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EZCORP Announces Restructuring and Fiscal Year Results

Nov 14, 2000

EZCORP, Inc. (NASDAQ: EZPW) announced today the results for its 2000 fourth fiscal quarter and fiscal year, which ended September 30, 2000, and a restructuring charge primarily resulting from the closing of fifty-four stores.

The Company is reporting a net loss for the 2000 fourth fiscal quarter of $16.1 million ($1.34 per share). This loss includes a $7.8 million ($0.65 per share) special charge, primarily for the store closures, and a $3.7 million ($0.31 per share) change in the estimated tax benefit from the cumulative effect of the accounting method change adopted in the Company's second fiscal 2000 quarter. Absent the special charge and change in estimate, the Company is reporting a net loss of $4.6 million ($0.38 per share).

For the twelve months ended September 30, 2000, the Company is reporting a net loss of $32.6 million ($2.71 per share), which includes the $18.1 million ($1.50 per share) cumulative effect of the accounting change. Excluding the special charge and the accounting change, the Company is reporting a net loss for the twelve-month period of $6.7 million ($0.56 per share) compared to prior year pro forma net income of $1.7 million ($0.15 per share).

Commenting on these results and his outlook for the future, President and Chief Executive Officer, Joseph L. Rotunda, stated, "Although there were environmental factors influencing our business, they are not the primary causes of our poor performance. With the benefit of 20/20 hindsight, we believe our results are a consequence of the internal dilution of the organization, its focus, and its effectiveness. We have identified what the problems are and have implemented plans to resolve them. These fourth quarter results and special charge are the product of steps taken to reposition the Company for profitable growth."

"Our first objective was to bring costs in line with revenues and to reduce debt. After a thorough review of our markets and store portfolio, we made the decision to close fifty-four stores, thirty-seven of which have already been closed. During the past year, these stores have reduced operating income before depreciation and amortization by approximately $2.0 million and net income by approximately $2.1 million, or $0.18 per share. We also have taken steps to reduce the size of our operating organization and overhead costs commensurately with our store count reduction, eliminating in excess of $3.0 million of operating expenses."

Rotunda continued, "This rationalization was prudent and necessary; however, our long-term health is best served by addressing elements that contribute to organic growth within the Company. Lending guidelines were adjusted in June and July to appropriate market levels. Lending on hunting rifles is being reintroduced in approximately 225 stores with individual store training and certification. Focus and accountability on store execution has been amplified with a new management compensation plan, individual store budgets, employee training, and a comprehensive standard of operations program. Short-term non-collateralized loans, often called payroll advances, are in beta test and will be introduced starting in our second fiscal 2001 quarter, with the rollout completed by the end of the third fiscal 2001 quarter. These, along with other initiatives that satisfy our customers' needs, are in development for future introduction."

Rotunda concluded, "Our plans are credible and will return us to profitability early in our new fiscal year. Recent trends in our lending and selling activities indicate that the Company has turned the corner. Couple this with solid redemption rates and strong margins and it's evident that we're on our way. Not only will we return to profitability early this year, but we'll also build on the foundation established to become the premier provider of short term loans and other financial services to our market segment."

EZCORP offers consumers convenient, non-recourse loans collateralized by tangible personal property. A secondary, but related, business activity is the selling of previously owned merchandise consisting primarily of forfeited collateral. The Company currently operates 299 stores in twelve states.

This announcement contains certain forward-looking statements regarding the Company's expected performance for future periods. Actual results for these periods may materially differ from these statements. Such forward- looking statements involve risks and uncertainties such as changing market conditions in the overall economy and the industry, consumer demand for the Company's services and merchandise, changes in regulatory environment, new store openings and other factors periodically discussed in the Company's annual, quarterly and other reports filed with the Securities and Exchange Commission.

If you would like to hear a recording of this earnings announcement, call (877) 690-2096. This recording will be available for replay from 5:00 pm CST on November 14th through 5:00 pm CST on November 17th. For further information, contact Dan Tonissen, Sr. Vice President and Chief Financial Officer at (512) 314-2200.

