26
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[x]QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO
FEE REQUIRED]
For the transition period from ______________ to
_____________
Commission File Number 0-19424
_______________________________
EZCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2540145
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1901 Capital Parkway
Austin, Texas 78746
(Address of principal executive offices)
(Zip Code)
(512) 314-3400
(Registrant's telephone number, including area code)
NA
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes X No__
APPLICABLE ONLY TO CORPORATE ISSUERS:
The only class of voting securities of the registrant
issued and outstanding is the Class B Voting Common Stock,
par value $.01 per share, 100% of which is owned by two
record holders which are affiliates of the registrant.
There is no trading market for the Class B Voting Common
Stock.
As of June 30, 1996, 6,980,591 shares of the
registrant's Class A Non-voting Common Stock, par value $.01
per share and 5,019,176 shares of the registrant's Class B
Voting Common Stock, par value $.01 per share were
outstanding.
EZCORP, INC.
INDEX TO FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
June 30, 1996 and September 30, 1995 1
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended June 30, 1996 and 1995 2
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended June 30, 1996 and 1995 3
Notes to Interim Condensed Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION 11
SIGNATURE 26
PART I
Item 1. Financial Statements (Unaudited)
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
June 30, September 30,
1996 1995
--------- ------------
ASSETS:
Current assets:
Cash and cash equivalents $ 3,931 $ 4,593
Pawn loans receivable 31,933 39,782
Service charge receivable 9,299 11,452
Inventories (net) 33,836 41,575
Other 5,172 9,839
------- --------
Total current assets 84,171 107,241
Property and equipment, net 34,736 36,596
Other assets:
Excess purchase price over net
assets acquired 13,218 13,574
Other 5,445 7,177
------- -------
Total assets $137,570 $164,588
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current maturities of
long-term debt $ 168 $ 171
Accounts payable and
accrued expenses 7,743 10,026
Other 1,850 2,100
------- -------
Total current liabilities 9,761 12,297
Long-term debt less current
maturities 16,291 42,916
Stockholders' equity:
Preferred stock none outstanding - -
Class A Non-voting Common stock
6,980,591 shares outstanding at
June 30, 1996 (6,967,867 at
September 30, 1995) 70 70
Class B Voting Common stock
5,019,176 shares outstanding 50 50
Additional paid-in capital 114,301 114,236
Retained earnings (2,139) (4,209)
------- -------
112,282 110,147
Other (764) (772)
------- -------
Total stockholders' equity 111,518 109,375
------- -------
Total liabilities and
stockholders' equity $137,570 $164,588
======= =======
See Notes to Interim Condensed Consolidated Financial
Statements (unaudited).
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
------ ------ ------ -------
Revenues:
Sales $ 22,238 $ 25,375 $ 83,076 $ 82,688
Pawn service charges 15,891 17,685 52,004 53,366
------- ------- ------- -------
Total revenues 38,129 43,060 135,080 136,054
Cost of goods sold 18,578 21,337 71,410 69,069
------- ------- ------- -------
Net revenues 19,551 21,723 63,670 66,985
Operating expenses:
Operations 13,463 17,046 45,232 49,740
Administrative 2,234 3,235 7,907 9,482
Depreciation and
amortization 1,945 1,814 5,688 5,348
------- ------- ------- -------
Total operating
expenses 17,642 22,095 58,827 64,570
Operating income (loss) 1,909 (372) 4,843 2,415
Interest expense 319 790 1,602 2,283
------- ------- ------- -------
Income (loss) before
income taxes 1,590 (1,162) 3,241 132
Income tax expense
(benefit) 563 (385) 1,171 88
------- ------- ------- -------
Net income (loss) $ 1,027 $ (777) $ 2,070 $ 44
======= ======== ======= ========
Earnings (loss) per share $ 0.09 $ (0.06) $ 0.17 $ 0.00
======= ======== ======= ========
Weighted average shares
outstanding 11,990,734 11,978,010 11,987,393 11,978,115
========== ========== ========== ==========
See Notes to Interim Condensed Consolidated Financial
Statements (unaudited).
EZCORP, Inc. and SubsidiariesCondensed Consolidated
Statements of Cash Flows (Unaudited)(Dollars in thousands)
Nine Months Ended
June 30,
1996 1995
------ ------
OPERATING ACTIVITIES:
Net income $ 2,070 $ 44
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 5,688 5,348
Deferred income taxes - (86)
Gain on sale of assets (262) -
Changes in operating assets and liabilities:
Decrease/(increase) in service
charge receivable 2,153 (313)
Decrease in inventories 7,739 2,256
Decrease in accounts payable
and accrued expenses (2,283) (155)
Decrease in income taxes payable - (3,307)
Decrease in income taxes
recoverable 4,236 -
Other 1,283 (1,735)
------ -------
Net cash provided by
operating activities 20,624 2,052
INVESTING ACTIVITIES:
Pawn loans forfeited and
transferred to inventories 38,749 37,874
Pawn loans made (111,689) (144,147)
Pawn loans repaid 80,789 107,275
-------- --------
Net decrease in loans 7,849 1,002
Additions to property, plant,
and equipment (4,650) (8,019)
Sale of assets 2,143 -
Issuance of notes receivable
to related parties - (3,000)
-------- --------
Net cash provided/(used)
in investing activities 5,342 (10,017)
FINANCING ACTIVITIES:
Proceeds from bank borrowings 3,000 9,750
Payments on borrowings (29,628) (5,211)
-------- --------
Net cash provided/(used)
by financing activities (26,628) 4,539
-------- --------
Decrease in cash and cash equivalents (662) (3,426)
Cash and cash equivalents at
beginning of period 4,593 6,267
-------- --------
Cash and cash equivalents at
end of period $ 3,931 $ 2,841
======= ========
See Notes to Interim Condensed Consolidated Financial
Statements (unaudited).
