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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 March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to _____________
Commission File Number 0-19424
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EZCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2540145
- ------------------------------ -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1901 Capital Parkway
Austin, Texas 78746
-------------------
(Address of principal executive offices)
(Zip Code)
(512) 314-3400
--------------
(Registrant's telephone number, including area code)
NA
--
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
The only class of voting securities of the registrant issued and
outstanding is the Class B Voting Common Stock, par value $.01 per share, 100%
of which is owned by two record holders. There is no trading market for the
Class B Voting Common Stock.
As of March 31, 1997, 10,515,530 shares of the registrant's Class A
Non-Voting Common Stock, par value $.01 per share and 1,480,301 shares of the
registrant's Class B Voting Common Stock, par value $.01 per share were
outstanding.
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EZCORP, INC.
INDEX TO FORM 10-Q
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1997 and September 30, 1996.......................... 1
Condensed Consolidated Statements of Operations -
Three and Six Months Ended March 31, 1997 and 1996............. 2
Condensed Consolidated Statements of Cash Flows -
Six Months Ended March 31, 1997 and 1996....................... 3
Notes to Interim Condensed Consolidated Financial Statements... 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations............... 6
PART II. OTHER INFORMATION.................................................. 10
SIGNATURE................................................................... 12
PART I
Item 1. Financial Statements (Unaudited)
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
March 31, September 30,
1997 1996
--------- ---------
ASSETS:
Current assets:
Cash and cash equivalents $ 3,321 $ 1,419
Pawn loans receivable 33,488 34,636
Service charge receivable 9,939 10,262
Inventories (net) 30,760 35,834
Other 4,808 5,138
--------- ---------
Total current assets 82,316 87,289
Property and equipment, net 33,644 34,266
Other assets:
Excess purchase price over net assets acquired 12,862 13,099
Other 5,409 5,712
--------- ---------
Total assets $ 134,231 $ 140,366
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current maturities of long-term debt $ 8 $ 172
Accounts payable and accrued expenses 6,762 8,183
Other 2,624 2,776
--------- ---------
Total current liabilities 9,394 11,131
Long-term debt less current maturities 8,138 16,244
Stockholders' equity:
Preferred stock, par value $.01 a share - Authorized
5,000,000 shares; none issued and outstanding -- --
Class A Non-voting common stock, par value $.01 a share -
Authorized 40,000,000 shares; 10,524,563 shares issued
and 10,515,530 shares outstanding at March 31, 1997 (9,728,904
issued and 9,719,871 outstanding at September 30, 1996) 105 97
Class B Voting Common stock, par value $.01 a share -
Authorized 2,274,969 shares; 1,480,301 shares issued and
outstanding at March 31, 1997 (2,270,863 shares issued and
outstanding at September 30, 1996) 15 23
Additional paid-in capital 114,338 114,301
Retained earnings 3,005 (666)
--------- ---------
117,463 113,755
Other (764) (764)
--------- ---------
Total stockholders' equity 116,699 112,991
--------- ---------
Total liabilities and stockholders' equity $ 134,231 $ 140,366
========= =========
See Notes to Interim Condensed Consolidated Financial Statements (unaudited).
1
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------- ----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Revenues:
Sales $ 28,108 $ 28,721 $ 55,209 $ 60,837
Pawn service charges 18,188 16,797 36,929 36,112
----------- ----------- ----------- -----------
Total revenues 46,296 45,518 92,138 96,949
Cost of goods sold 23,018 24,837 45,531 52,830
----------- ----------- ----------- -----------
Net revenues 23,278 20,681 46,607 44,119
Operating expenses:
Operations 15,433 15,214 30,446 31,769
Administrative 2,990 2,732 6,184 5,673
Depreciation and amortization 1,828 1,851 3,716 3,745
----------- ----------- ----------- -----------
Total operating expenses 20,251 19,797 40,346 41,187
----------- ----------- ----------- -----------
Operating income 3,027 884 6,261 2,932
Interest expense 232 521 522 1,283
----------- ----------- ----------- -----------
Income before income taxes 2,795 363 5,739 1,649
Income tax expense 1,026 145 2,067 607
----------- ----------- ----------- -----------
Net income $ 1,769 $ 218 $ 3,672 $ 1,042
=========== =========== =========== ===========
Earnings per share $ 0.15 $ 0.02 $ 0.31 $ 0.09
=========== =========== =========== ===========
Weighted average shares outstanding 11,995,831 11,990,723 11,994,262 11,985,721
=========== =========== =========== ===========
See Notes to Interim Condensed Consolidated Financial Statements (unaudited).
