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16
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[x]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 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
_______________________________
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)
Registrant's telephone number, including area code:
(512) 314-3400
____________________________________
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Class A Non-voting Common Stock The Nasdaq Stock Market
$.01 par value per share
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes X No__
Indicate by check mark if disclosures of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
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, one of whom is an affiliate of the
registrant. There is no trading market for the Class B
Voting Common Stock. The aggregate market value of the
Class A Non-voting Common Stock held by non-affiliates of
the registrant as of December 1, 1997, based on the closing
price on the Nasdaq Stock Market on such date, was $90
million.
As of December 1, 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.
EZCORP, INC.
YEAR ENDED SEPTEMBER 30, 1997
INDEX TO FORM 10-K
Item Page
No. No.
INTRODUCTION
PART I.
1. Business 2
2. Property 13
3. Legal Proceedings 15
4. Submission of Matters to a Vote
of Security Holders 15
PART II.
5. Market for Registrant's Common Equity and Related
Stockholder Matters 16
6. Selected Financial Data 16
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
8. Financial Statements and Supplementary Data 23
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 40
PART III.
10. Directors and Executive Officers of the
Registrant 40
11. Executive Compensation 42
12. Security Ownership of Certain Beneficial Owners and
Management 47
13. Certain Relationships and Related Party
Transactions 48
PART IV.
14. Financial Statement Schedules, Exhibits, and
Reports on Forms 8-K 50
SIGNATURES
PART I
Item 1. Business
EZCORP, Inc. (the "Company") is a Delaware corporation;
its principal executive offices are located at 1901 Capital
Parkway, Austin, Texas 78746, and its telephone number is
(512) 314-3400. As used herein, the Company includes the
subsidiaries listed in Exhibit 22.1.
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.
General
The Company is engaged in establishing, acquiring, and
operating pawnshops which function as convenient sources of
consumer credit and as value-oriented specialty retailers of
primarily previously owned merchandise. Through its lending
function, the Company makes relatively small, non-recourse
loans secured by pledges of tangible personal property. The
Company contracts for a pawn service charge to compensate it
for each pawn loan. Pawn service charges, which generally
range from 12% to 300% per annum, are calculated based on
the dollar amount and duration of the loan and accounted for
approximately 44% of the Company's revenues for the year
ended September 30, 1997 ("Fiscal 1997"). In Fiscal 1997,
approximately 78% of the loans made by the Company were
redeemed in full along with the payment of the pawn service
charge or were renewed or extended through the payment of
the pawn service charge. In most states in which the Company
operates, collateral is held one month with a sixty-day
extension period after which such collateral is forfeited
for resale.
As of December 1, 1997, the Company operated 249
locations: 151 in Texas, 24 in Colorado, 23 in Indiana, 13
in Alabama, 10 in Georgia, 9 in Oklahoma, 8 in Tennessee, 3
in Mississippi, 3 in Louisiana, 2 in North Carolina, 1 in
Arkansas, 1 in Florida and 1 in Nevada. The Company intends
to expand through the establishment or acquisition of stores
primarily in existing markets to form efficient regional
clusters. The Company intends to expand in states with
regulatory, competitive, and demographic characteristics
conducive to successful pawnshop operation.
The pawnshop industry in the United States is a large,
highly fragmented, and growing industry. The industry
consists of over 10,000 pawnshops owned primarily by
independent operators who typically own one to three
locations.
Lending Activities
The Company is engaged in the business of making pawn
loans, which typically are relatively small, non-recourse
loans secured by pledges of tangible personal property. As
of September 30, 1997, the Company had approximately 590,000
loans outstanding, representing an aggregate principal
balance of $42.8 million. The Company contracts for a pawn
service charge to compensate it for a pawn loan. A majority
of the Company's outstanding pawn loans are in an amount
that permits pawn service charges of 20% per month or 240%
per annum. For Fiscal 1997, pawn service charges accounted
for approximately 44% of the Company's total revenues.
Collateral for the Company's pawn loans consists of
tangible personal property, generally jewelry, consumer
electronics, tools, firearms, and musical instruments. The
Company does not investigate the creditworthiness of a
borrower, but relies on the estimated resale value of the
pledged property, the probability of its redemption, and the
estimated time required to sell the item as a basis for its
credit decision. The amount that the Company is willing to
lend generally ranges from 20% to 65% of the pledged
property's estimated resale value depending on an evaluation
of these factors. The sources for the Company's determination
of the resale value of collateral are numerous and include
catalogues, blue books, newspaper advertisements, and previous
sales of similar merchandise.
The pledged property is held through the term of the
loan, which in Texas is one month with an automatic 60-day
grace period, unless repaid or renewed earlier. The Company
seeks to maintain a redemption rate of between 70% and 80%,
and in each of the Company's last three fiscal periods, it
achieved this targeted redemption rate. The redemption rate
is maintained through loan policy and proper implementation
of such policy at the store level. If a borrower does not
repay, extend or renew a loan, the collateral is forfeited
to the Company and then becomes inventory available for sale
in the Company's pawnshops. The Company does not record loan
losses or charge-offs because the principal amount of an
unpaid loan and any accrued pawn service charges become the
carrying cost of the forfeited collateral, which is recorded
as the Company's inventory. The Company evaluates the
salability of inventory and provides an allowance for
valuation of inventory, based on the type of merchandise,
recent sales trends and margins, and the age of merchandise.
The table below shows the dollar amount of loans made,
loans repaid, and loans forfeited for the Company for the
fiscal years ended September 30, 1995, 1996, and 1997:
Fiscal Years Ended September 30,
1995 1996 1997
--------------------------------
(dollars in millions)
Loans made $ 192.2 $ 151.4 $ 170.4
Loans repaid (137.9) (105.7) (108.9)
Loans forfeited (52.3) (50.8) (53.3)
------ ------ ------
Net increase (decrease) in pawn
loans outstanding at
the end of the year $ 2.0 $ (5.1) $ 8.2
====== ====== ======
The realization of gross profit on sales of inventory
primarily depends on the Company's initial assessment of the
property's estimated resale value. Improper assessment of
the resale value of the collateral in the lending function
can result in reduced marketability of the property and
resale of the property for an amount less than the carrying
cost of the property. Jewelry, which constitutes
approximately 60% of the principal amount of items pledged,
can be evaluated primarily based on weight, carat content,
and value of gemstones, if any. The other items pawned
typically consist of consumer electronics, tools, firearms,
and musical instruments.
At the time a pawn transaction is entered into, a pawn
loan agreement, commonly referred to as a pawn ticket, is
delivered to the borrower. It sets forth, among other
things, the name and address of the pawnshop and the
borrower, the borrower's identification number from his
driver's license, military identification or other official
number, the date of the loan, an identification and
description of the pledged goods, including applicable
serial numbers, the amount financed, the pawn service
charge, the maturity date of the loan, the total amount that
must be paid to redeem the pledged goods on the maturity
date, and the annual percentage rate.
Of the Company's 249 locations in operation as of
December 1, 1997, 151 were stores located in Texas.
Accordingly, Texas pawnshop laws have the greatest
application to the Company's operations. In Texas, pawnshop
operations are regulated by the State of Texas Office of
Consumer Credit Commissioner in accordance with Chapter 51
of the Texas Credit Code, commonly known as the Texas
Pawnshop Act (the "Pawnshop Act"). See "Regulation."
The maximum allowable pawn service charges for
stratified loan amounts made in the State of Texas are set
in accordance with Texas law under the Pawnshop Act.
Historically, the maximum allowable pawn service charges
under Texas law have not changed; however, the stratified
loan amounts have been adjusted upward by nominal amounts
each year. The maximum allowable pawn service charges under
the Pawnshop Act for the various stratified loan amounts for
the year beginning July 1, 1996, and ending June 30, 1997,
and for the year beginning July 1, 1997, and ending June 30,
1998, are as follows:
Schedule of Applicable Loan Service Charges for Texas
Year Ending June 30, 1997 Year Ending June 30, 1998
Maximum Maximum
Allowable Allowable
Annual Annual
Amount Financed Percentage Amount Financed Percentage
Per Pawn Loan Rate Per Pawn Loan Rate
-------------- ---------- -------------- ----------
$1 to $132 240% $1 to $135 240%
$132.01 to $440 180% $136 to $450 180%
$440.01 to $1,320 30% $451 to $1,350 30%
$1,320.01 to $11,000 12% $1,351 to $11,250 12%
Under Texas law, there is a ceiling on the maximum
allowable pawn loan. For the period July 1, 1996 through
June 30, 1997, the loan ceiling was $11,000. For the period
July 1, 1997 through June 30, 1998, the loan ceiling is
$11,250. The Company's average loan amount for Fiscal 1997
was approximately $73.
Retail Activities
Jewelry sales represent approximately 60% of the
Company's merchandise sales with the remaining sales
consisting primarily of consumer electronics, tools,
firearms, and musical instruments. The Company believes its
ability to offer quality used merchandise at prices
significantly lower than original retail prices attracts
value-conscious customers. The Company obtains its inventory
primarily from unredeemed collateral, and to a lesser
extent, from purchases from the general public and from
wholesale sources. For Fiscal 1997, purchases from the
general public and from wholesale sources constituted
approximately 7% of the dollar value of inflows to
inventory. During Fiscal 1997, $82.1 million of merchandise
was added to inventory through forfeited collateral. Of such
amount, approximately $53.3 million was from the principal
amount of unredeemed pawn loans, and $28.8 million was from
accrued service charges. For Fiscal 1997, retail activities
accounted for approximately 56% of the Company's total
revenues, but only 18% of the Company's net revenue, after
deducting cost of goods sold on merchandise sales.
The Company utilizes market pricing and customer
purchasing decision studies to better define its retail
customers and their buying habits. Analysis of the sales and
inventory data provided by the Company's management
information systems facilitate the design of promotional and
merchandising programs and merchandise pricing decisions.
Regional merchandising managers develop and implement
promotional and merchandising programs, review merchandise
pricing decisions and balance inventory levels within
markets. During Fiscal 1997, the Company continued to
upgrade merchandise presentations through improved category
merchandise displays and better retail signage.
The Company does not give prospective buyers any
warranties on most merchandise sold through its retail
operations, except for certain purchases of new, wholesale-
purchased merchandise, which may have a limited
manufacturer's warranty. Prospective buyers may purchase an
item on layaway through the Company's "EZ Layaway" program.
Through EZ Layaway, a prospective purchaser will typically
put down a minimum of 20% of an item's purchase price as a
customer layaway deposit. The Company will
hold the item for a 90-day period during which the customer
is required to pay for the item in full. As of September 30,
1997, the Company had $2 million in customer layaway
deposits and related payments.
The Company's overall inventory is stated at the lower
of cost or market. The Company provides inventory reserves
for shrinkage and cost in excess of market value. The
Company has continued to refine the method of estimating
these reserves through further study and analysis of sales
trends, inventory aging, shrinkage, and losses on aged
inventory. Valuation allowances, including shrinkage
reserves, amounted to $6.9 million as of September 30, 1997.
At September 30, 1997, total inventory on hand was $39.3
million, after deducting an allowance for shrinkage and
valuation of inventory.
Seasonality
Historically, pawn service charge revenues are highest
in the Company's fiscal fourth quarter (July, August and
September) due to higher loan demand during the summer
months and merchandise sales are highest in the Company's
fiscal first and second fiscal quarters (October through
March) due to the holiday season and tax refunds.
Operations
General
The typical Company location is a free-standing
building or part of a retail strip center. Nearly all of the
Company's pawnshop locations have contiguous parking
facilities. Store interiors are designed to resemble small
discount operations and attractively display merchandise by
category. Distinctive exterior design and attractive in-
store signage provide an appealing atmosphere to customers.
The typical store has approximately 2,000 square feet of
retail space and approximately 4,000 square feet dedicated
to lending activities (principally collateral storage). The
Company maintains property and general liability insurance
for each of its pawnshops. The Company's stores are open six
or seven days a week, depending on location.
Store Management
A typical Company store employs five to six people
consisting of a manager, an assistant manager, and three to
four sales and lending representatives. Store managers are
specifically responsible for ensuring that their store is
run in accordance with the Company's established policies
and procedures, and for operating their store according to
performance parameters consistent with the Company's store
operating guidelines. Each manager reports to one of
approximately 29 area managers who are responsible for the
stores within a specific operating region. Area managers are
responsible for the performance of all stores within their
area and report to one of three regional directors. The
regional directors report to the President of the Company.
Management Information Systems and Controls
The Company has a store level point of sale (POS)
system that automates the recording of all store-level
transactions. Financial summary data from all stores is
retrieved and processed at the corporate office each day and
is available for management review by early morning for the
preceding day's transactions. This information is available
to field management via the Company's internal network. The
Company's communications network provides access to each
store from the corporate offices.
During 1997, the Company began the development of the
next generation of its POS system. This new system will
provide additional store level functionality, enhance
reporting and controls and provide software and hardware
scalability. The Company plans to beta test this new system
in its second fiscal 1998 quarter and, based on the success
of this test, install the system chain wide by the end of
fiscal 1998. Also, the Company has invested in its home
office systems with the creation of a centralized data
warehouse and is in the process of replacing its financial
and human resource information systems. The Company
believes that these systems will provide better tools to
analyze, monitor, manage and control the business.
The Year 2000 issue is the result of computer programs
being written using two digits rather than four (for
example, "97" for 1997) to define the applicable year. Any
of the Company's programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than
the year 2000. In some cases, the new date will cause
computers to stop operating, while in other cases, incorrect
output may result. Since the Company is currently in the
process of replacing and upgrading its computer hardware and
software systems, the Company believes that there is little
business risk attributable to the Year 2000 issue.
The Company has an internal audit staff of
approximately 16 employees to ensure that the Company's
policies and procedures are consistently followed. In
addition, the audit department carefully monitors, among
other things, the Company's perpetual inventory system,
lending practices and regulatory compliance.
Personnel
As of September 30, 1997, the Company employed
approximately 1,800 people, including approximately 200
management and administrative personnel. The Company
believes that its profitability is dependent upon its
employees' ability to make loans that achieve optimum
redemption rates, to sell retail merchandise effectively,
and to provide prompt and courteous customer service. The
Company seeks to hire people who will become long-term,
career employees. To achieve the Company's long-range
personnel goals, the Company strives to develop its
employees through a combination of classroom training and
supervised on-the-job loan and sales training for new
employees.