EZCORP, Inc. and SubsidiariesNotes to Interim Condensed
Consolidated Financial Statements (Unaudited)
June 30, 1996
Note A - Basis of Presentation
The accompanying unaudited
condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring entries) considered necessary for a fair
presentation have been included. The accompanying financial
statements should be read with the Notes to Consolidated
Financial Statements included in the Company's Annual Report
on Form 10-K for the year ended September 30, 1995.
The Company's business is subject to seasonal
variations, and operating results for the three- and nine-
month periods ended June 30, 1996 are not necessarily
indicative of the results of operations for the full fiscal
year.
Note B - Accounting Principles and Practices
The provision for federal income taxes has been
calculated based on the Company's estimate of its effective
tax rate for the full fiscal year.
To conform with the current year's presentation, $0.8
million and $3.8 million of proceeds from the disposal of
scrap jewelry have been reclassified from cost of sales to
sales for the three- and nine-month periods ended June 30,
1995, respectively.
The Company provides inventory reserves for shrinkage
and cost in excess of market value. The Company estimates
these reserves using analysis of sales trends, inventory
aging, sales margins and shrinkage on inventory. As of June
30, 1996, inventory reserves were $7.1 million.
During fiscal 1995, the Company established a $7.7
million provision for the closing and consolidation of
thirty-two (32) of its stores and for the write-down of
tangible and intangible assets. As of June 30, 1996, thirty-
one (31) of these stores had closed and one (1) was still in
operation. The June 30, 1996 accrued liability for store
closings is $0.6 million, principally for estimated rent
obligations.
In October 1995, the Financial Accounting Standards
Board issued FASB Statement No. 123, "Accounting for Stock
Based Compensation" which prescribes accounting and
reporting standards for all stock-based compensation plans.
The Company is required to adopt the Statement for its
fiscal year that begins October 1, 1996 and is presently
evaluating the Statement. The Company has yet to decide
upon the alternatives provided in the Statement.
Note C - Earnings (Loss) Per Share
Earnings per share calculations assume exercise of all
outstanding stock options and warrants using the treasury
stock method of calculation. The per share calculation
excludes these common equivalent shares as their effect is
anti-dilutive.
EZCORP, Inc. and SubsidiariesNotes to Interim Condensed
Consolidated Financial Statements (Unaudited)June 30, 1996
Note D - Litigation
The Company is involved in litigation relating to
claims that arise from time to time from normal business
operations. Currently, the Company is a defendant in
several lawsuits. Some of these lawsuits involve claims for
substantial amounts. While the ultimate outcome of these
lawsuits involving the Company cannot be ascertained, after
consultation with counsel, it is management's opinion that
the resolution of these suits will not have a material
adverse effect on the Company's financial condition. See
Item 1. Legal Proceedings.
Note E - Bank Credit Agreement
On June 24, 1996, the Company amended its November 29,
1994 revolving line of credit. The amended revolving line
of credit matures January 31, 1998. Terms of the amended
agreement require, among other things, that the Company meet
certain financial covenants and provide the bank group a
first lien security interest in certain assets of the
Company. Borrowings under the line bear interest at the
bank's Eurodollar rate plus 1% to 2%. The amount which the
Company can borrow is based on a percentage of its inventory
levels and outstanding pawn loan balance, up to $50 million.
Note F - Subsequent Event
On July 17, 1996, the holder of a majority of the
Company's outstanding Class B Voting Common Stock acted to
convert 54.76% of the outstanding shares of Class B Voting
Common Stock into a like number of shares of Class A Non-
voting Common Stock. Following this conversion, there were
9,728,904 Class A and 2,270,863 Class B shares outstanding.
Also on that date, the Board of Directors approved an
amendment to the Company's Certificate of Incorporation to
reduce the number of authorized Class B shares to 2,274,969
shares.
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations
Third Quarter Ended June 30, 1996 vs. Third Quarter Ended
June 30, 1995
The following table sets forth selected, unaudited,
consolidated financial data with respect to the Company for
the three months ended June 30, 1996 and 1995.
Three Months Ended % or
June 30, Point
1996 1995 Changea
-------- -------- --------
(Dollars in thousands)
Net Revenues:
Salesb $ 22,238 $ 25,375 (12.4%)
Pawn service charges 15,891 17,685 (10.1%)
------- -------
Total revenuesb 38,129 43,060 (11.5%)
Cost goods soldb 18,578 21,337 (12.9%)
------- -------
Net revenues $ 19,551 $ 21,723 (10.0%)
======= =======
Other Data:
Gross profit as a
percent of salesb 16.5% 15.9% 0.6 pt
Average annual
inventory turnover 2.1x 1.4x 0.7x
Average inventory balance
per location as of the
end of the quarter $140 $225 (37.8%)
Average loan balance
per location as of the end
of the quarter $132 $140 (5.7%)
Average yield on loan
portfolio 212% 205% 7.0 pts
Redemption rate 80% 75% 5.0 pts
Expenses as a Percent of Total Revenues:b
Operating 35.3% 39.6% (4.3 pts)
Administrative 5.9% 7.5% (1.6 pts)
Depreciation and
amortization 5.1% 4.2% 0.9 pts
Interest, net 0.8% 1.8% (1.0 pts)
Locations in Operation:
Beginning of period 240 250
Acquired - -
Established 2 12
Sold, combined or closed - -
----- -----
End of period 242 262
===== =====
Average locations in operation
during the periodc 241.0 256.0
===== =====
- --------------------------------
a In comparing the period differences between dollar
amounts or store counts, a percentage change is used.