2
EZCORP, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
Six Months Ended
March 31,
-----------------------
1997 1996
-------- --------
OPERATING ACTIVITIES:
Net income $ 3,672 $ 1,042
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,716 3,745
Deferred income taxes (103) --
Changes in operating assets and liabilities:
Decrease in service charge receivable 323 2,781
Decrease in inventories 5,074 5,447
Decrease in accounts payable and accrued expenses (1,360) (1,477)
Increase in customer layaway deposits 27
Decrease in income taxes payable (180) --
Decrease in income taxes recoverable -- 4,236
Other 525 656
-------- --------
Net cash provided by operating activities 11,694 16,430
INVESTING ACTIVITIES:
Pawn loans forfeited and transferred to inventories 23,349 28,722
Pawn loans made (71,502) (74,630)
Pawn loans repaid 49,301 56,797
-------- --------
Net decrease in loans 1,148 10,889
Additions to property, plant, and equipment (2,669) (2,184)
Sale of assets -- 761
-------- --------
Net cash provided/(used) in investing activities (1,521) 9,466
FINANCING ACTIVITIES:
Proceeds from bank borrowings 3,000 1,000
Payments on borrowings (11,271) (21,589)
-------- --------
Net cash used by financing activities (8,271) (20,589)
-------- --------
Increase in cash and cash equivalents 1,902 5,307
Cash and cash equivalents at beginning of period 1,419 4,593
-------- --------
Cash and cash equivalents at end of period $ 3,321 $ 9,900
======== ========
See Notes to Interim Condensed Consolidated Financial Statements (unaudited).
3
EZCORP, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)
March 31, 1997
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring entries) considered necessary for a fair presentation have
been included. The accompanying financial statements should be read with the
Notes to Consolidated Financial Statements included in the Company's Annual
Report on Form 10-K for the year ended September 30, 1996.
The Company's business is subject to seasonal variations, and operating
results for the three- and six-month periods ended March 31, 1997 are not
necessarily indicative of the results of operations for the full fiscal year.
Note B - Accounting Principles and Practices
The provision for federal income taxes has been calculated based on the
Company's estimate of its effective tax rate for the full fiscal year.
The Company provides inventory reserves for shrinkage and cost in excess of
market value. The Company estimates these reserves using analysis of sales
trends, inventory aging, sales margins and shrinkage on inventory. As of March
31, 1997, inventory reserves were $6.9 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 included tangible and intangible assets. As of March 31, 1997, all
of these stores have been closed. The March 31, 1997 accrued liability for store
closings is $0.2 million, principally for estimated rent obligations.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock Based Compensation" which prescribes accounting
and reporting standards for all stock-based compensation plans. The Company has
determined it will continue to account for its stock based compensation plans in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." The Company will not expense the fair value of stock
based compensation, but will provide proforma footnote disclosures in the annual
report of what net income would have been had the Company adopted the new fair
value method for recognition purposes.
Note C - Earnings Per Share
Earnings per share calculations assume exercise of all outstanding stock
options and warrants using the treasury stock method of calculation. The per
share calculation excludes these common equivalent shares as their effect is
anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact of Statement 128 will not affect
the current calculation of primary
4
EZCORP, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)
March 31, 1997
Note C - Earnings Per Share (continued)
and fully diluted earnings per share for the quarters and six months ended March
31, 1997 and 1996, respectively, as the common equivalent shares for these stock
options are anti-dilutive.