Assistant managers receive additional training,
primarily on-the-job, focusing on product knowledge and
inventory management. Managers attend on-going management
skills and operations performance training. Regional
directors and area managers receive leadership training in
utilizing their human resources to increase each store's
profitability. The Company's management believes that its
managers, at all levels, are the principal trainers in the
organization.
The Company anticipates that the store managers for new
stores will be promoted primarily from the ranks of existing
store employees and has created a process for forecasting
future needs and identifying potential internal candidates
for position openings. The Company's career development plan
not only develops and advances employees within the Company,
but also provides training for the efficient integration of
experienced retail managers and pawnbrokers from outside the
Company.
In Texas, each pawnshop employee is required to be
licensed in order to make loans or sell merchandise and is
required to file for that license within 30 days of the date
of hire. The licensing fee is $65.00 and encompasses a
review of the individual's personal background. Licenses are
renewed annually at a fee of $10.00; renewals also entail a
review of each individual's personal background.
Trade Name
The Company historically operated its pawnshops under
the "U-Pawn-It" and "EZ Pawn" names. In 1991, the Company
began converting stores to the "EZ Pawn" name. The Company
now operates virtually all of its pawnshops under the name
"EZ Pawn." The Company has registered the mark "E-Z Pawn"
with the United States Patent and Trademark Office.
Growth and Expansion
During Fiscal 1997, the Company established five (5)
stores. The Company plans to continue its expansion in
existing markets and to enter new markets in other states
which have regulatory, demographic, and competitive
characteristics that are conducive to successful pawnshop
operations. The Company seeks to establish clusters of
stores in specific geographic regions depending upon
individual market demographics. In this manner, the Company
expects to achieve certain economies of scale relative to
its advertising, name recognition, and managerial and
administrative costs.
The eleven (11) most recently established stores with
twelve full months of operating data, opened by the Company
through September 30, 1997, required an average gross
investment (including inventory, pawn loans and property,
plant and equipment) of approximately $350,000 per pawnshop
during the first twelve months of operation.
The Company's expansion program is dependent on several
variables, such as the availability of acceptable sites or
acquisition candidates and qualified personnel. The
Company's ability to add newly established stores in Texas
counties having a population of 250,000 or more has been
adversely affected by Texas law which became effective
September 1, 1991, which requires a finding of public need
and probable profitability by the Texas Consumer Credit
Commissioner as a condition to the issuance of any new
pawnshop license in such counties. Since September 1, 1991,
the Company has opened or acquired 51 locations in Texas
counties having a population of less than 250,000. See
"Regulation."
Competition
The Company encounters significant competition in
connection with the operation of its business. These
competitive conditions may adversely affect the Company's
revenues, profitability, and its ability to expand. In
connection with the lending of money, the Company competes
primarily with other pawnshops. The majority of the
Company's competitors are independently owned pawnshops. The
Company is the second largest publicly held chain of
pawnshops in the United States. The Company believes that
the primary elements of competition in the pawnshop business
are store location and design, the ability to loan
competitive amounts on items pawned, management of store-
level employees, and the quality of customer service. In
addition, as the pawnshop industry consolidates, the Company
believes that the ability to compete effectively will be
based increasingly on strong general management, regional
market focus, automated management information systems, and
access to capital. Some of the Company's competitors may
have greater financial resources than the Company.
To a certain extent, the Company also competes with
other types of financial institutions such as consumer
finance companies, which generally lend on an unsecured as
well as secured basis. Other lenders may and do lend money
on an unsecured basis, at interest rates which are lower
than the service charges of the Company, and on other terms
more favorable than those offered by the Company.
The Company's competitors, in connection with the sale
of merchandise, include numerous retail and wholesale
stores, including jewelry stores, gun stores, discount
retail stores, consumer electronics stores, other pawnshops,
and other retailers of previously owned merchandise.
Competitive factors in the Company's retail operations
include the ability to provide the customer a variety of
merchandise at an exceptional value. On a retail level, the
Company competes with numerous other retailers who have
significantly greater financial resources than the Company.
Regulation
Pawnshop Operations
The Company's pawnshop operations are subject to
extensive regulation, supervision, and licensing under
various federal, state, and local statutes, ordinances, and
regulations. Of the Company's 249 locations as of December
1, 1997, 151 were in Texas. Accordingly, Texas pawnshop laws
have the greatest application to the Company's operations.
The laws of Colorado, Indiana, Alabama, Georgia, Oklahoma,
Tennessee, Mississippi, Louisiana, North Carolina, Arkansas,
Florida and Nevada also have application to the Company's
pawnshop operations in those states. At December 1, 1997,
the Company's pawnshops were located as follows: 151 in
Texas, 24 in Colorado, 23 in Indiana, 13 in Alabama, 10 in
Georgia, 9 in Oklahoma, 8 in Tennessee, 3 in Mississippi, 3
in Louisiana, 2 in North Carolina, 1 in Arkansas, 1 in
Florida and 1 in Nevada. In the states in which the Company
operates other than Texas, Oklahoma, and Alabama, pawnshops
are subject to local regulation at the municipal and county
level, which regulation may affect the ability of the
Company to expand its operations in those states.
Texas Pawnshop Regulations
In Texas, pawnshops are governed by the Texas Pawnshop
Act and the Rules of Operation promulgated thereunder, and
are subject to licensing by and supervision of the State of
Texas Office of Consumer Credit Commissioner. In addition,
pawnshops and pawnshop employees in Texas are required to be
licensed by the Texas Consumer Credit Commissioner.
Furthermore, the Company is required to supply the Texas
Consumer Credit Commissioner with copies of information
filed with the Securities and Exchange Commission.
The maximum allowable pawn service charges for
stratified loan amounts made in the State of Texas are set
in accordance with the Texas Pawnshop Act. Historically, the
maximum allowable pawn service charges under Texas law have
not changed; however, the stratified loan amounts have been
adjusted upward by nominal amounts each year. Under Texas
law, there is a ceiling on the maximum allowable pawn loan.
From July 1, 1996 to June 30, 1997, the loan ceiling was
$11,000. For the period July 1, 1997 through June 30, 1998,
the loan ceiling is $11,250. A table of the maximum
allowable pawn service charges under the Texas Pawnshop Act
for the various stratified loan amounts for July 1, 1996 to
June 30, 1998 is presented in "Lending Activities."
To be eligible for a license to operate a pawnshop in
Texas, an applicant must: (i) be of good moral character,
which in the case of a business entity applies to each
officer, director, and holder of five percent or more of the
entity's outstanding shares; (ii) have net unencumbered
assets (as defined in the Texas Pawnshop Act) of at least
$150,000 readily available for use in conducting the
business of each licensed pawnshop; (iii) show that the
applicant has the financial responsibility, experience,
character, and general fitness to command the confidence of
the public in its operation; and (iv) show that the pawnshop
will be operated lawfully and fairly in accordance with the
Texas Pawnshop Act. Current applications to the Texas
Consumer Credit Commissioner inquire, among other things,
into the applicant's credit history and criminal record.
In addition, the Texas Pawnshop Act requires the Texas
Consumer Credit Commissioner to make a determination of
public need and probable profitability, in counties with a
population of 250,000 or more, for a new pawnshop license,
or for a relocation of a pawnshop more than one mile away
from the existing address. The determination of public need
and probable profitability may be made administratively by
the Commissioner; however, if a public hearing is requested
by the Commissioner or by any pawnshop licensee that would
be affected by the granting of the proposed application, the
determination of public need and probable profitability must
be made in a public hearing with notice and opportunity for
all affected parties to participate. For a new license
application in any Texas county, the Commissioner provides
notice of the application, and the opportunity for a public
hearing, to the other licensed pawnshops in the county in
which the applicant proposes to operate. The timeframe for
the license application approval process has remained
unchanged for applications in counties of less than 250,000
population, with the Commissioner generally required by law
to process an application within 60 days of its receipt. In
counties having a population of 250,000 or more, a similar
timeframe for the license application approval process
exists where no public hearing has been held, however, the
public hearing process can increase the timeframe
substantially or result in no application approval at all.
The Company's ability to add newly established stores in
Texas counties having a population of 250,000 or more has
been adversely affected by the referenced provisions of the
Texas Pawnshop Act.
The Texas Consumer Credit Commission may, after notice
and hearing, suspend or revoke any license for a Texas
pawnshop upon finding, among other things, that: (i) any
fees or charges have not been paid; (ii) the licensee has
violated (whether knowingly or unknowingly without due care)
any provisions of the Texas Pawnshop Act or any regulation
or order thereunder; or (iii) any fact or condition exists
which, if it had existed at the time the original
application was filed for a license, would have justified
the Commissioner in refusing such license.
The Texas Consumer Credit Commissioner has also
promulgated Rules of Operation which regulate the day-to-day
management of the Company's pawnshops. Under the Pawnshop
Act and the Rules of Operation, a pawnbroker may not: accept
a pledge from a person under the age of 18 years; make any
agreement requiring the personal liability of the borrower;
accept any waiver of any right or protection accorded to a
pledgor under the Texas Pawnshop Act; fail to exercise
reasonable care to protect pledged goods from loss or
damage; fail to return pledged goods to a pledgor upon
payment of the full amount due; make any charge for
insurance in connection with a pawn transaction; enter into
any pawn transaction that has a maturity date of more than
one month; display for sale in storefront windows or
sidewalk display cases: pistols, swords, canes, blackjacks
and similar weapons; or purchase used or second hand
personal property unless a record is established containing
the name, address, and identification of the seller, a
complete description of the property, including serial
number, and a signed statement that the seller has the right
to sell the property.
The Rules of Operation were amended effective October
1, 1994 to further provide that a pawnbroker must maintain
additional records relating to extensions of loans, records
of payments, written receipts, titled goods, lost or damaged
goods, and records of requests by crime victims for
assistance in determining whether stolen property might have
been pledged to the pawnbroker. In addition, the amended
rules require the filing with the Commissioner of a
description of systems and programs utilized in a
pawnbroker's electronic data processing system; the
utilization of approved safes for jewelry pledges; the
maintenance of general liability insurance of not less than
$500,000 per occurrence; and the maintenance of fire
insurance or other credible evidence of financial resources
of not less than two times the amount financed plus the
finance charge on open jewelry loans and not less than one
and one-half times the amount financed plus the finance
charge on all other loans. The Company does not believe that
compliance with the amended rules has materially impacted
the Company's operations. There can be no assurance,
however, that these amended rules will not have a material
adverse effect on the Company.
Colorado Pawnshop Regulations
Colorado law provides for the licensing and bonding of
pawnbrokers in that state. It also requires that pawn
transactions be reported to local authorities and that
certain bookkeeping records be maintained. Under Colorado
law, the maximum allowable pawn service charge is 240%
annually for pawn loans up to $50, and 120% annually for
pawn loans in excess of $50.
Indiana Pawnshop Regulation
The Company's Indiana operations are regulated by the
Department of Financial Institutions. The Department
requires all persons or entities to obtain a license to act
as a pawnbroker. The Indiana Pawnbroker's Act provides for
the Department of Financial Institutions to investigate the
general fitness of the applicant, to determine whether the
convenience and needs of the public will be served by
granting an applicant a license, and generally to regulate
pawnshops in the state.
The Department of Financial Institutions has broad
investigatory and enforcement authority under the statute.
The Department may grant, revoke, and suspend licenses. For
compliance purposes, pawnshops are required to keep such
books, accounts, and records as will enable the Department
to determine if the pawnshop is complying with the statute.
Each pawnshop is required to give authorized agents of the
Department of Financial Institutions free access to its
books and accounts for these purposes. The Indiana statute
provides for the following annual rates of interest plus
pawn service charges: 276% annually on transactions of $300
or less; 261% annually on transactions greater than $300,
but not exceeding $1,000; and 255% annually on transactions
greater than $1,000.
Alabama Pawnshop Regulations
The Alabama Pawnshop Act regulates the licensing and
operation of pawnshops in that state. The general fitness of
pawnshop applicants is investigated by the Supervisor of the
Bureau of Loans of the State Department of Banking. The
Supervisor also issues pawnshop licenses. The Alabama
Pawnshop Act requires that certain bookkeeping records be
maintained and made available to the Supervisor and to local
law enforcement authorities. The Alabama Pawnshop Act
establishes a maximum allowable pawn service charge of 300%
annually.
Georgia Pawnshop Regulations
Georgia state law requires pawnbrokers to maintain
detailed permanent records concerning pawn transactions and
to keep them available for inspection by duly authorized law
enforcement authorities. The Georgia statute prohibits
pawnbrokers from failing to make entries of material matters
in their permanent records, and allows duly authorized
officers to inspect such records. Under applicable Georgia
statutes, municipal authorities may license pawnbrokers,
define their powers and privileges by ordinance, impose
taxes upon them, revoke their licenses, and exercise such
general supervision as will ensure fair dealing between the
pawnbroker and the pawnshop customers.
Georgia law establishes a maximum allowable rate of
interest and service charge of 25% of the principal amount
of a pawn transaction for each thirty days. This annual rate
is in effect for the first 90 days of any pawn transaction
or extension or continuation thereof. The maximum allowable
charge for interest and service charges is reduced to 12.5%
for each thirty-day period thereafter. Georgia law requires
a grace period after default on a pawn transaction. During
the grace period, the pawnbroker may not sell the pledged
item. The grace period is 30 days for motor vehicles and 10
days for all other pawn collateral.
Oklahoma Pawnshop Regulations
The Company's Oklahoma operations are subject to the
Oklahoma Pawnshop Act. Following substantially the same
statutory scheme as the Texas Pawnshop Act, the Oklahoma
Pawnshop Act provides for, among other matters, the
licensing and bonding of pawnbrokers in Oklahoma and
provides for the Oklahoma Administrator of Consumer Credit
to investigate the general fitness of the applicant and
generally regulate pawnshops in that state. The
Administrator has broad rule-making authority with respect
to Oklahoma pawnshops.
In general, the Oklahoma Pawnshop Act prescribes
stratified loan amounts and maximum rates of service charges
which pawnbrokers in Oklahoma may charge for lending money
in Oklahoma within each stratified range of loan amounts.