In comparing the period differences between two
percentages, a percentage point (pt.) change is used.
b Sales from scrap and wholesale activity were
reclassified from cost of goods sold to sales. All
1995 amounts have been adjusted as a result of this
reclassification.
c Average locations in operation during the period is
calculated based on the average of the pawnshops
operating at the beginning and end of such period.
Nine Months Ended June 30, 1996 vs. Nine Months Ended June
30, 1995
The following table sets forth selected, unaudited,
consolidated financial data with respect to the Company for
the nine months ended June 30, 1996 and 1995.
Nine Months Ended % or
June 30, Point
1996 1995 Changea
------- ------- -------
(Dollars in thousands)
Net Revenues:
Salesb $ 83,076 $ 82,688 0.5%
Pawn service charges 52,004 53,366 (2.6%)
------- -------
Total revenuesb 135,080 136,054 (0.7%)
Cost of goods soldb 71,410 69,069 3.4%
------- -------
Net revenues $ 63,670 $ 66,985 (4.9%)
======= =======
Other Data:
Gross profit as a
percent of salesb 14.0% 16.5% (2.5 pts)
Average annual
inventory turnover 2.4x 1.4x 1.0x
Average inventory balance
per location as of the
end of the quarter $140 $225 (37.8%)
Average loan balance
per location as of the end
of the quarter $132 $140 (5.7%)
Average yield on loan
portfolio 208% 202% 6.0 pts
Redemption rate 78% 76% 2.0 pts
Expenses as a Percent of Total Revenues:b
Operating 33.5% 36.6% (3.1 pts)
Administrative 5.9% 7.0% (1.1 pts)
Depreciation and
amortization 4.2% 3.9% 0.3 pts
Interest, net 1.2% 1.7% (0.5 pts)
Locations in Operation:
Beginning of period 261 234
Acquired - -
Established 6 28
Sold, combined or closed (25) -
----- -----
End of period 242 262
===== =====
Average locations in operation
during the periodc 251.5 248.0
===== =====
a In comparing the period differences between dollar
amounts or store counts, a percentage change is used.
In comparing the period differences between two
percentages, a percentage point (pt.) change is used.
b Sales from scrap & wholesale activity were reclassified
from cost of goods sold to sales. All 1995 amounts
have been adjusted as a result of this
reclassification.
c Average locations in operation during the period is
calculated based on the average of the pawnshops
operating at the beginning and end of such period.
Results of Operations
The following discussion compares
results for the three- and nine-month periods ended June 30,
1996 ("Fiscal 1996 Periods") to the three- and nine-month
periods ended June 30, 1995 ("Fiscal 1995 Periods"). The
discussion should be read in conjunction with the
accompanying financial statements and related notes.
During the three-month Fiscal 1996 Period, the Company
opened two (2) newly established stores. During the twelve
(12) months ended June 30, 1996, the Company opened eleven
(11) newly established stores and closed thirty-one (31)
stores. The store closings were the result of the Company's
decision, made during the fourth Fiscal 1995 quarter, to
consolidate and close thirty-two (32) stores. At June 30,
1996, the Company operated 242 stores in eleven (11) states.
The Company's primary activity is the making of small,
non-recourse loans secured by tangible personal property.
The income earned on this activity is pawn service charge
revenue. For the three month period ended June 30, 1996,
pawn service charge revenue decreased 10% to $15.9 million.
A decline in same store pawn service charges and pawn
service charge revenue of the thirty-one (31) closed stores
resulted in a year over year decline (7 and 5 percentage
points, respectively) in pawn service charge revenue. These
two unfavorable factors are partially offset by pawn service
charge revenues from stores opened during the last twelve
months (2 percentage point impact). The decrease in same
store pawn service charge revenues was primarily due to
lower average loan amounts (6%) and a smaller number of
loans (4%) offset by an increase of 7 percentage points in
annualized yield earned on the loan balance (212% for the
Fiscal 1996 Period versus 205% for the Fiscal 1995 Period).
The yield improvement results primarily from management's
actions to reduce the number of high-dollar, low-yielding
loans.
For the nine-month period, pawn service charge revenue
decreased 3% to $52 million. The decline in same store pawn
service charge revenue and pawn service charge revenue lost
as a result of store closings account for 2 and 6 percentage
points of the 3% year over year decline. These factors are
largely offset by pawn service charge revenues from stores
opened during the last twelve months (5 percentage point
impact).
A secondary, but related, activity of the Company is
the sale of merchandise, primarily collateral forfeited from
its lending activity. For the three-month Fiscal 1996
Period, merchandise sales decreased 12% to $22.2 million
compared with $25.4 million for the Fiscal 1995 Period. The
12% decrease was the net effect of lower same store sales (7
percentage points), sales lost from closed stores (8
percentage points) and sales generated from new stores (3
percentage points). The Company's management believes that
lower average inventories per store (down 38% from the prior
year) contributed to the same store sales declines.
