo Finmart's loan portfolio or collateralized cash at Grupo Finmart’s option. As of June 30, 2016 and 2015, Grupo Finmart’s secured foreign currency debt and notes, excluding secured notes consolidated from VIEs, were secured by consumer loans totaling $32.7 million and $35.2 million, respectively, and collateralized cash totaling $1.9 million and $8.6 million, respectively, included in “Current assets held for sale” and “Non-current assets held for sale” in our condensed consolidated balance sheets. All unsecured notes are collateralized with Grupo Finmart’s assets.
During the nine-months ended June 30, 2016, Grupo Finmart issued $6.1 million of 13.5% unsecured notes due September 2016 (repayment term extended through 2017 during the three-months ended March 31, 2016), $6.1 million of 18% unsecured notes due September 2016 and $1.0 million of 15% unsecured notes due January 2017 (net of repayments during the quarter). Amounts of debt issued are stated at exchange rates in effect at time of issuance.
During the nine-months ended June 30, 2016, Grupo Finmart repaid the following amounts of debt that were outstanding as of September 30, 2015: the remaining $0.9 million 8.2% secured foreign currency debt due 2016; $12.3 million 8.5% unsecured notes due 2015; $1.5 million 10% unsecured notes due 2015; $3.9 million 11% unsecured notes due 2015; $2.9 million 12% secured notes due 2016; and $1.2 million 13% unsecured notes due 2016. Such amounts include the impact of foreign exchange effects and amortization of deferred costs. In addition, portions of other debt amounts still outstanding as of June 30, 2016 were repaid.
Notes Consolidated from VIEs
During the year ended September 30, 2014, Grupo Finmart entered into three separate agreements with third party investors and variable interest entities (“VIEs”) to securitize selected loans providing asset backed financing for operations. The VIEs issued promissory notes to the third party first beneficiaries of the VIEs. The debt described below is collateralized by all of the assets of the VIEs as presented in our condensed consolidated balance sheets described in Note 16.

22


The secured notes consolidated from VIEs contain certain prepayment clauses. Where the collections on consumer loans held by the VIEs are greater than anticipated in future reporting periods, we expect an accelerated repayment of the secured notes. See Note 2 for assets and liabilities of consolidated variable interest entities included in our condensed consolidated balance sheets.
During the nine-months ended June 30, 2016, the VIEs repaid a net $32.4 million of debt that was outstanding as of September 30, 2015, including the impact of foreign exchange effects and amortization of deferred costs.
Consumer Loans Facility Due 2019
On February 17, 2014, Grupo Finmart entered into a new securitization transaction to transfer collection rights of certain eligible consumer loans to a bankruptcy remote trust in exchange for cash as discussed in Note 16.
In addition to the initial net payment of $6.9 million during the six-months ended March 31, 2016, including the impact of foreign exchange effects and amortization of deferred costs, the facility began amortizing at a monthly rate of $1.0 million beginning March 2016, which includes principal and interest at TIIE plus an applicable margin, through maturity of the facility in 2019.
NOTE 8: STOCK COMPENSATION