The regulations provide for a graduated rate structure,
similar to the graduated rate structure utilized in federal
income tax computations. Under this method of calculation, a
$500 loan, for example, earns interest as follows: (1) first
$150 at 240% annually, (2) next $100 at 180% annually, and
(3) the remaining $250 at 120% annually. The maximum
allowable pawn service charges for the various stratified
loan amounts under the Oklahoma statute are as follows:
Maximum Allowable
Amount Financed Annual Percentage
Per Pawn Loan Rate
--------------- -----------------
$1 to $150 240%
$151 to $250 180%
$251 to $500 120%
$501 to $1,000 60%
$1,001 to $25,000 36%
The amount financed in Oklahoma may not exceed $25,000 per
pawn transaction. In addition, the Oklahoma Pawnshop Act
requires each applicant to (1) be of good moral character;
(2) have net assets of at least $25,000; (3) show that the
pawnshop will be operated lawfully and fairly within the
purpose of the Oklahoma Pawnshop Act; and (4) not have been
convicted of any felony which directly relates to the duties
and responsibilities of the occupation of pawnbroker.
Tennessee Pawnshop Regulations
Tennessee law provides for the licensing of pawnbrokers
in that state. It further requires (1) that pawn
transactions be reported to local law enforcement agencies,
(2) requires pawnbrokers to maintain insurance coverage on
the property held on pledge for the benefit of the pledgor,
(3) establishes certain hours during which pawnshops may be
opened for business, and (4) requires certain bookkeeping
records be maintained. Tennessee law prohibits pawnbrokers
from selling, redeeming, or disposing of any goods pledged
or pawned to or with them within 15 days after making their
report to local law enforcement agencies.
Applicable Tennessee law provides that pawnbrokers may
charge interest of 2% a month, plus service charge of 20% or
one-fifth of the amount of the loan for investigating the
title, storing and insuring the pledged goods, closing the
loan, and for other expenses and losses associated with the
loan.
Mississippi Pawnshop Regulations
The Company's Mississippi operations are subject to the
Mississippi Pawnshop Act. The Mississippi Pawnshop Act
provides for regulation to be administered by the
Commissioner of Banking. Municipalities in the state may
enact ordinances which are in compliance with, but not more
restrictive than those in the Mississippi Pawnshop Act.
The Mississippi Pawnshop Act provides for, among other
matters, the licensing of pawnbrokers. The Act also provides
for the Commissioner of Banking to investigate the general
fitness of the applicant and generally to regulate pawnshops
in the state. The Commissioner has broad rule-making
authority with respect to Mississippi pawnshops. The
Mississippi Pawnshop Act establishes a maximum allowable
pawn service charge of 300% annually.
Louisiana Pawnshop Regulations
The Company's Louisiana operations are governed by the
Louisiana Pawnshop Act. The statute gives regulatory and
enforcement powers to the Commissioner of the Office of
Financial Institutions within the Department of Economic
Development. This statute provides for, among other things,
the licensing and bonding of all pawnbrokers in Louisiana.
Under Louisiana law, the maximum allowable interest
charge is 120% annually. In addition, pawnshops may collect
a 10% service charge for the first month of a pawn
transaction. Louisiana law requires that a pawnbroker hold
jewelry that is pledged as collateral until the lapse of six
months prior to resale from the time the loan was entered or
extended. The law requires a three-month lapse on other
items.
North Carolina Pawnshop Regulations
In North Carolina, a pawnbroker must obtain a license
by showing sufficient net assets and moral character to
demonstrate that it will not operate to the detriment of the
public. The applicable interest and service charges are 2%
per month interest, and a monthly fee not to exceed 20% for
the following: (1) title investigation, (2) handling,
appraisal and storage, (3) insuring a security, (4)
application fee, (5) making daily reports to law enforcement
or other services. The total monthly fees may not exceed
$100 in the first month, $75 in the second month, $75 in the
third month, $50 in the fourth month and for any subsequent
months. Pawn loans in North Carolina are to have a 30 day
loan term, with a 60 day grace period, after which time the
collateral is subject to resale by the pawnbroker.
Arkansas Pawnshop Regulations
Arkansas law does not provide for the licensing of
pawnbrokers or pawnshops in that state. By statute,
pawnbrokers must maintain certain records of each pawn
transaction and make those records available to local law
enforcement agencies. Arkansas law establishes a maximum
allowable interest rate of 17% annually; however, a pawnshop
operator may charge reasonable fees for investigating title,
storage, and other services.
Florida Pawnshop Regulations
The applicable Florida statute provides for
registrations of pawnbrokers with the Florida Department of
Revenue. That agency has broad power to adopt rules and
regulations to effect the purposes of the statute, and to
impose fines for violation of the statute's registration
requirements. The law requires that the pawnbroker maintain
detailed records of all secondhand goods transactions, and
to deliver such records to the appropriate local law
enforcement agencies. The relevant statute does not
establish a maximum allowable rate of interest or service
charges.
The Company's Florida transactions take the form of buy-
sell agreements. The property placed with a pawnbroker is
subject to sale or disposal when the seller has not
repurchased the property from the pawnbroker and there has
been no payment on account made for a period of sixty days
after the sale. The applicable Florida statute provides
for registrations of pawnbrokers with the Florida Department
of Revenue. That agency has broad power to adopt rules and
regulations to effectuate the purposes of the statute, and
to impose fines for violation of the statute's registration
requirements. The law requires that the pawnbroker maintain
detailed records of all secondhand goods transactions, and
deliver such records to the appropriate local law
enforcement agencies. The relevant statute does not
establish a maximum allowable rate of interest or service
charges.
As of October 1, 1996, pawn transactions have been
subject to Florida regulations codified in Chapter 539 of
the Florida Statutes. Under such regulations, licensing of
pawnshops and regulatory enforcement of such shops is
performed by the Division of Consumer Services of the
Department of Agriculture and Consumer Services. Such
regulations require, among other things, that the pawnshop
fill out a Pawnbroker Transaction Form showing the customer
name, type of item pawned, and disclosing the amount of the
pawn loan and the applicable finance charges. A copy of
each form must be delivered to local law enforcement
officials at the end of each business day.
From October 1, 1996, pawn loans in Florida had a 30
day maturity date. If the customer does not redeem the loan
within 30 days following the maturity date (or the next
business day, whichever is later), all right, title, and
interest to the property vests in the pawnbroker. The
pawnbroker is entitled to charge two percent of the amount
financed for each thirty days as interest, and an additional
amount as pawn service charges, provided the total amount of
such charge, inclusive of interest, does not exceed 25% of
the amount financed for each 30 day period in a pawn
transaction. The pawnbroker may charge a minimum pawn
service charge of $5.00 for each 30 day period. Pawns may
be extended by agreement, with the charge applicable being
one-thirtieth of the original total pawn service charge for
each day by which the loan is extended. For loans redeemed
greater than 60 days after the date made, pawn service
charges continue to accrue at the daily rate of one-
thirtieth of the original total pawn service charge.
Nevada Regulations
In Nevada, all pawn loans must be held for redemption
for at least 120 days after the date the loan is made. A
pawnbroker may charge interest at the rate of 10% per month
for money loaned on the security of personal property
actually received. In addition, the pawnbroker may collect
an initial set up fee of $5. Property received in pledge
may not be removed from the pawnshop, except when redeemed
by the owner, prior to 30 days after a report of the receipt
of such property is reported to the sheriff or chief of
police.
Local Regulations
At the local level, each pawnshop, voluntarily or
pursuant to municipal ordinance, provides copies of
transactions involving pawn loans and over-the-counter
purchases to the local police department. These daily
transaction reports are designed to provide the local police
with a detailed description of the goods involved, including
serial numbers, if any, and the names and addresses of the
owners obtained from valid identification cards.
A copy of each transaction ticket is provided to local
law enforcement agencies for processing by the National
Crime Investigative Computer to determine rightful
ownership. Goods held to secure pawn loans or goods
purchased which are determined to belong to an owner other
than the borrower or seller are
subject to recovery by the rightful owner. While a risk
exists that pledged or purchased merchandise may be subject
to claims of rightful owners, historically, the Company has
experienced such claims with respect to less than 0.5% of
pawn loans made.
There can be no assurance that additional local, state,
or federal legislation will not be enacted or that existing
laws and regulations will not be amended which would
materially, adversely impact the Company's operations and
financial condition.
Firearms Regulations
With respect to gun and ammunition sales, each pawnshop
must comply with the regulations promulgated by the Federal
Bureau of Alcohol, Tobacco and Firearms (BATF) which require
each pawnshop dealing in guns to maintain a permanent
written record of all transactions involving the receipt or
disposition of guns.
The BATF promulgated rules under the Brady Handgun
Violence Prevention Act on February 28, 1994. The rules
basically require that all licensees, in either selling
inventoried or redeeming pawned firearms to those other than
the original pledgor, have the buyer complete appropriate
forms and wait the requisite five-day period prior to
completing the sale and delivering the firearm.
The Company complies with the Brady Handgun Violence
Prevention Act (the "Brady Act"), and rules the United
States Department of Treasury promulgated relating thereto.
The Company does not believe that compliance with the Brady
Act and the new rules promulgated thereunder have materially
affected the Company's operations. There can be no
assurance, however, that compliance with the Brady Act will
not adversely affect the Company's operations.
On September 13, 1994, the Violent Crime Control and
Law Enforcement Act of 1994 became effective upon signature
of the President. Among other provisions, the Act exempts
pawnbrokers from the provision of the Brady Act with respect
to the return of firearms to the person who originally
pawned them.
Item 2. Property
As of December 1, 1997, the Company owned the real
estate and buildings for 23 of its pawnshops and leased 226
of its operating pawnshop locations. Leased facilities are
generally leased for a term of five to ten years with one or
more options to renew. The Company's existing leases expire
on dates ranging between February 28, 1998 and February 28,
2008. All leases provide for specified periodic rental
payments. Most leases require the Company to maintain the
property and pay the cost of insurance and taxes. The
Company believes that termination of any particular lease
would not have a material adverse effect on the Company's
operations. Of the Company's leased pawnshop locations, five
are leased from affiliated entities in the ordinary course
of business. All of such leases provide for market rental
rates. The Company's strategy is generally to lease, rather
than acquire, space for its pawnshop locations unless the
Company finds what it believes is a superior location at an
attractive price. The Company believes that the facilities
owned and leased by it as pawnshop locations are suitable
for such purpose.
The following table presents the metropolitan areas or
regions (as defined by the Company) generally served by the
Company and the number of retail locations serving each such
market as of December 1, 1997:
Number of
Locations in
Area/Region Each Area
------------- ------------
Texas:
Houston 58
San Antonio 17
South Texas 17
North and West Texas 17
Dallas 8
Central Texas 11
Austin Area 10
Laredo Area 8
Corpus Christi 5
---
Total Texas 151
Colorado:
Denver Area 16
Colorado Springs Area 6
Pueblo 2
---
Total Colorado 24
Indiana:
Indianapolis Area 12
Other Areas 11
---
Total Indiana 23
Alabama:
Birmingham Area 6
Montgomery 4
Mobile 2
Other Areas 1
---
Total Alabama 13
Georgia:
Atlanta Area 10
---
Total Georgia 10
Oklahoma:
Oklahoma City Area 4
Tulsa Area 3
Other Areas 2
---
Total Oklahoma 9
Tennessee:
Memphis 8
---
Total Tennessee 8
Mississippi:
Jackson 2
Other Areas 1
---
Total Mississippi 3
Louisiana:
New Orleans Area 2
Other Areas 1
---
Total Louisiana 3
North Carolina:
Raleigh-Durham Area 2
---
Total North Carolina 2
Arkansas:
West Helena 1
---
Total Arkansas 1
Florida:
Pensacola 1
---
Total Florida 1
Nevada:
Las Vegas 1
---
Total Nevada 1
---
Total Company 249
===
In addition to its store locations, the Company owns
its corporate offices and leases certain warehouse
facilities. In Fiscal 1992, the Company purchased a 27,400
square foot building in Austin, Texas for use as a corporate
office. The Company also leases approximately 8,100 square
feet in Austin, Texas for its Central Jewelry Processing
Center under a five-year lease agreement with one five-year
option to renew.
Item 3. Legal Proceedings
From time to time, the Company is involved in
litigation relating to claims arising from its 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 cannot be ascertained, after consultation with
counsel, the Company believes the resolution of these suits
will not have a material adverse effect on the Company's
financial condition. There can be no assurance, however,
that this will be the case.
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
trial court has ruled 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 in 1998.
The Company is also the nominal defendant in a
lawsuit filed July 18, 1997 by a holder of thirty-nine
(39) shares of Company stock styled for the benefit of the
Company against certain directors of the Company in the
Castle County Court of Chancery in the State of Delaware.
The suit alleges the defendants breached their fiduciary
duties to the Company in approving certain management
incentive compensation arrangements and an affiliate's
financial advisory services contract with the Company.
The suit seeks recision of the subject agreements,
unspecified damages and expenses, including plaintiff's
legal fees. The defendants have filed a motion to dismiss
which is pending before the court.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Since August 27, 1991, the Company's Class A Non-voting
Common Stock ("Class A Common Stock") has traded on the
Nasdaq Stock Market under the symbol EZPW. As of December 1,
1997, there were 298 stockholders of record of the Company's
Class A Non-voting Common Stock. There is no trading market
for the Company's Class B Voting Common Stock ("Class B
Common Stock"), and as of December 1, 1997, such stock was
held by two stockholders of record.
The high and low per share price for the Company's
Class A Common Stock for the past two fiscal years, as
reported by Nasdaq, were as follows:
High Low
Fiscal 1996: ----- -----
First quarter ended December 31, 1995 $5.75 $4.25
Second quarter ended March 31, 1996 7.50 4.75
Third quarter ended June 30, 1996 7.00 5.75
Fourth quarter ended September 30, 1996 6.88 5.44
Fiscal 1997:
First quarter ended December 31, 1996 $8.88 $5.75
Second quarter ended March 31, 1997 8.13 6.38
Third quarter ended June 30, 1997 10.25 7.38
Fourth quarter ended September 30, 1997 11.06 8.75
As of December 1, 1997, the Company's Class A Common
Stock closed at $11.75 per share.