For the nine-month period, merchandise sales were up
0.5% to $83.1 million. The nominal year over year increase
is approximately the net result of a decline in same store
sales (1 percentage point), sales lost from closed stores (8
percentage points), sales generated from new stores (5.5
percentage points) and a higher level of wholesale and scrap
sales activity (4 percentage points).
For the three-month Fiscal 1996 Period, gross profits
as a percentage of sales increased 0.6 of one percentage
point, to 16.5%, from the Fiscal 1995 Period. This increase
resulted largely from the combined favorable effect of a
reduction in inventory shrinkage measured as a percentage of
merchandise sales (reduced by 1.5 percentage points to 2.3%)
and improved gross profit on the sale of scrap jewelry (1.3
percentage points). This increase was partially offset by a
decline in merchandise sales margins (a 2.2 percentage point
decrease). The lower merchandise sales margins result
primarily from management's strategy of pricing merchandise
based on, among other factors, merchandise age since
acquired or forfeited.
For the nine-month Fiscal 1996 Period, gross profits as
a percentage of sales decreased 2.5 percentage points, to
14% from the Fiscal 1995 Period. The lower gross profit
percentage was the net result of lower inventory shrinkage
(2.7 percentage points), improved gross profit on wholesale
and scrap sales (1.3 percentage points) and lower margins on
merchandise sold (6.5 percentage points).
The Company's gross margin level (gross profit as a
percentage of merchandise sales) results from, among other
factors, the composition, quality and age of its inventory.
At June 30, 1996, the Company's store inventories consisted
of approximately 64% jewelry (e.g., ladies' and men's rings,
chains, bracelets, etc.) and 36% general merchandise (e.g.,
televisions, VCRs, tools, sporting goods, musical
instruments, firearms, etc.). Approximately 75% of the
jewelry inventory and 86% of the general merchandise
inventory were less than twelve months old based on the
Company's acquisition date (date of forfeiture for
collateral or date of purchase). As a result of a higher
average selling price, consumer preference and seasonal
demand, consistent with other retailers, jewelry is a slower
moving merchandise category than our general merchandise.
Due to seasonally high demand for jewelry during the
Christmas and Valentines periods, jewelry tends to be slower
moving during the Company's third and fourth quarters (April
through September) than during its first and second quarters
(October through March). As a result, the Company expects
its jewelry inventory to turn more slowly and to age during
its third and fourth quarters.
Operating expenses as a percentage of total revenues
decreased approximately 4 and 3 percentage points to 35.3%
and 33.5% for the Fiscal 1996 Periods from 39.6% and 36.6%
in the Fiscal 1995 Periods. Administrative expenses as a
percentage of total revenues decreased to 5.9% in both the
Fiscal 1996 Periods from 7.5% and 7.0% in the Fiscal 1995
Periods. Both store operating and administrative expenses
have declined relative to total revenues as a result of the
closure of underperforming stores and the Company's programs
to reduce costs.
Depreciation and amortization expense increased in the
Fiscal 1996 Periods primarily as a result of the higher
level of depreciation on the eleven (11) newly established
stores added since June 30, 1995. Interest expense (net)
was down 1.0 and 0.5 percentage points in the Fiscal 1996
Periods over the prior year largely as a result of decreased
borrowings under the Company's bank line of credit.
Liquidity and Capital Resources
Net cash provided by operating activities for the nine-
month Fiscal 1996 Period was $20.6 million, an increase of
$18.6 million from the nine-month Fiscal 1995 Period.
Approximately one-half of this increase is due to improved
operating results and working capital utilization. The
balance of the increase is due to income tax refunds
resulting from the carry-back of the Company's Fiscal 1995
net operating loss and the lower level of taxes payable
resulting from the carry-forward of the net operating loss.
For the nine-month Fiscal 1996 Period, the Company
invested approximately $4.7 million including investments in
leasehold improvements and equipment for existing stores and
six (6) newly established stores. The Company funded these
expenditures from cash flow provided by operating activities
and the seasonal reduction in its investment in pawn loans.
The Company projects that it will open approximately 10 new
stores in fiscal 1996 (including six (6) that have already
opened) and will relocate or remodel 5 to 10 of its existing
stores. The Company anticipates that cash flow from
operations and funds available under its existing bank line
of credit should be adequate to fund these capital
expenditures and seasonal pawn loan growth expected during
its fourth fiscal quarter.
On June 24, 1996, the Company amended its November 29,
1994 revolving line of credit. The amended revolving line of
credit matures January 31, 1998. Terms of the amended
agreement require, among other things, that the Company meet
certain financial covenants and provide the bank group a
first lien security interest in certain assets of the
Company. Borrowings under the line bear interest at the
bank's Eurodollar rate plus 1% to 2%. The amount which the
Company can borrow is based on a percentage of its inventory
levels and outstanding pawn loan balance, up to $50 million.
At June 30, 1996, the Company had $15 million outstanding on
the credit facility and additional borrowing capacity of
approximately $21 million.
Seasonality
Historically, pawn service charge revenues are highest
in the fourth fiscal quarter (July, August and September)
due to higher loan demand during the summer months and
merchandise sales are highest in the first fiscal quarter
(October, November and December) due to the holiday season.