Note D - Litigation
The Company is involved in litigation relating to claims that arise from
time to time from normal business operations. Currently, the Company is a
defendant in several lawsuits. Some of these lawsuits involve claims for
substantial amounts. While the ultimate outcome of these lawsuits involving the
Company cannot be ascertained, after consultation with counsel, it is
management's opinion that the resolution of these suits will not have a material
adverse effect on the Company's financial condition or results of operations;
however, there can be no assurance as to the ultimate outcome of these matters.
On July 28, 1995, the Company terminated the Employment Agreement of
Courtland L. Logue, Jr., the Company's former Chairman and Chief Executive
Officer, and an owner of approximately 19% of the Company's outstanding voting
securities (Class B Voting Common Stock). Since Mr. Logue's termination, the
Company has had ongoing discussions with him concerning certain equipment leases
and other matters of dispute between Mr. Logue and the Company, as well as the
application of provisions to Mr. Logue's Employment Agreement and Stock Purchase
Agreement with the Company. On March 8, 1996, the Company filed a lawsuit styled
EZCORP, Inc. v. Courtland L. Logue, Jr. in the 201st District Court of Travis
County, Texas to declare Mr. Logue's employment contract terminated and, as a
result, to permit the Company to recover approximately $2.7 million in damages
pursuant to the terms of Mr. Logue's Stock Purchase Agreement. Mr. Logue filed
counter-claims to recover monetary damages relating to the Employment Agreement
and certain equipment leases and notes entered into between Mr. Logue and the
Company. The Company has been advised that the trial court intends to rule that
the Company may not recover from Mr. Logue, under the terms of the performance
right provision, as that provision, according to the trial court, represents an
unenforceable penalty and not, as the Company believes, an enforceable
liquidated damage provision. However, the Company has asserted other claims
against Mr. Logue for the recovery of significant monetary damages. The case is
in the discovery phase, with a trial expected later in 1997.
Note E - Subsequent Event
On May 9, 1997 the Company amended its November 29, 1994 revolving line of
credit. The amended revolving line of credit matures January 30, 2000. Terms of
the amended agreement require, among other things, that the Company meet certain
financial covenants. The previous requirement to provide the bank group a first
lien security interest in certain assets of the Company has been removed.
Borrowings under the line bear interest at the bank's Eurodollar rate plus 0.75%
to 1.5%. The amount which the Company can borrow is based on a percentage of its
inventory levels and outstanding pawn loan balance, up to $50 million.
5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Second Quarter Ended March 31, 1997 vs. Second Quarter Ended March 31, 1996
The discussion in this section of this report contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in this section and those discussed elsewhere in this report.
The following table sets forth selected, unaudited, consolidated financial
data with respect to the Company for the three months ended March 31, 1997 and
1996.
Three Months Ended
March 31,(a) % or
-------------------------- Point
1997 1996 Change(b)
-------------------------- ---------
Net Revenues:
Sales $ 28,108 $ 28,721 (2.1%)
Pawn service charges 18,188 16,797 8.3%
--------- ---------
Total revenues 46,296 45,518 1.7%
Cost goods sold 23,018 24,837 (7.3%)
--------- ---------
Net revenues $ 23,278 $ 20,681 12.6%
========= =========
Other Data:
Gross profit as a percent of sales 18.1% 13.5% 4.6 pts.
Average annual inventory turnover 2.8x 2.5x 0.3x
Average inventory balance per location as of the
end of the quarter $ 125 $ 151 (17.2%)
Average loan balance per location as of the end
of the quarter $ 136 $ 120 13.3%
Average yield on loan portfolio 212% 212% 0.0 pts.
Redemption rate 80% 78% 2.0 pts.
Expenses as a Percent of Total Revenues:
Operating 33.3% 33.4% (0.1) pt.
Administrative 6.5 6.0 0.5 pt.
Depreciation and amortization 3.9 4.1 (0.2) pt.