The Company's restated certificate of incorporation
provides that cash dividends on common stock, when declared,
must be declared and paid share and share alike on the Class
A Common Stock and the Class B Common Stock. There have been
no dividends declared on the Company's Common Stock during
the four most recent fiscal years.
The current policy of the Company's Board of Directors
is to retain any future earnings to provide funds for the
operation and expansion of the Company's business; however,
the Board of Directors will review the dividend policy
periodically to determine whether the declaration of
dividends is appropriate. In addition, the Company's bank
line of credit agreement restricts the payment of dividends
without prior consent from the Company's lenders.
Item 6. Selected Financial Data
The following selected financial information should be
read in conjunction with, and is qualified in its entirety
by reference to the financial statements of the Company and
the notes thereto included elsewhere in this Form 10-K:
Selected Financial and Operating Data
The Company
--------------------------------------------
Fiscal Years Ended September 30,
1993 1994 1995 1996 1997
--------------------------------------------
(Amounts in thousands, except per share
and store figures)
Operating Data:
Sales (1) $ 63,791 $104,773 $115,220 $103,511 $101,454
Pawn service charges 44,834 63,169 74,254 70,115 78,845
------- ------- ------- ------- -------
Total revenues (1) 108,625 167,942 189,474 173,626 180,299
Cost of goods sold (1) 48,179 88,256 113,227 88,953 84,468
------- ------- ------- ------- -------
Net revenues 60,446 79,686 76,247 84,673 95,831
Store operating expenses 40,485 58,181 74,417 58,969 60,735
Corporate administrative
expenses 8,433 12,668 15,406 10,712 13,320
Depreciation and
amortization 2,703 4,471 7,352 7,573 7,616
Interest expense (income) (378) 1,512 3,059 1,884 982
------- ------- ------- ------- -------
Income (loss) before
income taxes 9,203 2,854 (23,987) 5,535 13,178
Income tax expense (benefit) 3,095 1,065 (8,138) 1,992 4,745
------- ------- ------- ------- -------
Net income (loss) $ 6,108 $ 1,789 $(15,849) $ 3,543 $ 8,433
======= ======= ======= ======= =======
Earnings (loss) per
common share $ 0.56 $ 0.15 $ (1.32) $ 0.30 $ 0.70
Cash dividends per
common share - - - - -
Weighted average common
shares and share
equivalents 10,981 11,975 11,977 11,988 11,995
Stores operated at end
of period 186 234 261 246 249
September 30,
1993 1994 1995 1996 1997
-----------------------------------------------
Balance Sheet Data:
Pawn loans $ 27,961 $ 37,777 $ 39,782 $ 34,636 $ 42,837
Inventory 39,127 63,070 41,575 35,834 39,258
Working capital 83,850 106,691 94,916 76,158 89,451
Total assets 137,314 173,989 164,588 140,366 151,051
Long-term debt, net 3,476 36,791 42,916 16,244 19,133
Stockholders' equity 123,935 125,086 109,375 112,991 121,461
(1)Sales from scrap and wholesale activities were
reclassified from cost of goods sold to sales in the
1993, 1994 and 1995 operating data.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This discussion and analysis compares the results of
operations for the twelve month periods ending September 30,
1997, 1996, and 1995 (designated as "Fiscal 1997", "Fiscal
1996", and "Fiscal 1995"). The discussion should be read in
conjunction with, and is qualified in its entirety by, the
accompanying financial statements and related notes.
Summary Financial Data
Fiscal Years Ended September 30,
1995 1996 1997
--------------------------------
(Dollars in thousands, except as indicated)
Net Revenues:
Sales $115,220 $103,511 $101,454
Pawn service charges 74,254 70,115 78,845
------- ------- -------
Total revenues 189,474 173,626 180,299
Cost of sales 113,227 88,953 84,468
------- ------- -------
Net revenues $ 76,247 $ 84,673 $ 95,831
======= ======= =======
Other Data:
Gross margin 1.7% 14.1% 16.7%
Average annual inventory
turnover 1.9x 2.3x 2.4x
Average inventory per
location at year end $159 $146 $158
Average loan balance per
location at year end $152 $141 $172
Average pawn loan at
year end (whole dollars) $70 $67 $73
Average yield on loan
portfolio 204% 209% 211%
Redemption rate 76% 78% 78%
Expenses and income as a percentage
of total revenue (%):
Store operating 39.3 33.9 33.7
Administrative 8.1 6.2 7.4
Depreciation and amortization 3.9 4.4 4.2
Interest 1.7 1.1 0.5
Income (loss) before income
taxes (12.7) 3.2 7.3
Net income (loss) (8.4) 2.0 4.7
Stores in operation:
Beginning of year 234 261 246
Acquired - - -
New openings 33 11 5
Sold, combined, or closed (6) (26) (2)
---- ---- ----
End of year 261 246 249
Average number of locations
during the year (1) 248 254 248
_ __________________
(1)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.
Fiscal 1995 Special Charges
To facilitate year to year comparisons, the following
table details the Fiscal 1996 impact of the jewelry
liquidation commenced in the fourth Fiscal 1995 quarter and
the pretax special charges of $25.5 million for Fiscal 1995.
These are more fully discussed below and in Note N of the
Notes to Consolidated Financial Statements.
Fiscal 1995 Fiscal 1996
($ millions) ($ millions)
----------- -----------
Revenues
Merchandise sales $ 8.9 $ 3.8
Pawn service charges - -
------- -------
Total revenue 8.9 3.8
Cost of goods sold 24.3 3.8
------- -------
Net revenue (15.4) -
Operating expenses
Operations 7.7 -
Administrative 2.4 -
Depreciation and
amortization - -
------- -------
Total operating
expenses 10.1 -
------- -------
Operating income (loss) $ (25.5) $ -
======= =======
During Fiscal 1996, the Company sold on a wholesale
basis or scrapped $3.8 million of jewelry which had been
identified as excess and written down to net realizable
value during the Company's fourth Fiscal 1995 quarter.
These sales and their related cost are included in
"Merchandise Sales" and "Cost of Goods Sold." Due to the
earlier write-down, these sales had no effect on income for
Fiscal 1996.
In the fourth Fiscal 1995 quarter, the Company
identified and commenced the liquidation of approximately
$27 million in jewelry inventory which had accumulated
primarily as a result of a $20 million new jewelry program
undertaken in prior periods and as a result of past lending
practices, which have since been modified. During this
quarter the Company sold approximately $15.6 million of this
jewelry (included in "Cost of Goods Sold") for $8.9 million
(included in "Merchandise Sales"). Largely as a result of
this scrapping activity, the Company increased its valuation
reserve by $8.7 million (included in "Cost of Goods Sold").
In addition, the Company provided $7.7 million for the
closing and consolidating of thirty-two (32) stores
including the write-down of various tangible and intangible
assets (included in "Operations" expense) and provided $2.4
million for several legal matters (included in
"Administrative" expense).
Results of Operations
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 Fiscal 1997, pawn service charge revenue
increased $8.7 million from Fiscal 1996 to $78.8 million as
a result of an increase in same store pawn service charge
revenue ($8.5 million), pawn service charge revenue from new
stores not opened the full twelve month period ($0.6
million), reduced by stores which were closed ($0.4
million). At September 30, 1997, same store pawn loan
balances were 23% above September 30, 1996, and the
annualized yield increased by two (2) percentage points to
211%.
For Fiscal 1996, pawn service charge revenue decreased
$4.2 million from Fiscal 1995 to $70.1 million. A decline
in same store pawn service charge revenue ($2.9 million) and
the loss of pawn service charge revenue of the 32 closed
stores ($3.6 million) were partially reduced by new stores
not open the full 12 month period ($2.3 million). At September
30, 1996, same store pawn loan balances were 10% below
September 30, 1995 and the annualized yield increased
by five (5) percentage points to 209%.
A secondary, but related, activity of the Company is
the sale of merchandise, primarily collateral forfeited from
its lending activity. For Fiscal 1997, merchandise sales
decreased approximately $2.1 million from Fiscal 1996 to
$101.4 million. A decline in same store merchandise sales
($0.3 million), merchandise sales of the closed stores ($0.8
million) and the decrease in wholesale jewelry sales
discussed above ($3.8 million) were offset by new store
sales ($2.8 million). Same store merchandise sales were
down 0.3% compared to Fiscal 1996.
For Fiscal 1996, merchandise sales decreased
approximately $11.7 million from Fiscal 1995 to
approximately $103.5 million. A decline in same store
merchandise sales ($3.5 million), merchandise sales of the
32 closed stores ($8.1 million), and the decrease in amount
of sales associated with the special inventory liquidation
discussed above ($5.1 million) were partially offset by new
store sales ($5.0 million). Same store sales for Fiscal
1996 declined two percent from Fiscal 1995 primarily as a
result of lower inventory levels per store ($146,000 in
Fiscal 1996 compared to $159,000 in Fiscal 1995).
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 September 30, 1997, 1996 and 1995, the Company's
inventories consisted of approximately 63%, 66% and 60%
jewelry (e.g., ladies' and men's rings, chains, bracelets,
etc.) and 37%, 34% and 40% general merchandise (e.g.,
televisions, VCRs, tools, sporting goods, musical
instruments, firearms, etc.). At September 30, 1997, 1996
and 1995, approximately 87%, 75% and 78% of the jewelry
inventory was less than twelve months old based on the
Company's date of acquisition (date of forfeiture for
collateral or date of purchase) as was approximately 96%,
87% and 86% of the general merchandise inventory.
For Fiscal 1997, gross margins improved 2.6 percentage
points from Fiscal 1996 to 16.7% as a result of an
improvement in margins on merchandise sales (0.9 of a
percentage point), a reduction in inventory shrinkage when
measured as a percentage of merchandise sales (down 0.8 of a
percentage point to approximately 1.4%) and improved gross
profit on wholesale and scrap jewelry sales (an increase of
0.9 of a percentage point).
For Fiscal 1996, gross margins improved 12 percentage
points from Fiscal 1995 to 14%. Excluding the impact of the
special charges discussed above, gross profits as a
percentage of merchandise sales decreased two percentage
points from Fiscal 1995 to 15%. This decrease results from
a decline in margins on merchandise sales (six percentage
points) offset by the combined favorable effect of a
reduction in inventory shrinkage measured as a percentage of
merchandise sales (down three percentage points to
approximately two percent) and improved gross profit on the
sale of scrap jewelry (one percentage point).
In Fiscal 1997, operating expenses as a percentage of
total revenues decreased 0.2 of a percentage point from
Fiscal 1996 to 33.7% primarily as a result of the economies
realized from the approximately four percent total revenue
increase. Administrative expenses increased 1.2 percentage
points from Fiscal 1996 to 7.4% primarily as a result of
higher management bonus expense and non-capitalized system
development costs in Fiscal 1997.
In Fiscal 1996, operating and administrative expenses
as a percentage of total revenues decreased five and two
percentage points, respectively (two and one percentage
points, excluding the effect of the special charges
discussed above) from Fiscal 1995 to 34% and 6%. Both
operating and administrative expenses declined relative to
total revenues as a result of the closure of under
performing stores and the Company's programs to reduce
costs.
Depreciation and amortization expense increased year
over year from Fiscal 1995 to Fiscal 1997 largely as a
result of the higher level of depreciation on stores opened
since September 30, 1994. In Fiscal 1997, depreciation and
amortization expense increased slightly compared to Fiscal
1996 due to the fewer new store openings. In Fiscal 1996,
depreciation and amortization expense increases were
partially offset by the effect of stores that were closed.
For the three year period, interest expense decreased
to $1.0 million in Fiscal 1997 from $1.9 million in Fiscal
1996 and $3.1 million in Fiscal 1995 largely due to
decreasing average debt balances for the full twelve month
periods.
Income tax expense for Fiscal 1997 was $4.7 million
(36% of pretax income) compared to $2.0 million (36% of
pretax income) for Fiscal 1996. An income tax benefit of
$8.1 million for Fiscal 1995 resulted from the Fiscal 1995
net operating loss.
Net income for Fiscal 1997 was $8.4 million compared to
net income of $3.5 million for Fiscal 1996. The improvement
in net income results primarily from higher pawn service
charge revenues and improved gross margins on merchandise
sales, partially offset by higher administrative costs. Net
income for Fiscal 1996 was $3.5 million compared to a net
loss $15.8 million for Fiscal 1995. The improvement in net
income results from the net year over year favorable effect
of the special charges discussed above, the favorable
operating impact of the store closings, and the favorable
impact of lower inventory shrinkage, operating and
administrative expenses, and interest expense.
The Year 2000 issue is the result of computer programs
being written using two digits rather than four (for
example, "97" for 1997) to define the applicable year. Any
of the Company's programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than
the year 2000. In some cases, the new date will cause
computers to stop operating, while in other cases, incorrect
output may result. Since the Company is currently in the
process of replacing and upgrading its computer hardware and
software systems, the Company believes that there is little
business risk attributable to the Year 2000 issue.
Liquidity and Capital Resources
Net cash provided by operating activities for Fiscal
1997 was $10.4 million compared to $22.1 million provided in
Fiscal 1996 and $8.2 million provided in Fiscal 1995.
Improved operating results offset by increases in
inventories and pawn service charge receivable were the main
factors for the reduced cash provided by operating
activities. In addition, 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 ($6.2 million). In
Fiscal 1997, bank borrowings increased $2.7 million due to
the $13.7 million used by investing activities ($8.2 million
increase in investments in pawn loans, and $5.5 million
invested in property, plant and equipment) offset by $10.4
million provided by operating activities, and $0.6 million
reduction in the Company's cash balances.
In Fiscal 1997, the Company invested $5.5 million to
open five (5) newly established stores, to remodel or
relocate 3 existing stores, and to upgrade or replace
existing equipment and computer systems. The Company funded
these expenditures largely from cash flow provided by
operating activities. The Company plans to open
approximately 50 new stores in the next twelve months and
complete the conversion of the computer systems with an
expected total capital investment of approximately $15
million. The Company anticipates that cash flow from
operations and funds available under its existing bank line
of credit will be adequate to fund these capital
expenditures and the anticipated pawn loan growth during the
coming year. There can be no assurance, however, that the
Company's cash flow and line of credit will provide adequate
funds for these expenditures.