PART II
Item 1. Legal Proceedings
On July 28, 1995, the Company terminated the
Employment Agreement of Courtland L. Logue, Jr., the
Company's former Chairman and Chief Executive Officer, and
an owner of approximately 19% of the Company's outstanding
voting securities (Class B Voting Common Stock). Since Mr.
Logue's termination, the Company has had ongoing discussions
with him concerning certain equipment leases between Mr.
Logue and the Company, as well as the application of
provisions to Mr. Logue's Employment Agreement and Stock
Purchase Agreement with the Company. The Company believes
these agreements require, among other things, a $2.7 million
payment by Mr. Logue to the Company. On March 8, 1996, the
Company filed a lawsuit styled EZCORP, Inc. v. Courtland L.
Logue, Jr. in the 201st District Court of Travis County,
Texas in an effort to bring resolution to this dispute. Mr.
Logue has filed counter-claims relating to the Employment
Agreement and certain equipment leases and notes entered
into between Mr. Logue and the Company.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Note F of Notes to Interim Condensed Consolidated
Financial Statements (Unaudited) contained in this report is
incorporated herein by reference
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Incorporated by
Number Description Reference to
------- --------------------------------- ---------------
Exhibit 3.1A Certificate of Amendment to
Certificate of Incorporation of
EZCORP, Inc. Filed herewith
Exhibit 10.74 Third Amendment to Amended and Filed herewith
Restated Loan Agreement Between the
Company and Wells Fargo Bank (formerly
First Interstate Bank of Texas, N.A.),
as Agent, RE: Revolving Credit Loan
Exhibit 11.1 Statement Regarding Computation
of Per Share Earnings Filed herewith
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K for the quarter
ended June 30, 1996.
Exhibit 3.1A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
EZCORP, INC.
It is hereby certified that:
I.The name of the corporation (the "Corporation") is
EZCORP, Inc.
II.The Certificate of Incorporation of the Corporation
is hereby amended by striking out the first paragraph of
Article FOURTH and by substituting in lieu thereof the
following:
"FOURTH: The total number of shares of stock
which the Corporation shall have authority to
issue is forty-seven million two hundred seventy-
four thousand nine hundred sixty-nine (47,274,969)
shares of capital stock, classified as (i) five
million (5,000,000) shares of preferred stock, par
value $.01 per share ("Preferred Stock"), (ii)
forty million (40,000,000) shares of Class A Non-
Voting Common Stock, par value $.01 per share
("Class A Non-Voting Common Stock"), and (iii) two
million two hundred seventy-four thousand nine
hundred sixty-nine (2,274,969) shares of Class B
Voting Common Stock, par value $.01 per share
("Class B Voting Common Stock").
III. The amendment to the Certificate of Incorporation
herein certified has been duly approved by the Corporation's
Board of Directors and was duly adopted by written consent
of the stockholders in accordance with the provisions of
Sections 228 and 242 of the General Corporation Law of the
State of Delaware.
EXECUTED this 17th day of July, 1996.
EZCORP, INC.
By:
Vincent A. Lambiase,
President and
Chief Executive Officer
Exhibit 10.74
THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN
AGREEMENT (the "Amendment"), entered into as of June 24,
1996 among EZCORP, INC., a Delaware corporation
("Borrower"), each of the Banks, and WELLS FARGO BANK
(TEXAS), NATIONAL ASSOCIATION, a national banking
association (formerly known as First Interstate Bank of
Texas, N.A.), as Agent for itself and the other Banks (in
such capacity, together with its successors in such capacity
the "Agent") and as the Issuing Bank.
RECITALS:
Borrower, Agent, Banks and Issuing Bank have
previously entered into that certain Amended and Restated
Loan Agreement dated as of November 29, 1994 as amended by
that certain First Amendment to Amended and Restated Loan
Agreement effective as of February 15, 1995 and as further
amended by that certain Second Amendment to Amended and
Restated Loan Agreement and Waiver dated as of August 3,
1995 (as amended, the "Agreement").
Borrower, Agent, Banks and Issuing Bank now desire
to amend the Agreement to revise a pricing provision, revise
the Commitments, extend the Revolving Credit Loan
Termination Date, and revise certain financial covenants as
hereinafter more specifically provided.
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, the parties hereto agree
as follows:
Definitions
Definitions. All capitalized terms not otherwise
defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
Amendments
Definitions. Effective as of the date hereof, the
definitions of "Borrowing Quarter," "Interest Margin,"
"Projected Net Income" and "Projected Net Income Margin"
appearing in Section 1.1 of the Agreement are hereby deleted
and the definitions of "Applicable Rate" and "Revolving
Credit Loan Termination Date" are hereby amended to read as
follows:
'"Applicable Rate' means: (a) during the period
that an Advance is a Prime Rate Advance, the Prime
Rate; and (b) during the period that a Revolving
Credit Loan Advance is a Eurodollar Advance, the
Adjusted Eurodollar Rate plus one and one-half
percent (1-1/2%).
'Revolving Credit Loan Termination Date' means 10:00
A.M. Austin, Texas time on January 30, 1998, or such
earlier date and time on which the Commitments
terminate as provided in this Agreement."