Interest, net 0.5 1.1 (0.6) pt.
Locations in Operation:
Beginning of period 248 238
Acquired 0 --
Established 1 2
Sold, combined or closed (2) --
--------- ---------
End of period 247 240
========= =========
Average locations in operation during the period(c) 247.5 239.0
========= =========
- ------------------------------
(a) Figures in thousands, except percentages, inventory turnover and store
count.
(b) In comparing the period differences between dollar amounts or store counts,
a percentage change is used. In comparing the period differences between
two percentages, a percentage point (pt.) change is used.
(c) Average locations in operation during the period is calculated based on the
average of the stores operating at the beginning and end of such period.
6
Six Months Ended March 31, 1997 vs. Six Months Ended March 31, 1996
The discussion in this section of this report contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in this section and those discussed elsewhere in this report.
The following table sets forth selected, unaudited, consolidated financial
data with respect to the Company for the six months ended March 31, 1997 and
1996.
Six Months Ended
March 31,(a) % or
-------------------------- Point
1997 1996 Change(b)
-------------------------- ---------
Net Revenues:
Sales $ 55,209 $ 60,837 (9.3%)
Pawn service charges 36,929 36,112 2.3%
--------- ---------
Total revenues 92,138 96,949 (5.0%)
Cost of goods sold 45,531 52,830 (13.8%)
--------- ---------
Net revenues $ 46,607 $ 44,119 5.6%
========= =========
Other Data:
Gross profit as a percent of sales 17.5% 13.2% 4.3 pts.
Average annual inventory turnover 2.6x 2.5x 0.1x
Average inventory balance per location as of the
end of the quarter $ 125 $ 151 (17.2%)
Average loan balance per location as of the end
of the quarter $ 136 $ 120 13.3%
Average yield on loan portfolio 214% 209% 5.0 pts.
Redemption rate 79% 77% 2.0 pts.
Expenses as a Percent of Total Revenues:
Operating 33.0% 32.8% 0.2 pt.
Administrative 6.7 5.9 0.8 pt.
Depreciation and amortization 4.0 3.9 0.1 pt.
Interest, net 0.6 1.3 (0.7) pt.
Locations in Operation:
Beginning of period 246 261
Acquired 0 --
Established 3 4
Sold, combined or closed (2) (25)
--------- ---------
End of period 247 240
========= =========
Average locations in operation during the period(c) 246.5 250.5
========= =========
- ------------------------------
(a) Figures in thousands, except percentages, inventory turnover and store
count.
(b) In comparing the period differences between dollar amounts or store counts,
a percentage change is used. In comparing the period differences between
two percentages, a percentage point (pt.) change is used.
(c) Average locations in operation during the period is calculated based on the
average of the stores operating at the beginning and end of such period.
7
Results of Operations
The following discussion compares results for the three- and six-month
periods ended March 31, 1997 ("Fiscal 1997 Periods") to the three- and six-month
periods ended March 31, 1996 ("Fiscal 1996 Periods"). The discussion should be
read in conjunction with the accompanying financial statements and related
notes.
During the three-month Fiscal 1997 Period, the Company opened one (1) newly
established store and closed two stores. During the twelve (12) months ended
March 31, 1997, the Company opened ten (10) newly established stores and closed
three (3) stores. The two stores closed during the three-month Fiscal 1997
Period were the result of the Company's ongoing review of its store portfolio.
At March 31, 1997, the Company operated 247 stores in twelve (12) states.
The Company's primary activity is the making of small, non-recourse loans
secured by tangible personal property. The income earned on this activity is
pawn service charge revenue. For the three month period ended March 31, 1997,
pawn service charge revenue increased $1.4 million to $18.2 million. This
resulted from an increase in same store pawn service charge revenue ($1.3
million) and the pawn service charge revenue from new stores not open the full
three-month period ($0.1 million). At March 31, 1997, same store pawn loan
balances were 15% above March 31, 1996 while the annualized yield on the average
pawn loan balance remained unchanged at 212%.