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.
Borrowings under the line are unsecured and 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. At September 30, 1997, the Company had $19
million outstanding on the credit facility and additional
borrowing capacity of approximately $30 million.
Seasonality
Historically, pawn service charge revenues are highest
in the Company's fiscal fourth quarter (July, August and
September) due to higher loan demand during the summer
months and merchandise sales are highest in the Company's
fiscal first and second fiscal quarters (October through
March) due to the holiday season and tax refunds.
Forward-Looking Information
This Annual Report on Form 10-K includes "forward-
looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements
other than statement of historical information provided
herein are forward-looking and may contain information about
financial results, economic conditions, trends and known
uncertainties. The Company cautions the reader that actual
results could differ materially from those expected by the
Company depending on the outcome of certain factors,
including without limitation (i) fluctuations in the
Company's inventory and loan balances, inventory turnover,
average yield on loan portfolio, redemption rates, labor and
employment matters, competition, operating risk, acquisition
and expansion risk, liquidity and capital requirements and
the effect of government and environmental regulations and
(ii) adverse changes in the market for the Company's
services. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligations to
release publicly the results of any revisions to these
forward-looking statements which may be made to reflect
events or circumstances after the date hereon, including
without limitation, changes in the Company's business
strategy or planned capital expenditures, or to reflect the
occurrence of unanticipated events.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page
Report of Independent Auditors 24
Consolidated Financial Statements:
Consolidated Balance Sheets as of
September 30, 1997 and 1996 25
Consolidated Statements of Operations
for each of the Three Years in the Period
Ended September 30, 1997 26
Consolidated Statements of Cash Flows
for each of the Three Years in the Period
Ended September 30, 1997 27
Consolidated Statements of Stockholders'
Equity for each of the Three Years in the
Period Ended September 30, 1997 28
Notes to Consolidated Financial Statements 29
Report of Independent Auditors
Board of Directors
EZCORP, Inc.
We have audited the accompanying consolidated balance sheets
of EZCORP, Inc. and its subsidiaries as of September 30,
1997 and 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of
the three years in the period ended September 30, 1997. Our
audits also included the financial statement schedule listed
in the Index at Item 14(a)(2). These financial statements
and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of EZCORP, Inc. and its
subsidiaries at September 30, 1997 and 1996, and the
consolidated results of their operations and their cash
flows for each of the three years in the period ended
September 30, 1997, in conformity with generally accepted
accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Austin, Texas
November 13, 1997
Consolidated Balance Sheets
September 30,
1996 1997
-----------------------------
(In thousands)
Assets:
Current assets:
Cash and cash equivalents $ 1,419 $ 829
Pawn loans 34,636 42,837
Service charges receivable 10,262 13,130
Inventory, net 35,834 39,258
Deferred tax asset 2,140 1,889
Prepaid expenses and other assets 2,998 1,965
------- -------
Total current assets 87,289 99,908
Property and equipment, net 34,266 32,586
Other assets:
Goodwill, net 13,099 12,532
Deferred tax asset 1,200 1,730
Notes receivable related parties 3,031 3,033
Other assets, net 1,481 1,262
------- -------
Total assets $140,366 $151,051
======= =======
Liabilities and Stockholders' Equity:
Current liabilities:
Current maturities of long-term debt$ 172 $ 9
Accounts payable and other accrued
expenses 8,183 7,715
Customer layaway deposits 1,976 1,914
Federal income taxes payable 800 819
------- -------
Total current liabilities 11,131 10,457
Long-term debt, less current
maturities 16,244 19,133
Stockholders' equity:
Preferred Stock, par value $.01
per share - Authorized 5,000,000
shares; none issued and outstanding - -
Class A Non-voting Common Stock,
par value $.01 per share 97 105
Authorized 40,000,000 shares;
9,728,904 issued and 9,719,871
outstanding in 1996; 10,524,563
issued and 10,515,530 outstanding
in 1997
Class B Voting Common Stock, convertible,
par value $.01 per share 23 15
Authorized 2,274,969 shares in 1996
2,270,863 issued and outstanding
in 1996
Authorized 1,484,407 shares in 1997
1,480,301 issued and outstanding
in 1997
Additional paid-in capital 114,301 114,338
Retained earnings (deficit) (666) 7,767
------- -------
113,755 122,225
Treasury stock (9,033 shares in
1996 and 1997) (35) (35)
Receivables from stockholders (729) (729)
------- -------
Total stockholders' equity 112,991 121,461
Commitments and contingencies
------- -------
Total liabilities and stockholders'
equity $140,366 $151,051
======= =======
See notes to consolidated financial statements.
Consolidated Statements of Operations
Years Ended September 30,
1995 1996 1997
----------------------------------------
(In thousands, except per share amounts)
Revenues:
Sales $115,220 $103,511 $101,454
Pawn service charges 74,254 70,115 78,845
------- ------- -------
Total revenues 189,474 173,626 180,299
Costs of goods sold 113,227 88,953 84,468
------- ------- -------
Net revenues 76,247 84,673 95,831
Operating expenses:
Operations 74,417 58,969 60,735
Administrative 15,406 10,712 13,320
Depreciation 5,847 6,302 6,761
Amortization 1,505 1,271 855
------- ------- -------
Total operating expenses 97,175 77,254 81,671
------- ------- -------
Operating income (loss) (20,928) 7,419 14,160
Interest expense 3,059 1,884 982
------- ------- -------
Income (loss) before income
taxes (23,987) 5,535 13,178
Income tax expense (benefit) (8,138) 1,992 4,745
------- ------- -------
Net income (loss) $(15,849) $ 3,543 $ 8,433
======= ======= =======
Earnings (loss) per share $ ( 1.32) $ 0.30 $ 0.70
======= ======= =======
Weighted average shares 11,977 11,988 11,995
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Years Ended September 30,
1995 1996 1997
----------------------------------------
(In thousands)
Operating Activities:
Net income (loss) $(15,849) $ 3,543 $ 8,433
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation and
amortization 7,425 7,573 7,616
Deferred income taxes (139) - -
Restructuring expenses 7,664 - -
Net (gain)/loss on sale
or disposal of assets - (167) 520
Changes in operating assets
and liabilities:
Service charges
receivable (2,071) 1,190 (2,868)
Inventory 21,495 5,741 (3,424)
Notes and accounts
receivable from related
parties (153) (3) (2)
Prepaid expenses and
other assets (473) (55) 862
Accounts payable and
accrued expenses 2,243 (1,778) (431)
Customer layaway deposits 88 (124) (62)
Federal income taxes
payable (3,307) 800 19
Deferred tax asset (4,532) 1,192 (279)
Income taxes recoverable (4,236) 4,236 -
------- -------- --------
Net cash provided by
operating activities 8,155 22,148 10,384
Investing Activities:
Pawn loans forfeited and
transferred to inventory 52,297 50,805 53,272
Pawn loans made (192,239) (151,437) (170,379)
Pawn loans repaid 137,937 105,778 108,906
-------- -------- --------
(2,005) 5,146 (8,201)
Additions to property,
plant and equipment (10,813) (5,836) (5,505)
Issuance of notes receivable
to related parties (3,000) - -
Proceeds from sale of assets - 2,031 6
-------- -------- --------
Net cash provided by
(used in) investing
activities (15,818) 1,341 (13,700)
Financing Activities:
Proceeds from bank
borrowings 15,500 5,000 15,000
Payments on bank borrowings (9,518) (31,671) (12,274)
Collections of stockholder
notes receivable 7 8 -
------- ------- -------
Net cash provided by
(used in) financing
activities 5,989 (26,663) 2,726
------- ------- -------
Decrease in cash and
equivalents (1,674) (3,174) (590)
Cash and equivalents at
beginning of period 6,267 4,593 1,419
Cash and equivalents at -------- -------- --------
end of period $ 4,593 $ 1,419 $ 829
======== ======== ========
Cash paid during the periods for:
Interest $ 2,974 $ 2,481 $ 1,237
Income taxes $ 4,076 $ - $ 5,006
Noncash investing and financing activities:
Issuance of common stock
to 401(k) plan $ 71 $ 65 $ 37
See notes to consolidated financial statements.
Consolidated Statements of Stockholders' Equity
Add'l Retained Receivables
Common Stock Paid in Earnings/ Treasury from
Shares Par Value Capital (Deficit) Stock Stockholders Total
------ --------- ------- --------- -------- ------------ --------
(In thousands)
Balances at
September 30,
1994 11,981 $120 $114,165 $11,640 $(35) $(804) $125,086
Issuance of
common stock
to 401(k)
plan 6 - 71 - - - 71
Reductions
on stockholder
notes - - - - - 67 67
Net loss - - - (15,849) (15,849)
------ ---- ------- ------- ---- ------ --------
Balances at
September 30,
1995 11,987 120 114,236 (4,209) (35) (737) 109,375
Issuance of
common stock
to 401(K)
plan 12 - 65 - - - 65
Reductions
on stockholder
notes - - - - - 8 8
Net income - - - 3,543 - - 3,543
------ --- ------- ----- ---- ----- -------
Balances at
September 30,
1996 11,999 120 114,301 (666) (35) (729) 112,991
Issuance of
common stock
to 401(K)
plan 5 - 37 - - - 37
Net income - - - 8,433 - - 8,433
------ ---- -------- ------ ---- ----- -------
Balances at
September 30,
1997 12,004 $120 $114,338 $7,767 $(35) $(729) $121,461
====== ==== ======== ====== ==== ===== ========
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
Note A - Summary of Accounting Policies
The following is a summary of significant accounting
policies of the Company.
Organization: The Company is primarily engaged in
establishing, acquiring, and operating pawnshops. As of
September 30, 1997, the Company operated 249 locations in 12
states. The pawnshops function as sources of customer
credit and as specialty retailers primarily of previously
owned merchandise.
Consolidation: The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Revenue Recognition: Pawn loans ("loans") are generally
made on the pledge of tangible personal property for one
month with an automatic sixty-day grace period (the "loan
term"). Pawn service charges on loans are recorded based on
the interest method. If the loan is not repaid, the
forfeited collateral (inventory) is valued at the lower of
cost (principal plus accrued interest) or the fair value of
the property. When this inventory is sold, sales revenue
and the related cost are recorded at the time of sale.
Cash and Cash Equivalents: For purposes of this statement,
the Company considers investments with maturities of ninety
days or less when purchased to be cash equivalents.
Inventory: Inventory is stated at the lower of cost
(specific identification) or market (net realizable value).
Inventory consists of merchandise acquired from forfeited
loans, merchandise purchased from customers, merchandise
acquired from the acquisition of other pawnshops, and new
merchandise purchased from vendors. The Company provides an
allowance for shrinkage and valuation based on management's
evaluation of the age, condition, and salability of the
merchandise. The valuation allowance deducted from the
carrying value of inventory amounted to $7,948,661 and
$6,933,476 at September 30, 1996 and 1997, respectively.
Customer Layaway Deposits: Customer layaway deposits are
recorded as deferred revenue until the entire related sales
price has been collected.
Property and Equipment: Property and equipment are stated
at cost. Provisions for depreciation are computed on a
straight-line basis using estimated useful lives of 30 years
for buildings and 5 to 10 years for equipment and leasehold
improvements. For federal income tax purposes, cost is
recovered using accelerated methods.
Intangible Assets: Intangible assets consist primarily of
excess purchase price over net assets acquired in
acquisitions. Excess cost over fair value of net assets
acquired (or goodwill) is amortized on a straight-line basis
over 20 to 40 years (the expected period of benefit). The
carrying value of goodwill is reviewed at the store level to
determine if the facts and circumstances suggest that it may
be impaired. If this review indicates that goodwill will
not be recoverable, as determined based on the undiscounted
cash flows of the entity over the remaining amortization
period, the Company's carrying value of the goodwill is
reduced by the estimated shortfall of cash flows.
Accumulated amortization of goodwill was $5,250,079 and
$5,715,851 at September 30, 1996 and 1997, respectively.
Accumulated amortization of all other intangible assets was
$6,018,367 and $6,353,168 at September 30, 1996 and 1997,
respectively.
Earnings Per Common Share: Shares issuable under stock
option plans are excluded from the weighted average number
of shares because the effect on dilution would be less than
3% in the aggregate.
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings per Share" which is
required to be adopted for financial statements issued for
periods ending after December 15, 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 if the effect is material. Under the new
requirements, the presentation of primary earnings per share
is replaced with a presentation of basic earnings per share,
the calculation of which excludes the dilutive effect of
common stock equivalents. The impact of Statement 128 will
not materially change the current calculation of earnings
per share as these stock options are immaterial.
Advertising: Advertising costs are expensed as incurred.
Advertising expense was $6,284,033, $2,700,663 and
$1,267,087 for the fiscal years ended September 30, 1995,
1996, and 1997, respectively.
Income Taxes: The Company files a consolidated return with
its wholly owned subsidiaries. Deferred taxes are recorded
based on the liability method and result primarily from
differences in the timing of the recognition of certain
revenue and expense items for federal income tax purposes
and financial reporting purposes.
Stock-Based Compensation: The Company accounts for its
stock based compensation plans in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"). In October 1995, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" ("SFAS 123"). SFAS 123 encourages
expensing the fair value of employee stock options, but
allows an entity to continue to account for stock-based
compensation to employees under APB 25 with disclosures of
the pro forma effect on net income had the fair value
accounting provisions of SFAS 123 been adopted. These pro
forma disclosures are effective for option grants in fiscal
years 1996 and after. The Company has calculated the fair
value of options granted in these periods using the Black-
Scholes option pricing model and has determined that the pro
forma impact on net income is immaterial. Thus, no pro
forma disclosures have been presented.
Use of Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Year 2000: The Year 2000 issue is the result of computer
programs being written using two digits rather than four
(for example, "97" for 1997) to define the applicable year.
Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900
rather than the year 2000. In some cases, the new date will
cause computers to stop operating, while in other cases,
incorrect output may result. Since the Company is currently
in the process of replacing and upgrading its computer
hardware and software systems, the Company believes that
there is little business risk attributable to the Year 2000
issue.
Note B - Acquisitions
There were no acquisitions for the fiscal years ended
September 30, 1995, 1996 and 1997.