Reporting Requirements. Effective as of the date
hereof, Section 8.1(c) of the Agreement is hereby amended to
read as follows:
"(c)Quarterly Certificate. As soon as a
vailable, and in any event within forty-five (45)
days, after the end of each Fiscal Quarter of the
Borrower, a certificate of the chief financial
officer of the Borrower (I) stating that to the
best of such officer's knowledge, no Default has
occurred and is continuing, or if a Default has
occurred and is continuing, a statement as to the
nature thereof and the action that is proposed to
be taken with respect thereto, and (ii) showing in
reasonable detail the most recent Fiscal Quarter
calculations demonstrating compliance with Article
X, and accompanied by a certificate executed by
the Borrower representing that attached thereto is
a current (as of the date thereof) list of
existing store locations owned or leased by
Borrower and each Guarantor;"
Liens. Effective as of the date hereof, Section
9.2 of the Agreement is hereby amended to read as follows:
"Section 9.2Limitation on Liens. The Borrower
will not incur, create, assume, or permit to
exist, and will not permit any Subsidiary to
incur, create, assume, or permit to exist, any
Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired,
except:
(a) Liens disclosed on Schedule 5 hereto
and Liens in favor of the Agent for the benefit
of the Banks;
(b) Liens for taxes, assessments, or other
governmental charges which are not delinquent or
which are being contested in good faith and for which
adequate reserves have been established;
(c) Liens of mechanics, materialmen, warehousemen,
carriers, or other similar statutory Liens securing
obligations that are not yet due and are incurred in
the ordinary course of business;
(d) Liens resulting from good faith deposits to
secure payments of workmen's compensation or other social
security programs or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids,contracts
(other than for payment of Debt), or leases made in the
ordinary course of business;
(e) Purchase money Liens securing Permitted Debt described
in Section 9.1(b) and (c);"
Additional Limitation on Liens. Effective as of
the date hereof, Section 9.12 of the Agreement is hereby
amended to read as follows:
"Section 9.12 Additional Limitation on Liens.
In addition to the limitation contained in Section
9.2 of this Agreement, the Borrower will not
incur, create, assume or permit to exist, and will
not permit any Subsidiary to incur, create, assume
or permit to exist, any Lien upon any of the
Receivables or any Inventory, except in favor of
the Agent for the benefit of the Banks and,
except, with respect to Inventory only, statutory
landlord liens relative to Inventory located at
store locations leased by Borrower or one of the
Subsidiaries."
Capital Expenditures. Effective as of the date
hereof, Section 9.13 of the Agreement is hereby deleted.
Fixed Charge Coverage. Effective as of the date
hereof, Section 10.3 of the Agreement is hereby amended to
read as follows:
"Section 10.3 Fixed Charge Coverage. Borrower
will maintain a Fixed Charge Coverage of not less
than 1.6."
Ratio of Pawn Receivables to Inventory. Effective
as of the date hereof, Section 10.8 of the Agreement is
hereby amended to read as follows:
"Section 10.8Pawn Receivables/Inventory.
Borrower, on a consolidated basis, will maintain
for the following rolling four quarter periods a
ratio of Pawn Receivables to Inventory of at
least:
Ratio Periods
.65 For the four consecutive Fiscal Quarters
ending September 30, 1995;
.70 For the four consecutive Fiscal Quarters
ending December 31, 1995, and each March 30,
June 30, September 30 and December 31 thereafter."
Revision of Commitments - Schedule 6 to the
Agreement. Effective as of the date hereof, Schedule 6 to
the Agreement reflecting the Commitments of the Banks is
hereby amended to read in the form attached hereto as
Schedule 6.
Conditions Precedent
Condition. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions
precedent:
Agent shall have received all of the
following, each dated (unless otherwise indicated) the
date of this Amendment, in form and substance
satisfactory to the Agent:
This Amendment executed by all parties
hereto.
New Revolving Credit Notes executed by
Borrower in favor of each of the Banks in the
amount of each Bank's Commitment.
Resolutions of the Board of Directors of
Borrower certified by its secretary or assistant
secretary which authorizes the execution, delivery
and performance by Borrower of this Amendment and
the other Loan Documents executed in connection
herewith.
A certificate of incumbency certified by
the secretary or the assistant secretary of
Borrower certifying the names of the officers
thereof authorized to sign this Amendment and the
other Loan Documents together with specimen
signatures of such officers.
Resolutions of the Board of Directors of
each of the Guarantors certified by its secretary
or assistant secretary which authorize the
execution, delivery and performance by each of the
Guarantors of this Amendment and the other Loan
Documents executed in connection herewith.
A certificate of incumbency certified by
the secretary or the assistant secretary of each
Guarantor certifying the names of the officers
thereof authorized to sign this Amendment and the
other Loan Documents together with specimen
signatures of such officers.
That certain Extension and Amendment Fee
Letter (herein so called) in form and substance
satisfactory to the Agent executed by the
Borrower.
No Default. No Default shall have occurred
and be continuing.
Representations and Warranties. All of the
representations and warranties contained in Article VII
of the Agreement, as amended hereby and in the other
Loan Documents shall be true and correct on and as of
the date of this Amendment with the same force and
effect as if such representations and warranties had
been made on and as of such date, except to the extent
such representations and warranties speak to a specific
date.
Extension and Amendment Fee. Borrower shall
have paid to the Agent for the account of the Banks an
extension and amendment fee in the amount agreed to
pursuant to that certain Extension and Amendment Fee
Letter executed in connection herewith.