For the six-month period, pawn service charge revenue increased $0.8
million to $36.9 million. The increase was due to an increase in annualized
yield earned on the loan balance from 209% to 214%. Pawn service charge revenue
of ten (10) stores that opened during the preceding twelve (12) months ($0.3
million) was offset by the stores that closed ($0.3 million).
A secondary, but related, activity of the Company is the sale of
merchandise, primarily collateral forfeited from its lending activity. For the
three-month Fiscal 1997 Period, merchandise sales decreased approximately $0.6
million from the Fiscal 1996 Period to approximately $28.1 million. A decline in
same store merchandise sales ($0.1 million), merchandise sales of the closed
stores ($0.1 million), and a decrease in scrap and wholesale jewelry sales ($1.1
million) were partially offset by new store sales ($0.7 million). Same store
sales for the three-month Fiscal 1997 Period declined one percent from the
Fiscal 1996 Period primarily as a result of a 17% reduction in inventory levels
per store (approximately $125,000 at the end of the Fiscal 1997 Period as
compared to $151,000 at the end of the Fiscal 1996 Period).
For the six-month Fiscal 1997 Period, merchandise sales decreased
approximately $5.6 million from the Fiscal 1996 Period to approximately $55.2
million. A decline in same store merchandise sales ($2.8 million), merchandise
sales of the closed stores ($0.6 million), and the decrease in scrap and
wholesale jewelry sales ($3.8 million) were partially offset by new store sales
($1.6 million). Same store sales for the six-month Fiscal 1997 Period declined
five percent from the Fiscal 1996 Period largely due to the decline in per store
inventory levels referred to above.
For the three- and six-month Fiscal 1997 Periods, respectively, gross
profits as a percentage of merchandise sales increased 4.6 and 4.3 percentage
points, to 18.1% and 17.5%, from the Fiscal 1996 Periods. This increase results
from an improvement in margins on merchandise sales (2.3 and 1.8 percentage
points), a reduction in inventory shrinkage when measured as a percentage of
merchandise sales (1.1 percentage points for both the three- and six-month
periods) and improved gross profit on wholesale and scrap jewelry sales (1.2 and
1.4 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 March 31, 1997, and 1996, respectively, the
Company's inventories consisted of approximately 65 and 63 percent jewelry (e.g.
ladies' and men's rings, chains, bracelets, etc.) and 35 and 37 percent general
merchandise (e.g., televisions, VCRs, tools, sporting goods, musical
instruments, firearms, etc.). At March 31, 1997 and 1996, respectively, 80% and
77% of the jewelry was less than twelve months old based on the Company's
8
date of acquisition (date of forfeiture for collateral or date of purchase) as
was approximately 90% and 86% of the general merchandise inventory for both
periods.
For the three-month Fiscal 1997 Period, operating expenses as a percentage
of total revenues decreased 0.1 percentage point to 33.3% from the Fiscal 1996
Period. For the six-month Fiscal 1997 Period, operating expenses as a percentage
of total revenues increased 0.2 percentage point to 33.0%. Administrative
expenses increased 0.5 and 0.8 percentage point in the Fiscal 1997 Periods to
6.5% and 6.7%, primarily as a result of a higher level of administrative expense
relative to the change in total revenues.
Depreciation and amortization expense decreased 0.2 percentage point in the
three-month Fiscal 1997 Period primarily as a result of the 1.7% increase in
total revenues. Depreciation and amortization for the six-month Fiscal 1997
Period increased 0.1 percentage point primarily as a result of the higher level
of depreciation on the ten (10) newly established stores added since March 31,
1996. Interest expense was down 0.6 and 0.7 percentage point in the Fiscal 1997
Periods compared to the prior year period largely as a result of decreased
borrowings under the Company's bank line of credit.