Note C - Property and Equipment
Major classifications of property and equipment were as
follows:
September 30,
1996 1997
------------------
(In thousands)
Land $ 1,351 $ 1,351
Buildings and improvements 28,488 29,633
Furniture and equipment 20,673 24,369
------ ------
Total 50,512 55,353
Less - accumulated depreciation (16,246) (22,767)
------ ------
$34,266 $32,586
====== ======
Note D - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the
following:
September 30,
1996 1997
--------------------
(In thousands)
Trade accounts payable $1,086 $ 895
Accrued payroll and related expenses 2,113 2,296
Other accrued expenses 4,984 4,524
----- -----
$8,183 $7,715
===== =====
Note E - Long-Term Debt
Long-term debt consisted of:
September 30,
1996 1997
-------------------
(In thousands)
Note payable to bank under $50
million line of credit
agreement amended as of May 1997;
interest on used
portion payable monthly at prime
rate or the bank's
Eurodollar rate plus 0.75% to 1.50%
(6.9375% at September 30, 1997);
principal due January 2000. $15,000 $19,000
Note payable to individual with
interest at 10%,
payable in monthly installments
of $1,881 including
interest, maturing August 2002
- - land and building
pledged as collateral. 150 142
Other notes payable paid in full
in Fiscal 1997. 1,266 -
------ ------
16,416 19,142
Less current maturities 172 9
------ ------
$16,244 $19,133
====== ======
The Company has a $50,000,000 unsecured revolving line of
credit with a bank group of which $19 million was
outstanding as of September 30, 1997. Credit availability is
based upon a percentage of inventory levels and outstanding
pawn loans. As of September 30, 1997, the additional
borrowing capacity was $30 million. Fees under the line of
credit include an annual $25,000 agent fee, a $25,000
facility fee and a commitmentfee equal to 0.35% of the unused
amount of the commitment.
Terms of the loan require, among other things, that the
Company meet certain financial covenants. In addition,
payment of dividends and incurrence of additional debt is
restricted.
Interest expense in the consolidated statements of
operations is shown net of interest income on investments in
the amount of $211,821, $293,628 and $245,275 for the years
ended September 30, 1995, 1996, and 1997, respectively.
Aggregate annual principal payment requirements on long-term
debt obligations for each of the following five years ending
September 30 are as follows:
1998 $ 8,802
1999 9,723
2000 19,010,742
2001 11,867
2002 100,475
Note F - Common Stock, Warrants and Options
The capital stock of the Company consists of two classes of
common stock designated as Class A and Class B. The rights,
preferences, and privileges of the Class A and Class B
Common Stock are similar except that each share of Class B
Common Stock has one vote and each share of Class A Common
Stock has no voting privileges. All Class A Common Stock is
publicly held. Holders of Class B Voting Common Stock may,
individually or as a class, convert some or all of their
shares into Class A Non-voting Common Stock. Class A Common
Stock becomes voting common stock upon the conversion of all
Class B Common Stock to Class A Common Stock. The Company is
required to reserve such number of authorized but unissued
shares of Class A Non-voting Common Stock as would be
issuable upon conversion of all outstanding shares of Class
B Voting Common Stock.
At September 30, 1997, warrants to purchase 23,559 shares of
Class A Non-voting Common Stock and 4,106 shares of Class B
Voting Common Stock at $6.17 per share were outstanding. The
warrants are exercisable through July 25, 2009.
The Company has an Incentive Stock Option Plan (the "Plan")
under which options to purchase Class A Non-voting Common
Stock may be granted to employees. Options granted under the
Plan are generally granted at exercise prices equal to or
greater than the fair market value on the date of grant. The
options vest at 20% each year and are fully vested in five
years. They have a contractual life of ten years. In
October 1994, the Board of Directors increased the number of
shares available under the Plan to 1,800,000 and amended the
Plan to provide accelerated vesting upon a change in control
of the Company. Total options available for grant at
September 30, 1997 was 1,237,995 shares.
As of September 30, 1997, the Company had 562,005 options
outstanding (options granted less options canceled due to
employee termination) at exercise prices ranging from $8.75
to $21.75 and a weighted average remaining contractual life
of 6.7 years. Of these options, 301,152 are vested with a
weighted average exercise price of $13.84 per share and none
have been exercised. A summary of Plan activity for each of
the three fiscal years ended September 30, 1995, 1996 and
1997 follows:
Stock Option Plans
Number of Shares Price Range of Shares Weighted Average
Under Option Under Option Exercise Price
---------------- --------------------- ----------------
Outstanding at
September 30, 1994 546,950 $13.00-$27.00 $15.26
Granted 402,969 $ 8.75-$12.50 $11.76
Canceled (230,081) $10.38-$27.00 $15.21
Exercised 0 -
-------- ------------- ------
Outstanding at
September 30, 1995 719,838 $ 8.75-$21.75 $13.32
Granted 62,624 $ 8.75 $ 8.75
Canceled (138,815) $ 8.75-$21.75 $11.61
Exercised 0 -
-------- ------------- ------
Outstanding at
September 30, 1996 643,647 $ 8.75-$21.75 $13.24
Granted 24,313 $12.75 $12.75
Canceled (105,955) $ 8.75-$21.75 $11.97
Exercised 0 -
-------- ------------- ------
Outstanding at
September 30, 1997 562,005 $ 8.75-$21.75 $13.46
======== ============= ======
Range of Options Outstanding
Weighted Exercisable
Weighted Average Shares
Number of Average Remaining Weighted
Range of Shares Exercise Contract Avg. Exer.
Exercise Prices Outstanding Price Life (years) Exercisable Price
- --------------- ----------- -------- ------------ ----------- -----------
$8.75-$12.75 147,655 $12.05 6.7 46,332 $12.12
$13.00-$13.00 257,900 $13.00 6.7 154,740 $13.00
$14.00-$14.50 125,400 $14.00 6.8 75,240 $14.00
$21.75-$21.75 31,050 $21.75 5.2 24,840 $21.75
- ------------- ------- ------ --- ------- ------
$8.75-$21.75 562,005 $13.46 6.7 301,152 $13.84
In accordance with SFAS 123, the fair value of these options
was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average
assumptions for the years ended September 30, 1997 and 1996,
respectively:
September 30 September 30
1996 1997
------------ ------------
Risk-free interest rate 5.68% 5.90%
Dividend yield 0% 0%
Volatility factor of the
expected market price of the
Company's common stock 38.6% 38.6%
Expected life of the options 5 years 5 years
The pro forma impact on net income and earnings per share is
immaterial, thus no pro forma disclosures have been
presented.
The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which
have no vesting restrictions and are fully transferable. In
addition, this option valuation model requires the input of
highly subjective assumptions including the expected stock
price volatility. Because the Company's employee stock
options have characteristics significantly different from
those of traded options, and because changes in the
subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the Black-Scholes
model does not necessarily provide a reliable single measure
of the fair value of its employee stock options.
Shares of reserved common stock at September 30, 1997, were
as follows:
Class A Class B
--------- ---------
Stock option plan 1,800,000 -
Stock warrants 23,559 4,106
401(k) plan 100,000 -
Conversion of Class B
Voting Stock 1,484,407 -
--------- --------
3,407,966 4,106
========= ========
Note G - Income Taxes
The federal income tax provision consisted of:
Years Ended September 30,
1995 1996 1997
----------------------------------
(In thousands)
Current $(3,660) $ 800 $ 5,024
Deferred (4,478) 1,192 (279)
------ ------ ------
$(8,138) $ 1,992 $ 4,745
====== ====== ======
A reconciliation of income taxes calculated at the statutory
rate and the provision for income taxes were as follows:
Years Ended September 30,
1995 1996 1997
----------------------------------
(In thousands)
Income taxes at the
federal statutory rate $(8,295) $ 1,882 $ 4,612
Effect of nondeductible
amortization of intangible
assets 27 27 27
Other 130 83 106
------ ------ ------
$(8,138) $ 1,992 $ 4,745
====== ====== ======
Income before income taxes on the statements of operations
differs from taxable income due to the following, which are
accounted for differently for financial statement purposes
than for federal income tax purposes and result in deferred
tax expense (benefit):
Years Ended September 30,
1995 1996 1997
----------------------------------
(In thousands)
Inventory basis $ (964) $ (105) $ (176)
Provision for store closings
and related charges (3,615) 1,365 (365)
Other 101 (68) 262
------ ------ -----
$(4,478) $ 1,192 $ (279)
====== ====== =====
Significant components of the Company's deferred tax
liabilities and assets as of September 30, 1996 and 1997 are
as follows:
Years Ended September 30,
1996 1997
--------------------------
(In thousands)
Deferred tax liabilities:
Book over tax inventory basis $ 695 $ 539
Prepaid expenses 311 354
----- -----
Total deferred tax liabilities 1,006 893
Deferred tax assets:
Book over tax depreciation 665 1,432
Inventory reserve 2,307 2,357
Amortization of non-competes 535 297
Accrued liabilities 762 390
Other, net 77 36
----- -----
Total deferred tax assets 4,346 4,512
----- -----
Net deferred tax asset $3,340 $3,619
===== =====
Note H - Related Party Transactions
Pursuant to the terms of a financial advisory services
agreement, an affiliate of the general partner of the
majority stockholder provides management consulting and
investment banking services to the Company for a $33,333
monthly retainer. These services include ongoing
consultation with respect to offerings by the Company of its
securities, including, but not limited to, the form, timing,
and structure of such offerings. In addition to the
retainer, the affiliate earns fees from the Company for
other business and financial consulting services. Management
fees and expense reimbursements of $557,210, $649,856 and
$590,152 were paid to the affiliate in the years ended
September 30, 1995, 1996, and 1997, respectively.
In November 1997, the Company accepted $26,677, which was
originally tendered in 1995, as final payment on a note from
the former Chairman of the Board to the Company. In
accepting such payment, the Company retained its rights to
assert certain claims against the former Chairman.
From July 1994 to August 1994, the Company loaned the
President and Chief Executive Officer $729,113 to purchase
50,000 shares of Class A Non-voting Common Stock, which is
shown as a reduction of stockholders' equity in these
financial statements. Interest accrues annually at a rate
equal to the prime rate plus one half of one percent.
Interest is payable annually on December 31 of each year
until June 30, 1999. As of September 30, 1997, the amount
owed is $729,113 plus accrued interest of $48,661. The
Company records interest income on the loan and annually,
the Board of Directors makes a determination of the amount
to be forgiven, if any, and changes such amount to
compensation expense tothe President and Chief Executive
Officer.
In October 1994, the Board of Directors approved agreements
which provide incentive compensation to the Chairman and the
Chief Executive Officer based on growth in the share price
of the Company's publicly traded common stock. Both
executives were advanced $1.5 million evidenced by a
recourse promissory note, due in 2004 and bearing interest
at the minimum rate allowable for federal income tax
purposes (ranging from 5.83% to 5.98% for 1997). Specified
percentages of loan principal will be forgiven each time the
average closing price of the Company's Class A Common Stock
exceeds specified Stock Price Targets for at least ten
consecutive trading days. The Stock Price Targets range from
$22.50 to $62.50 per share and provide for complete
forgiveness of principal if the share price exceeds $32.50
per share within five years or $62.50 per share within ten
years. The Program provides that Stock Price Targets will be
adjusted proportionately for certain capital transactions
and that the death or disability of the executive, or
certain changes in control, will result in forgiveness of
the then remaining principal and interest. Accrued interest
is forgiven based upon continued employment of the executive
and the Company is required to reimburse each
executive for the income tax consequences of this Program.
Through September 30, 1997, no Stock Price Targets have been
attained; charges to operations consist of interest
forgiveness and related income tax costs and totaled
$322,401. Also see Note I - Leases.
Note I - Leases
The Company leases various facilities and certain equipment
under operating leases. Certain buildings are leased from
the former Chairman of the Board of the Company, in the
ordinary course of business. Future minimum rentals due
under noncancelable leases including stores which were
closed are as follows for each of the years ending September
30:
Related Parties Other Total
---------------------------------
(In thousands)
1998 $ 267 $ 9,198 $ 9,465
1999 163 7,628 7,791
2000 - 5,763 5,763
2001 - 4,594 4,594
2002 - 2,851 2,851
Thereafter - 3,421 3,421
----- ------ ------
$ 430 $33,455 $33,885
===== ====== ======
The Company subleases some of the above facilities. Future
minimum rentals expected under these subleases are as
follows for each of the years ending September 30:
Related Parties Other Total
---------------------------------
(In thousands)
1998 $ 32 $ 461 $ 493
1999 23 252 275
2000 - 93 93
2001 - 69 69
2002 - 55 55
Thereafter - 72 72
------ ----- -----
$ 55 $1,002 $1,057
====== ===== =====
Rent expense for the years was as follows:
Related Parties Total
--------------------------
(In thousands)
1995 $ 276 $ 9,603
1996 245 9,722
1997 248 10,082
In connection with the closing of 32 stores in the fourth
quarter of 1995, the Company recorded a provision for lease
terminations of $1.2 million.
Note J - Employment Agreement
The Company entered into a 20-year employment agreement with
the former Chairman of the Board, Courtland L. Logue, Jr.,
("Mr. Logue") for a minimum base salary of $300,000 which
was to expire in 2009. On July 28, 1995, the Company
terminated Mr. Logue's contract under terms of such
agreement. The Company has made demand that Mr. Logue pay
monies in connection with a performance right contained in
Section 5(o) of a stock purchase agreement between Mr. Logue
and a predecessor Company. The Company and Mr. Logue have
not yet resolved this issue. See Note L - "Contingencies."
Note K - 401(k) Plan
Effective October 1, 1991, the Company's Board of Directors
established a 401(k) Plan whereby eligible employees of the
Company may contribute a maximum of 15% of their
compensation within allowable limits. The Company will
match 25% of each employee's contribution, up to 6% of their
compensation, in the form of the Company's Class A Non-
voting Common Stock. Contribution expense related to the
plan for 1995, 1996 and 1997 was approximately $66,000,
$65,000 and $37,000, respectively.
Note L - Contingencies
From time to time, the Company is involved in litigation
relating to claims arising from its 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 cannot be ascertained, after consultation with
counsel, the Company believes 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 trial court has ruled 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 in 1998.