Ratifications, Representations and Warranties
Ratifications. The terms and provisions set
forth in this Amendment shall modify and supersede all
inconsistent terms and provisions set forth in the Agreement
and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the
other Loan Documents are ratified and confirmed and shall
continue in full force and effect. Borrower, Banks, Issuing
Bank and Agent agree that the Agreement as amended hereby
and the other Loan Documents shall continue to be legal,
valid, binding and enforceable in accordance with their
respective terms.
Representations and Warranties. Borrower hereby
represents and warrants to Banks, Agent and Issuing Bank
that (i) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed
and/or delivered in connection herewith have been authorized
by all requisite corporate action on the part of Borrower
and will not violate the articles of incorporation or bylaws
of Borrower, (ii) the representations and warranties
contained in the Agreement, as amended hereby, and any other
Loan Document are true and correct on and as of the date
hereof as though made on and as of the date hereof, except
to the extent such representations and warranties speak to a
specific date, (iii) no Event of Default has occurred and is
continuing and no event or condition has occurred that with
the giving of notice or lapse of time or both would be an
Event of Default, (iv) Borrower is in full compliance with
all covenants and agreements contained in the Agreement as
amended hereby, (v) the Borrower has no Subsidiaries other
than those listed on Schedule 3 attached hereto and such
Schedule 3: (a) sets forth the jurisdiction of incorporation
of each corporate Subsidiary, the jurisdiction of formation
of TELP, and the percentage of the Borrower's ownership of
the outstanding voting stock of each corporate Subsidiary
and the partnership interest of Borrower in TELP, and (b)
identifies which Subsidiaries are Operating Subsidiaries and
which are Non-operating Subsidiaries. All of the
outstanding capital stock of each corporate Subsidiary has
been validly issued, is fully paid and is nonassessable.
Miscellaneous
Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any
other Loan Document including any Loan Document furnished in
connection with this Amendment shall survive the execution
and delivery of this Amendment and the other Loan Documents,
and no investigation by Banks, Agent or Issuing Bank or any
closing shall affect the representations and warranties or
the right of Banks or Agent or Issuing Bank to rely upon
them.
Reference to Agreement. Each of the Loan
Documents, including the Agreement and any and all other
agreements, documents, or instruments now or hereafter
executed and delivered pursuant to the terms hereof or
pursuant to the terms of the Agreement as amended hereby,
are hereby amended so that any reference in such Loan
Documents to the Agreement shall mean a reference to the
Agreement as amended hereby.
Severability. Any provision of this Amendment
held by a court of competent jurisdiction to be invalid or
unenforceable shall not impair or invalidate the remainder
of this Amendment and the effect thereof shall be confined
to the provision so held to be invalid or unenforceable.
Applicable Law. This Amendment and all other Loan
Documents executed pursuant hereto shall be deemed to have
been made and to be performable in Austin, Travis County,
Texas and shall be governed by and construed in accordance
with the laws of the State of Texas.
Successors and Assigns. This Amendment is binding
upon and shall inure to the benefit of Banks, Agent, Issuing
Bank and Borrower and their respective successors and
assigns, except Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior
written consent of Banks.
Counterparts. This Amendment may be executed in
one or more counterparts, each of which when so executed
shall be deemed to be an original, but all of which when
taken together shall constitute one and the same instrument.
ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER
INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED
IN CONNECTION WITH THIS AMENDMENT EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS
AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
Termination of Certain Commitments. The parties
hereto acknowledge and agree that contemporaneously herewith
(I) each of AmSouth Bank of Alabama ("AmSouth") and Bank
Hapoalim B.M. ("Hapoalim") have assigned to the remaining
Banks all of their rights and obligations under the Loan
Documents, including their respective Revolving Credit Notes
and Commitments, on a pro rata basis, such that after giving
effect thereto, the remaining Banks will have Commitments as
set out in Schedule 6 attached hereto, and (ii) as a result
of such assignment, AmSouth and Hapoalim have been released
from their obligations under the Loan Documents and shall no
longer be a Bank or have any Commitment under the Agreement
as amended hereby.
Executed as of the date first written above.
BORROWER:
EZCORP, INC.
By:
Name:DAN N. TONISSEN
Title:CHIEF FINANCIAL OFFICER
Address for Notices:
1901 Capital Parkway
Austin, TX 78746
Fax No.: (512) 314-3402
Telephone No.: (512) 329-5233
Attention: Dan Tonissen
Chief Financial
Officer
AGENT:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:
Name: Keith Smith
Title: Vice President
Address for Notices:
100 Congress Avenue, Suite 150
Austin, TX 78701
Fax No.: (512) 469-3311
Telephone No.: (512) 794-2200
Attention: Keith Smith
ISSUING BANK:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:
Name: Keith Smith
Title: Vice President
Address for Notices:
100 Congress Avenue, Suite 150
Austin, TX 78701
Fax No.: (512) 469-3311
Telephone No.: (512) 794-2200
Attention: Keith Smith
BANKS:
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By:
Name: Keith Smith
Title: Vice President
Address for Notices
100 Congress Avenue, Suite 150
Austin, TX 78701
Fax No.: (512) 469-3311
Telephone No.: (512) 794-2200
Attention: Keith Smith
Lending Office for Prime Rate
Advances and Eurodollar Advances
100 Congress Ave.
Austin, TX 78701
GUARANTY FEDERAL BANK, F.S.B.