                               EZCORP, Inc.
       Highlights of Consolidated Results of Operations (Unaudited)
          (in thousands, except per share data and store count)

                                      Three Months Ended September 30,
                                     A                B             C
                                    2000
                                   Before
                                  Special          Special
                                   Charge          Charge         2000

  1  Total revenues               $47,525            $---       $47,525
  2  Cost of goods sold            23,354           1,245        24,599
  3  Net revenues                  24,171          (1,245)       22,926
  4  Operating Expenses            26,078             ---        26,078
  5    Operating income before
        depreciation and
        amortization               (1,907)         (1,245)       (3,152)
  6  Depreciation and
      amortization                  2,679             ---         2,679
  7    Operating income (loss)     (4,586)         (1,245)       (5,831)
  8  Interest expense, net          2,473             ---         2,473
  9  Equity in net income of
      unconsolidated affiliate         (9)            ---            (9)
  10 (Gain) loss on sale of assets    (37)            ---           (37)
  11 Restructuring Charge             ---          10,572        10,572
  12 Income (loss) before
      income taxes                 (7,013)        (11,817)      (18,830)
  13 Income tax expense
      (benefit)                    (2,448)         (4,018)       (6,466)
  14 Income (loss) before
      cumulative effect of a
      change in accounting
      principle                    (4,565)         (7,799)      (12,364)
  15 Cumulative effect of
      changing to a
      different revenue
      recognition method           (3,700)            ---        (3,700)
  16 Net income (loss)            $(8,265)        $(7,799)     $(16,064)

     Amounts per common share:
  17   Income (loss) before
        cumulative effect of a
        change in accounting
        principle                  $(0.38)         $(0.65)       $(1.03)
  18   Cumulative effect of
        changing to a
        different revenue
        recognition method         $(0.31)           $---        $(0.31)
  19 Net income (loss)             $(0.69)         $(0.65)       $(1.34)

  20 Weighted average shares -
      fully diluted                12,032          12,032        12,032

     Other data, as of the end of the period:
  21 Net revenue per
        average store                 $74             $(4)          $70
  22 Operating expenses per
        average store                 $80            $---           $80
  23 Pawn loans outstanding -
      end of period               $46,916         $46,916       $46,916
  24 Loan balance per
      ending store                   $150            $150          $150
  25 Inventory - end of period    $35,660         $35,660       $35,660
  26 Inventory per ending store      $114            $114          $114
  27 Store count - average for
      period                          328             328           328
  28 Store count - end of period      313             313           313


                               EZCORP, Inc.
  Highlights of Consolidated Results of Operations (Unaudited) Continued
          (in thousands, except per share data and store count)

                                           Three Months Ended September 30,
                                                      D              E
                                                    1999           1999
                                                 As Reported     Pro Forma

  1  Total revenues                                $57,569        $45,190
  2  Cost of goods sold                             28,320         18,515
  3  Net revenues                                   29,249         26,675
  4  Operating Expenses                             24,641         24,641
  5    Operating income before depreciation
        and amortization                             4,608          2,034
  6  Depreciation and amortization                   2,497          2,497
  7    Operating income (loss)                       2,111           (463)
  8  Interest expense, net                           1,177          1,177
  9  Equity in net income of unconsolidated
      affiliate                                         44             44
  10 (Gain) loss on sale of assets                     120            120
  11 Restructuring Charge                              ---            ---
  12 Income (loss) before income taxes                 770         (1,804)
  13 Income tax expense (benefit)                      284           (705)
  14 Income (loss) before cumulative effect of a
      change in accounting principle                   486         (1,099)
  15 Cumulative effect of changing to a
      different revenue recognition method             ---            ---
  16 Net income (loss)                                $486        $(1,099)

     Amounts per common share:
  17   Income (loss) before cumulative effect of a
        change in accounting principle               $0.04         $(0.09)
  18   Cumulative effect of changing to a
        different revenue recognition method          $---           $---

  19 Net income (loss)                               $0.04         $(0.09)

  20 Weighted average shares - fully diluted        12,015         12,015

     Other data, as of the end of the period:
  21 Net revenue per average store                     $89            $81
  22 Operating expenses per average store              $75            $75
  23 Pawn loans outstanding - end of period        $53,940        $53,940
  24 Loan balance per ending store                    $163           $163
  25 Inventory - end of period                     $58,241        $43,658
  26 Inventory per ending store                       $176           $132
  27 Store count - average for period                  328            328
  28 Store count - end of period                       331            331


                               EZCORP, Inc.
       Highlights of Consolidated Results of Operations (Unaudited)
          (in thousands, except per share data and store count)

                                      Twelve Months Ended September 30,
                                     A               B             C
                                   2000
                                  Before
                                 Special          Special
                                  Charge          Charge          2000