The Company is also the nominal defendant in a lawsuit filed
July 18, 1997 by a holder of thirty-nine (39) shares of
Company stock styled for the benefit of the Company against
certain directors of the Company in the Castle County Court
of Chancery in the State of Delaware. The suit alleges the
defendants breached their fiduciary duties to the Company in
approving certain management incentive compensation
arrangements and an affiliate's financial advisory services
contract with the Company. The suit seeks recision of the
subject agreements, unspecified damages and expenses,
including plaintiff's legal fees. The defendants have
filed a motion to dismiss which is pending before the court.
Note M - Quarterly Information (Unaudited)
Year Ended September 30, 1997
First Quarter Second Quarter Third Quarter Fourth Quarter
----------------------------------------------------------
(In thousands, except per share amounts)
Total revenues $45,842 $46,296 $42,405 $45,756
Net income 1,903 1,769 2,050 2,711
Net income per share $0.16 $0.15 $0.17 $0.23
Year Ended September 30, 1996
First Quarter Second Quarter Third Quarter Fourth Quarter
----------------------------------------------------------
(In thousands, except per share amounts)
Total revenues $51,433 $45,518 $38,129 $38,546
Net income 825 218 1,027 1,473
Net income per share $0.07 $0.02 $0.09 $0.12
Note N - Fiscal 1995 Special Charges
The Company recorded the following pre-tax charges in the
quarter ended September 30, 1995, which decreased income
before taxes for the year ended September 30, 1995 by $25.5
million:
Amount
---------------
(In thousands)
Inventory valuation $ 8,740
Scrap jewelry liquidation 6,633
Provision for store closings 7,664
Other charges 2,469
-------
$ 25,506
=======
During the fourth quarter ended September 30, 1995, the
Company identified and commenced the liquidation of
approximately $27 million in jewelry inventory which had
accumulated primarily as a result of a $20 million new
jewelry program undertaken in prior periods and as a result
of past lending practices. The Company sold or scrapped
$15.6 million of this jewelry (included in "Cost of Goods
Sold") and realized $8.9 million of cash (included in
"Merchandise Sales") in the fourth quarter of 1995. Largely
as a result of the scrapping activity, the Company increased
its valuation reserve by $8.7 million (included in "Cost of
Goods Sold"). The remaining jewelry was liquidated during
1996.
Also during the fourth quarter of 1995, management made the
decision to close or consolidate 32 of the Company's
underperforming stores. This action resulted in a $7.7
million provision. The provision included $2.3 million for
the write-down of various fixed assets to realizable value,
$3.9 million for the write-down of various intangible
assets, $1.2 million for future rent obligations, and $0.3
million for various other expenses. The provision was
included as part of "Operations" expense for classification
purposes. As of September 30, 1995, the 32 stores
identified for closing and consolidation had aggregate pawn
loans outstanding of $1.9 million. During Fiscal 1995, these
stores incurred an operating loss of $0.4 million on total
revenues of $13.4 million.
During 1996, the Company paid and charged against the
provision $1.1 million and made no adjustments to the
original amount of the provision. As of September 30, 1996,
the accrual for store closings was $0.4 million, principally
for estimated rent obligations.
During 1997, the Company paid and charged against the
provision $0.3 million and increased the original amount of
the provision by $0.1 million. As of September 30, 1997,
the accrual for store closings was $0.2 million, principally
for estimated rent obligations.
In 1995, the Company provided $2.5 million principally for
several legal matters. This provision is included in
"Administrative" expense.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
The Company had no disagreements on accounting or
financial disclosure matters with its independent certified
public accountants to report under this Item 9.
PART III
Item 10. Directors and Executive Officers of the Registrant
The executive officers and directors of the Company as
of December 1, 1997 were as follows:
Name Age Title
---------------------- --- -----------------------
Sterling B. Brinkley(1) 45 Chairman of the Board
of Directors
Vincent A. Lambiase(1) (3) 57 President, Chief Executive
Officer, and Director
Daniel N. Tonissen(1) (3) 47 Senior Vice President,
Chief Financial Officer,
Assistant Secretary, and
Director
J. Jefferson Dean 31 Vice President
Strategic Planning and
Business Development,
Secretary and Director
Mark C. Pickup(2) (4) 47 Director
Richard D. Sage (2) (4) 57 Director
John E. Cay, III (4) 52 Director
---------------------------
(1) Member of Executive Committee
(2) Member of Incentive Compensation Committee
(3) Member of Section 401(k) Plan Committee
(4) Member of Audit Committee
The Class B Stockholders intend to re-elect the above-
listed directors at the Annual Stockholders' Meeting
expected to be held on March 12, 1998.
Mr. Brinkley has served as either Chairman of the Board
or Chairman of the Executive Committee of the Board of
Directors of the Company since 1989. He has served as a
Managing Director of Morgan Schiff & Co., Inc., an affiliate
of Mr. Phillip Cohen, from 1986 to 1990 and currently serves
as a consultant to Morgan Schiff & Co., Inc. See " Security
Ownership of Certain Beneficial Owners and Management." Mr.
Brinkley has also served as Chairman of the Board or
Chairman of the Executive Committee of Crescent Jewelers,
Inc., a 138-store jewelry chain since 1988. In addition,
since 1990, he has served as Chairman of the Board or
Chairman of the Executive Committee of Friedman's, Inc., a
425-store jewelry chain, and MS Pietrafesa, L.P., an apparel
manufacturing business. In addition, Mr. Brinkley is
President and Chairman of the Board of MS Pawn Corporation,
the general partner of MS Pawn Limited Partnership. Morgan
Schiff & Co., Inc., Crescent Jewelers, Inc., and MS
Pietrafesa, L.P. are affiliates of the Company.
Mr. Lambiase has served as a director, President, and
Chief Executive Officer of the Company since July 1994.
From 1991 to 1994, he was a Vice President for Blockbuster
Entertainment, Inc. From 1986 to 1991, he was an associate
of E.S. Jacobs & Company, a venture capital firm. From 1978
to 1985, he was CEO of Winchell's Donut House.
Mr. Tonissen has served as a director, Senior Vice
President, Chief Financial Officer, and Assistant Secretary
of the Company since August 1994. From 1992 to 1994, he was
Vice President and Chief Financial Officer of La Salsa
Holding Company, an operator and franchiser of restaurants.
From 1989 to 1991, he was Vice President and Chief Financial
Officer of Valley Grain Products, Inc.
Mr. Dean has served as a director of the Company since
1992, Secretary since 1995 and Vice President Strategic
Planning and Business Development since 1997. From 1994 to
1996, Mr. Dean served as Director of Strategic Planning for
the Company. From 1990 to 1996, Mr. Dean served as Vice
President Strategic Planning and as a director of MS
Pietrafesa, L.P., an apparel manufacturing business. In
addition, from 1991 to 1994, Mr. Dean served the Company as
Director of Financial Planning. From 1989 to 1990, Mr. Dean
served as an Associate of Morgan Schiff & Co., Inc. an
affiliate of Mr. Phillip Cohen (see "Security Ownership of
Certain Beneficial Owners and Management").
Mr. Pickup has served as a director of the Company
since 1993. He served as President and Co-Chief Executive
Officer of Crescent Jewelers, Inc. from 1993 to 1995 and
Chief Financial Officer of Crescent Jewelers, Inc. from 1992
until 1995. Since 1993, Mr. Pickup has also served as a
director of Friedman's, Inc. (and MS Jewelers Corporation,
its predecessor). From 1982 until 1992, Mr. Pickup was a
partner in the accounting firm of Ernst & Young, most
recently in the San Francisco office.
Mr. Sage has served as a director of the Company since
July 1995. He was a co-founder of AmeriHealth, Inc., which
owned and managed hospitals. He served as Treasurer of
AmeriHealth, Inc. from April 1983 to October 1995 and was a
member of the board of directors of AmeriHealth, Inc. from
April 1993 to December 1994. Mr. Sage served from June 1988
to June 1993 as a Regional Vice President of HHL Financial
Services Company, which specializes in the collection of
health care accounts receivable. He is presently a member of
the Board of Directors of Champion Healthcare Corporation.
Since June 1993, he has been associated with Sage Law
Offices in Miami, Florida.
Mr. Cay has served as a director of the Company since
March 1997. He has served as President and CEO of Palmer &
Cay, Inc., a Savannah based insurance brokerage and employee
benefit consulting firm, since 1970. Since 1987, he has
also served as a director of First Union National Bank of
Georgia. He is also a director of Omni Insurance Group, an
Atlanta based auto insurance company. He was recently
elected to the board of Friedman's, Inc., a 425-store
jewelry chain.
Committees of the Board
The Board of Directors held five (5) meetings and acted
by unanimous consent on one (1) other occasion during the
year ended September 30, 1997. The Board of Directors has
appointed four committees, an Executive Committee, an Audit
Committee, a Compensation Committee and a Section 401(k)
Plan Committee. The members of the Executive Committee for
Fiscal 1997 were Mr. Brinkley, Mr. Lambiase and Mr.
Tonissen. The Executive Committee held three (3) meetings
which all members attended. The members of the Audit
Committee for Fiscal 1997 were Mr. Pickup, Mr. Sage, Mr.
Dean (non-voting, until March 6, 1997) and Mr. Cay. The
Audit Committee held five (5) meetings which all members
attended. The Compensation Committee, comprised of Mr.
Pickup and Mr. Sage held three (3) meetings during Fiscal
1997 which all members attended. The committee that
administers the Section 401(k) Plan consists of Mr. Lambiase
and Mr. Tonissen and held one (1) meeting during Fiscal
1997. All directors attended more than 75% of the total
number of meetings of the Board and of the committees on
which they serve.
Compliance with Section 16(a) of the Exchange Act
All officers and directors were timely throughout the
fiscal year in filing all reports required by Section 16(a)
of the Exchange Act, with the exceptions of Sterling B.
Brinkley, whose Form 4 was filed two days late, Mr. James
Jefferson Dean, whose Form 4 was filed two days late and
whose Form 5 was filed 26 days late, and Mr. Mark C. Pickup,
whose Form 5 was filed 29 days late.
Item 11. Executive Compensation
Cash Compensation
The following table sets forth compensation paid by the
Company and its subsidiaries for services during Fiscal
1995, Fiscal 1996, and Fiscal 1997 to the Company's Chief
Executive Officer, and to each of the Company's four most
highly compensated executive officers whose total annual
compensation exceeded $100,000 (such four persons
collectively herein referred to as the "Named Executive
Officers").
All other
Annual Compensation Compensation
Name and Principal Position Year Salary($) Bonus($) Other($) ($)(1)(2)
- --------------------------- ---- --------- -------- -------- -----------
Sterling B. Brinkley 1995 298,397 62,400 58,883 -
Chairman of the Board(3) 1996 300,000 84,565 79,799 -
1997 300,000 188,572 83,580 -
Vincent A. Lambiase 1995 343,269 134,251 381,048 3,780
President & Chief Executive
Officer(4) 1996 350,000 149,611 211,878 3,780
1997 400,000 602,700 250,960 3,780
Daniel N. Tonissen 1995 152,024 - 116,250 1,674
Senior Vice President,
Chief Financial 1996 155,000 - 40,474 1,674
Officer, and Assistant
Secretary 1997 183,249 131,250 21,054 1,872
Steven R. Griessen 1996 115,000 - - 1,080
Vice President
Development(5) 1997 115,000 43,125 57,500 1,080
J. Jefferson Dean 1996 100,000 - - 1,080
Vice President Strategic 1997 130,538 97,500 - 1,080
Planning & Business
Development, and
Secretary(6)
- -----------------------------------------------
(1) The Company's long-term compensation program for most
senior officers does not include long-term incentive
payouts, stock options, SARs, or other forms of
compensation
(2) This category includes the value of any insurance
premiums paid on behalf of the named executive.
(3) Mr. Brinkley's Other Annual Compensation includes
$83,580 for payment of taxes for Fiscal 1997.
(4) Mr. Lambiase's Other Annual Compensation includes
$106,333 for payment of taxes for Fiscal 1997 and
$64,343 for relocation expenses.
(5) Mr. Griessen resigned effective October 1997. The
other compensation payable relates to this resignation.
(6) Mr. Dean became Secretary on November 29, 1995 and Vice
President Strategic Planning and Business Development
on January 31, 1997.
Employment Agreements
Vincent A. Lambiase, President and Chief Executive
Officer of the Company, is employed pursuant to an
employment agreement with the Company. The agreement engages
Mr. Lambiase as Chief Executive Officer from July 1, 1994
through June 30, 1999. Commencing on July 1, 1999 and each
July 1 thereafter, this term is to be extended for an additional
year unless the Company or Mr. Lambiase gives notice at
least 30 days prior to any such July 1 date that it or he
does not wish to extend the agreement.
In addition to a minimum base salary of $350,000 (which
may be increased by the Board of Directors), the agreement
entitles Mr. Lambiase to receive a bonus of 75% or more of
his base compensation based upon objectives determined each
year by the Executive Committee of the Board of Directors.
The agreement also provides for a loan by the Company to Mr.
Lambiase of sufficient cash to purchase 50,000 shares of
Company stock. Mr. Lambiase purchased such stock at various
times between July 25, 1994 and August 11, 1994 at an
average price per share of $14.49. The Company loaned Mr.
Lambiase a total of $729,113 to purchase this stock.
Interest, charged at the prime rate plus one-half of one
percent, is payable annually on December 31 of each year
until the earlier of June 30, 1999, or one year after the
death or permanent disability of Mr. Lambiase or a default
in payment on the loan. The agreement also grants to Mr.
Lambiase the option to purchase, pursuant to the Company's
Long-Term Incentive Plan, 250,000 shares of the Class A Non-
voting stock of the Company.
On October 7, 1994, pursuant to an authorization by the
Board of Directors on October 1, 1994, the Company funded
loans of $1,500,000 to each of Mr. Lambiase and Mr. Sterling
B. Brinkley, Chairman of the Board of the Company. These
loans shall be partially or wholly forgiven during the ten-
year period between October 7, 1994 and October 7, 2004, to
the extent that the Company's stock price reaches the levels
set forth in the following tables. Table I applies during
the first five years of the ten-year term, and Table II
applies during the last five years.