By:
Name:
Title:
Address for Notices:
301 Congress, Suite 1075
Austin, TX 78701
Attention: Chris Harkrider
Fax No.: (512) 320-1041
Telephone No.: (512) 320-1205
Lending Office for Prime Rate
Advances and Eurodollar Advances
8333 Douglas Avenue
Dallas, TX 75255
THE SUMITOMO BANK, LTD.,
CHICAGO BRANCH
By:
Name:
Title:
By:
Name:
Title:
Address for Notices:
Two Houston Center
909 Fannin, Suite 3750
Houston, TX 77010-1086
Attention: Manager
Fax No.: (713) 759-1419
Telephone No.: (713) 759-0770
Lending Office for Prime Rate
Advances and Eurodollar Advances
233 South Wacker Drive
Chicago, Illinois 60606-6448
Attention: Vice President and
Manager-Operations
Guarantors hereby consent and agree to this Amendment
and agree that each Guaranty and each Subsidiary Security
Agreement, shall remain in full force and effect and shall
continue to (I) guarantee and secure respectively the
Obligations and (ii) be the legal, valid and binding
obligation of Guarantors enforceable against Guarantors in
accordance with their respective terms.
GUARANTORS:
Operating Subsidiaries: Non-Operating Subsidiaries:
EZPAWN Alabama, Inc. EZ Car Sales, Inc.
EZPAWN Arkansas, Inc. EZPAWN Construction, Inc.
EZPAWN Colorado, Inc. EZPAWN Kansas, Inc.
EZPAWN Florida, Inc. EZPAWN Kentucky, Inc.
EZPAWN Georgia, Inc. EZPAWN Missouri, Inc.
EZPAWN Holdings, Inc. EZPAWN Nevada, Inc.
EZPAWN Indiana, Inc. EZPAWN North Carolina, Inc.
EZPAWN Louisiana, Inc. EZPAWN South Carolina, Inc.
EZPAWN Oklahoma, Inc.
EZPAWN Tennessee, Inc.
Texas EZPAWN Management, Inc.
By: By:
Name: Name:
Title: Title:
Texas EZPAWN L.P.
By: Texas EZPAWN Management, Inc.,
its sole general partner
By:
Name:
Title:
SCHEDULE 3
List of Subsidiaries
All of the following subsidiaries are incorporated in
Delaware and are 100% owned by EZCORP, Inc. except EZ Car
Sales, Inc. which is incorporated in Delaware, and 100%
owned by EZPawn Tennessee, Inc.:
Operating Subsidiaries Jurisdiction Where Subsidiary
Conducts Business
EZPAWN Alabama, Inc., d/b/a
EZPW Alabama, Inc. Alabama
EZPAWN Arkansas, Inc. Arkansas
EZPAWN Colorado, Inc. Colorado
EZPAWN Florida, Inc., d/b/a
EZPW Florida, Inc. Florida
EZPAWN Georgia Georgia
EZPAWN Indiana Indiana
EZPAWN Louisiana, Inc. Louisiana
EZPAWN Holdings, Inc. Mississippi
EZPAWN Oklahoma, Inc., d/b/a
EZPAWN Okie, Inc. Oklahoma
EZPAWN Tennessee, Inc. Tennessee
Texas EZPAWN Management, Inc. Texas
Non-Operating Subsidiaries Jurisdiction Where Subsidiary
Conducts Business
EZPAWN Construction, Inc. N/A
EZPAWN Kansas, Inc. N/A
EZPAWN Kentucky, Inc. N/A
Non-Operating Subsidiaries Jurisdiction Where Subsidiary
Conducts Business
EZPAWN Missouri, Inc. N/A
EZPAWN Nevada, Inc. N/A
EZPAWN North Carolina, Inc.N/A
EZPAWN South Carolina, Inc.N/A
EZ Car Sales, Inc. N/A
The following limited partnership is organized under the
laws of the State of Texas. Texas EZPAWN Management, Inc.
is its sole general partner and 1% owner. EZPAWN Holdings,
Inc. is its sole limited partner and 99% owner. Both
partners are wholly-owned subsidiaries of EZCORP, Inc.
Operating Entity Jurisdiction Where Entity
Conducts Business
Texas EZPAWN L.P. Texas
SCHEDULE 6
Commitments
BANKS COMMITMENTS
Wells Fargo Bank (Texas),
National Association $24,500,000
Guaranty Federal Bank, F.S.B. $12,750,000
The Sumitomo Bank, Ltd.,
Chicago Branch $12,750,000
Exhibit 11.1
Statement Regarding Computation of Per Share Earnings
(Losses)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
(Unaudited) (Unaudited)
Primary and fully diluted
Weighted average
number of common shares
outstanding during
the period 11,991 11,978 11,987 11,977
Net effect of
dilutive stock
options - based on
the treasury stock
method using overall
market price 0 0 0 1
------ ------ ------ ------
Total shares 11,991 11,978 11,987 11,978
====== ====== ====== ======
Net income (loss) $1,027 $(777) $2,070 $ 44
====== ====== ====== ======
Earnings (loss) per
sharea $ 0.09 $(0.06) $ 0.17 $ 0.00
====== ====== ====== ======
a Earnings per share calculations assume exercise of all
outstanding stock options and warrants using the
treasury stock method of calculation. The per share
calculation excludes these common equivalent shares as
their effect is anti-dilutive.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
EZCORP, INC.
(Registrant)
Date: August 14, 1996 By: /s/ DAN N. TONISSEN
(Signature)
Dan N. Tonissen
Senior Vice President and
Chief Financial Officer