Liquidity and Capital Resources
Net cash provided by operating activities for the Fiscal 1997 Period was
$11.7 million as compared to $16.4 million provided in the Fiscal 1996 Period. A
portion of the Fiscal 1996 operating cash flow is the result of income tax
refunds from the carryback of the Company's Fiscal 1995 net operating loss and
the lower level of taxes payable resulting from the carryforward of this net
operating loss. Net cash used by investing activities was $1.5 million for the
Fiscal 1997 Period compared to $9.5 million provided in the Fiscal 1996 Period.
The change is due to a smaller decrease in pawn loan balances in the Fiscal 1997
Period compared to the Fiscal 1996 Period and higher levels of capital
expenditures for the Fiscal 1997 Period.
In the Fiscal 1997 Period, the Company invested approximately $2.7 million,
including investments in leasehold improvements and equipment for existing
stores and three (3) newly established stores. The Company funded these
expenditures largely from cash flow provided by operating activities. The
Company plans to open approximately 10 to 15 stores and remodel 5 to 10 stores
in the 1997 fiscal year. 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 expected pawn loan growth during the coming
year.
The Company's current revolving line of credit agreement was amended on May
9, 1997 and matures January 30, 2000. That agreement requires, among other
things, that the Company meet certain financial covenants. Borrowings under the
line bear interest at the bank's Eurodollar rate plus 0.75% to 1.5%. The amount
which the Company can borrow is based on a percentage of its inventory levels
and outstanding pawn loan balance, up to $50.0 million. At March 31, 1997, the
Company had approximately $8.0 million outstanding on the credit facility and
additional borrowing capacity of approximately $29.0 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.
9
PART II
Item 1. Legal Proceedings
On July 28, 1995, the Company terminated the Employment Agreement of
Courtland L. Logue, Jr., the Company's former Chairman and Chief Executive
Officer, and an owner of approximately 19% of the Company's outstanding voting
securities (Class B Voting Common Stock). Since Mr. Logue's termination, the
Company has had ongoing discussions with him concerning certain equipment leases
and other matters of dispute between Mr. Logue and the Company, as well as the
application of provisions to Mr. Logue's Employment Agreement and Stock Purchase
Agreement with the Company. On March 8, 1996, the Company filed a lawsuit styled
EZCORP, Inc. v. Courtland L. Logue, Jr. in the 201st District Court of Travis
County, Texas to declare Mr. Logue's employment contract terminated and, as a
result, to permit the Company to recover approximately $2.7 million in damages
pursuant to the terms of Mr. Logue's Stock Purchase Agreement. Mr. Logue filed
counter-claims to recover monetary damages relating to the Employment Agreement
and certain equipment leases and notes entered into between Mr. Logue and the
Company. The Company has been advised that the trial court intends to rule that
the Company may not recover from Mr. Logue, under the terms of the performance
right provision, as that provision, according to the trial court, represents an
unenforceable penalty and not, as the Company believes, an enforceable
liquidated damage provision. However, the Company has asserted other claims
against Mr. Logue for the recovery of significant monetary damages. The case is
in the discovery phase, with a trial expected later in 1997.
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
On March 5, 1997, the majority shareholder of the Class B Voting Common
Stock approved Ernst & Young LLP to serve as the Company's auditors for the
ensuing year and elected the following persons as directors of the Company:
Sterling B. Brinkley Mark C. Pickup
Vincent A. Lambiase Richard D. Sage
Dan N. Tonissen John E. Cay, III
J. Jefferson Dean
The Company's Class B Voting Common Stock was the only class entitled to
vote on these matters. The majority shareholder of the Company holds 1,194,884
shares of the 1,480,301 shares of outstanding Class B Voting Common Stock.
Item 5. Other Information
Not Applicable
10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Incorporated by
Number Description Reference to
------ ----------- ------------
Exhibit 10.75 Fourth 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 Filed herewith
of Per Share Earnings
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K for the quarter ended
March 31, 1997.
11
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: May 15, 1997 By: /s/ DAN N. TONISSEN
------------------------------------
(Signature)
Dan N. Tonissen
Senior Vice President and
Chief Financial Officer
12