  1  Total revenues              $197,399            $---      $197,399
  2  Cost of goods sold            86,809           1,245        88,054
  3  Net revenues                 110,590          (1,245)      109,345
  4  Operating Expenses           104,837                       104,837
  5    Operating income before
        depreciation and
      amortization                  5,753          (1,245)        4,508
  6  Depreciation and
      amortization                 10,255                        10,255
  7    Operating income (loss)     (4,502)         (1,245)       (5,747)
  8  Interest expense, net          6,201                         6,201
  9  Equity in net income of
      unconsolidated affiliate       (225)                         (225)
  10 (Gain) loss on sale of assets   (280)                         (280)
  11 Restructuring Charge             ---          10,572        10,572
  12 Income (loss) before
      income taxes                (10,198)        (11,817)      (22,015)
  13 Income tax expense
      (benefit)                    (3,467)         (4,018)       (7,485)
  14 Income(loss) before
      cumulative effect of a
      change in accounting
      principle                    (6,731)         (7,799)      (14,530)
  15 Cumulative effect of
      changing to a
      different revenue
      recognition method          (18,044)            ---       (18,044)
  16 Net income (loss)           $(24,775)        $(7,799)     $(32,574)

     Amounts per common share:
  17   Income (loss) before
        cumulative effect of a
        change in accounting
        principle                  $(0.56)         $(0.65)       $(1.21)
  18   Cumulative effect of
        changing to a
        different revenue
        recognition method         $(1.50)           $---        $(1.50)
  19 Net income (loss)             $(2.06)         $(0.65)       $(2.71)

  20 Weighted average shares _
      fully diluted                12,017          12,017        12,017

     Other data
  21 Net revenue per
      average store                  $333             $(4)         $329
  22 Operating expenses per
      average store                  $316            $---          $316
  23 Pawn loans outstanding -
      end of period               $46,916         $46,916       $46,916
  24 Loan balance per
      ending store                   $150            $150          $150
  25 Inventory - end of period    $35,660         $35,660       $35,660
  26 Inventory per ending store      $114            $114          $114
  27 Store count - average for
      period                          332             332           332
  28 Store count - end of period      313             313           313


                               EZCORP, Inc.
  Highlights of Consolidated Results of Operations (Unaudited) Continued
          (in thousands, except per share data and store count)

                                          Twelve Months Ended September 30,
                                                      D              E
                                                    1999           1999
                                                 As Reported     Pro Forma

  1  Total revenues                               $231,969       $188,779
  2  Cost of goods sold                            113,824         76,474
  3  Net revenues                                  118,145        112,305
  4  Operating Expenses                             96,350         96,350
  5    Operating income before depreciation
        and amortization                            21,795         15,955
  6  Depreciation and amortization                   9,435          9,435
  7    Operating income (loss)                      12,360          6,520
  8  Interest expense, net                           3,691          3,691
  9  Equity in net income of unconsolidated
      affiliate                                       (304)          (304)
  10 (Gain) loss on sale of assets                     268            268
  11 Restructuring Charge                              ---            ---
  12 Income (loss) before income taxes               8,705          2,865
  13 Income tax expense (benefit)                    3,220          1,117
  14 Income(loss) before cumulative effect of a
      change in accounting principle                 5,485          1,748
  15 Cumulative effect of changing to a
      different revenue recognition method             ---        (10,501)
  16 Net income (loss)                              $5,485        $(8,753)

     Amounts per common share:
  17   Income (loss) before cumulative effect of a
        change in accounting principle               $0.46          $0.15
  18   Cumulative effect of changing to a
        different revenue recognition method          $---         $(0.88)
  19 Net income (loss)                               $0.46         $(0.73)

  20 Weighted average shares _ fully diluted        12,008         12,008

     Other data
  21 Net revenue per average store                    $377           $359
  22 Operating expenses per average store             $308           $308
  23 Pawn loans outstanding - end of period        $53,940        $53,940
  24 Loan balance per ending store                    $163           $163
  25 Inventory - end of period                     $58,241        $43,658
  26 Inventory per ending store                       $176           $132
  27 Store count - average for period                  313            313
  28 Store count - end of period                       331            331
NewsCom: http://www.newscom.com/cgi-bin/prnh/19981014/DAW003

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SOURCE: EZCORP, Inc.

Contact: Dan Tonissen, Sr. Vice President and Chief Financial Officer of
EZCORP, Inc., 512-314-2200

Website: http://www.ezcorp.com/

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