TABLE I
PERCENTAGE OF ORIGINAL
PRINCIPAL AMOUNT OF
STOCK PRICE TARGET LOAN FORGIVEN
------------------ ----------------------
$22.50 10%
$25.00 25%
$27.50 50%
$30.00 75%
$32.50 100%
TABLE II
PERCENTAGE OF REMAINING
PRINCIPAL AMOUNT OF
STOCK PRICE TARGET LOAN FORGIVEN
------------------ -----------------------
$32.50 50%
$40.00 60%
$47.50 70%
$55.00 80%
$62.50 100%
The closing stock prices set forth above must average
the above amounts for ten consecutive trading days and are
adjustable for any stock split, recapitalization or other
similar event. In the event of any forgiveness, the Company
shall remit to applicable taxing authorities amounts
sufficient to satisfy the tax obligations of such person
arising from the forgiveness. The loans are also subject to
forgiveness for each person in the event that such person
dies or becomes disabled or in the event of a change in
control of the Company. The loans bear interest at the
lowest rate allowable under the Internal Revenue Code, which
will preclude consideration of the loan as a "below market
loan" for purposes of Section 7872 of the Internal Revenue
Code. Each person receives a bonus in an amount sufficient
to pay interest on the loans and taxes arising from the
bonus.
The Company entered into an Employment Agreement with
Courtland L. Logue, Jr. (Mr. Logue), the Company's former
Chairman and Chief Executive Officer on July 25, 1989, which
was amended in September 1990 and in July 1994. On July 28,
1995, the Company terminated Mr. Logue's contract. The
Company has made demand that Mr. Logue pay monies in
connection with a performance right contained in Section
5(o) of a stock purchase agreement between Mr. Logue and a
predecessor Company, explained below. See "Legal
Proceedings."
The Employment Agreement referred to above also
contains provisions prohibiting Mr. Logue from disclosing
any information at any time which is proprietary to the
Company, or from using such information in any manner which
would cause loss or damage to the Company. The Agreement
also provides that if it is breached by Mr. Logue, he is
required by the provisions of the Second Amendment to the
Stock Purchase Agreement, to pay the Company cash in the
amount of approximately $2.7 million as liquidated damages.
The Company has made a demand for such payment. In addition
to the provisions of the Employment Agreement, the Stock
Purchase Agreement executed by Mr. Logue in connection with
the acquisition by the Company of the stock of the
Predecessor, prohibits Mr. Logue from engaging in any
activity which is substantially in competition with or
detrimental to the business of the Company for a period of
twenty (20) years following the consummation of the
transaction. While it is unclear whether a court would
enforce all aspects of the non-competition agreement set
forth in the Stock Purchase Agreement in strict accordance
with its terms, the Company believes that the provisions of
the Employment Agreement and the requirement that Mr. Logue
pay liquidated damages for breach of such are enforceable.
See "Legal Proceedings."
Outside directors receive between $12,000 and $25,000
per annum as determined by the Board of Directors for their
services on the Board and its committees as well as the
reimbursement of their out-of-pocket expenses to attend
Board and Committee meetings.
Option/SAR Grants in Last Fiscal Year
Potential Realizable
Value at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (2)
--------------------------------- ------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted(#)(1) Fiscal Year ($/Sh) Date 5% 10%
- ------------ ------------- ------------ ----------- ---------- ------- ------
J. Jefferson Dean
Vice President Strategic
Planning and Business
Development and
Secretary 24,313 100% 12.75 1/1/07 $ 0 $92,027
- ------------------------------------
(1) Stock options become exercisable in five equal
installments beginning one year after the date of
grant.
(2) As suggested by the Securities and Exchange
Commission's rules on executive compensation
disclosure, the Company projected the potential
realizable value of each grant of options or
freestanding SARs, assuming that the market price of
the underlying security appreciates in value from the
date of grant to the end of the option or SAR term at
annualized rates of 5% and 10%.
Aggregate Options/SAR Exercises in Last
Fiscal Year and FY-End Option/SAR Values
The following table sets forth certain information
concerning the exercise of stock options (or tandem SARs)
and freestanding SARs in Fiscal 1997 and the value of
unexercised options and SARs held by each of the Named
Executive Officers at the end of the Company's last fiscal
year.
Number of Securities Values of Unexercised
Underlying Unexercised In-the-Money Options
Options/SARs at /SARs at
FY-End (#) FY-End ($) (1)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($) Unexercisable Unexercisable
- -------- --------------- ----------- ----------------- --------------------
Sterling B. Brinkley
Chairman of the Board
- - 75,000/50,000 0/0
Vincent A. Lambiase
President & Chief
Executive Officer
- - 150,000/100,000 0/0
Daniel N. Tonissen
Senior Vice President,
Chief Financial Officer,
and Assistant Secretary
- - 9,724/14,589 0/0
J. Jefferson Dean
Vice President Strategic
Planning and Business
Development and Secretary
- - 0/24,313 0/0
- -----------------------------------------------
(1) Values stated are based upon the closing price of
$10.375 per share of the Company's Class A Non-voting
Common Stock on The Nasdaq Stock Market on September
30, 1997, the last trading day of the fiscal year.
Compensation Pursuant to Plans
Stock Incentive Plan
The Company's Board of Directors and stockholders
adopted the EZCORP, Inc. 1991 Long-Term Incentive Plan on
June 6, 1991 (the "Plan"). The Plan provides for (i) the
granting of stock options qualified under the Internal
Revenue Code of 1986, as amended (the "Code") section 422
(so-called "incentive stock options") to purchase Class A
Common Stock, (ii) the granting of stock options not
qualified under Code section 422 ("nonqualified stock
options") to purchase Class A Common Stock, (iii)
the granting of stock appreciation rights ("SARs"), which
give the holder the right to receive cash or Class A Common
Stock in an amount equal to the difference between the fair
market value of a share of Class A Common Stock on the date
of exercise and the date of grant, (iv) the granting of
limited stock appreciation rights ("LSARs"), which give the
holder the right under limited circumstances to receive cash
in an amount equal to the difference between (a) the per-
share price paid in an applicable tender offer or exchange
offer for the Company or fair market value of the Class A
Common Stock in the event of specified "change of control"
events and (b) the fair market value of the Class A Common
Stock on the date of grant. The Plan permits the exercise
price of the options to be paid either in cash, by
withholding from the shares to be delivered pursuant to the
exercise of the option that number of shares equal in value
to the exercise price, or by the delivery of already-owned
Class A Common Stock.
There are 1,800,000 shares of Class A Common Stock
(subject to certain adjustments) reserved under the Plan for
issuance upon the exercise of options and the settlement of
SARs and LSARs. Shares subject to an option, SAR, or LSAR
that is terminated or that expires will again be available
for grant under the Plan. Persons eligible to receive
options, SARs, and LSARs are all employees of the Company
selected by the Incentive Compensation Committee
("Committee") appointed by the Board of Directors to
administer the Plan. Non-employee directors are not eligible
to receive awards under the Plan.
In general, the Committee has the discretion to
establish the terms, conditions, and restrictions to which
options, SARs, and LSARs are subject. The options, SARs, and
LSARs are not transferable except by will and by the laws of
descent and distribution, and under other limited
circumstances. The Plan is intended to be qualified under
Rule 16b-3 promulgated by the Securities and Exchange
Commission, which Rule generally exempts certain option
grants and certain stock or cash awards from the provisions
of Section 16(b) under the Securities Exchange Act of 1934.
Options granted under the Plan are generally granted at
exercise prices equal to the fair market value on the date
of the grant. In October 1994, the Board of Directors
increased the number of shares available under the Plan to
1,800,000 and amended the Plan to provide accelerated
vesting upon a change in control of the Company.
As of September 30, 1997, the Company had 562,005
active options outstanding (options granted less options
canceled due to employee termination) at prices ranging from
$8.75 to $21.75. Of these options, 301,152 are vested and
none have been exercised. See Notes to Consolidated
Financial Statements - Note F "Common Stock and Warrants."
401(k) Plan
On June 6, 1991, the Company adopted the EZCORP, Inc.
401(k) Plan, a savings and profit sharing plan intended to
qualify under Section 401(k) of the Code. Under the plan,
employees of the Company and those subsidiaries that adopt
it may contribute up to 15% of their compensation (not to
exceed $9,500 in 1997) to the plan trust. The Company will
match 25% of an employee's contributions up to 6% of his
compensation. Employer contributions may be made in the form
of or invested in Class A Common Stock. Contribution expense
related to the plan for 1997 was approximately $37,000. The
Company's contributions vest based on the employee's length
of service with the Company and its subsidiaries, with 20%
of the total contributions vesting each year once the
employee has three years of service. On termination of
employment, an employee will receive all of his
contributions and any vested portion of the Company's
contributions, as adjusted by any earnings and losses.
Compensation Committee Interlocks and Insider Participation
For Fiscal 1997, the Company's Compensation Committee
was comprised of Messrs. Pickup and Sage. Mr. Brinkley,
during Fiscal 1996, served as a director and an executive
officer of the Company and MS Pietrafesa, L.P. Mr. Dean,
during Fiscal 1997, was an executive officer and a director
of MS Pietrafesa, L.P., and was an executive officer and
director of the Company. The Company and MS Pietrafesa,
L.P. are both controlled by investment partnerships or a
corporate general partner controlled by
Mr. Phillip E. Cohen. See "Security Ownership of Certain
Beneficial Owners and Management." Information concerning
certain transactions between certain of the above-named
persons and the Company is described elsewhere under the
caption "Certain Transactions," which disclosure is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Security Ownership of Management and Principal Stockholders
The Company is controlled, indirectly, by Phillip Ean
Cohen, through his ownership of all of the issued and
outstanding stock of MS Pawn Corporation, the sole general
partner of MS Pawn Limited Partnership ("MS Pawn") which
owns approximately 81% of the Class B Voting Common Stock of
the Company.
The table below sets forth information regarding the
beneficial ownership of the Company's Common Stock as of
December 1, 1997 for (i) each of the Company's current
directors, (ii) beneficial owners known to the registrant to
own more than five percent of any class of the Company's
voting securities, and (iii) all current officers and
directors as a group.
Class A Class B
Non-voting Voting
Name and Address Common Stock Common Stock Voting
of the Beneficial Owners(a) Number Percent Number Percent Percent
- -------------------------- ------ ------- ------ ------- -------
MS Pawn Limited Partnership(b)(g)
1,393,716(h)11.89%(h)1,198,990 80.77% 80.77%
MS Pawn Corporation
Phillip Ean Cohen
350 Park Avenue, 8th Floor
New York, New York 10022
Sterling B. Brinkley(c) 275,615 2.60% -- -- --
350 Park Avenue, 8th Floor
New York, New York 10022
Vincent A. Lambiase(d) 213,150 2.00% -- -- --
1901 Capital Parkway
Austin, Texas 78746
Daniel N. Tonissen(e) 19,588 0.19% -- -- --
1901 Capital Parkway
Austin, Texas 78746
J. Jefferson Dean(i) 46,461 0.44% -- -- --
1901 Capital Parkway
Austin, Texas 78746
Mark C. Pickup 2,600 0.02% -- -- --
6734 Corte Segunda
Martinez, California 94553
Richard D. Sage (j) 7,570 0.07% -- -- --
6100 S.W. 128th Street
Miami, Florida 33156
John E. Cay, III 2,500 0.02% -- -- --
P.O. Box 847
Savannah, GA 31402
Courtland L. Logue, Jr. 967,742(h) 8.96%(h) 285,417 19.28% 19.28%
3016 Hatley Drive
Austin, Texas 78746
All officers and directors
as a group (seven persons)
(b)(f) 567,484 5.27% -- -- --
- ---------------------------------------------
(a) Except as indicated in the footnotes to this table, the
persons named in the table have sole voting and
investment power with respect to all shares of Class B
Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.
(b) MS Pawn Corporation is the general partner of MS Pawn
and has the sole right to vote its shares of Class B
Common Stock and to direct their disposition. Mr. Cohen
is the sole stockholder of MS Pawn Corporation. See
"Certain Relationships and Related Transactions." Mr.
Cohen also owns 189,341 shares of Class A common stock
directly.
(c) Includes options to acquire 75,000 shares of Class A
Common Stock at $14.00 per share and warrants to
acquire 1,191 shares of Class A Common Stock at $6.17
per share.
(d) Includes options to acquire 150,000 shares of Class A
Common Stock at $13.00 per share.
(e) Includes options to acquire 14,588 shares of Class A
Common Stock at $12.75 per share.
(f) Includes options to acquire 244,450 shares of Class A
Common Stock at prices ranging from $10.00 to $14.00
per share and warrants to acquire 1,405 Class A Common
Stock shares at $6.17 per share.
(g) Includes warrants for 4,093 shares of Class A Common
Stock and 4,106 shares of Class B Common Stock held by
MS Pawn and warrants for 1,292 shares of Class A Common
Stock held by Mr. Cohen.
(h) The number of shares and percentage reflect Class A
Common Stock, together with Class B Common Stock which
is convertible to Class A Common Stock.
(i) Includes options to acquire 4,862 shares of Class A
Common Stock at $12.75 per share and Warrants to
acquire 183 shares of Class A Common Stock at $6.17 per
share.
(j) Includes warrants to acquire 31 shares of Class A
Common Stock at $6.17 per share.
In July 1996, MS Pawn Limited Partnership ("MS Pawn")
provided its limited partners the opportunity to withdraw
from MS Pawn. Pursuant to this arrangement, and in
accordance with Section 2 of Article Fourth of the Company's
Certificate of Incorporation, MS Pawn initiated the
conversion of 2,748,313 shares of Class B Voting Common
Stock held by MS Pawn and Courtland L. Logue, Jr. to Class A
Non-Voting Common Stock and distributed shares of Class A
Non-Voting Common Stock to the limited partners who
withdrew. In October 1996, February 1997 and March 1997,
790,561 shares of Class B Voting Common Stock held by the
same groups were converted to Class A Non-Voting Common
Stock.
Item 13. Certain Relationships and Related Transactions
In 1989, Courtland L. Logue, Jr., the Company's former
Chairman and Chief Executive Officer, borrowed $62,812 from
a subsidiary of the Company. Of this amount, the Company
believes that Mr. Logue owes at least $24,433 plus accrued
interest of at least $8,523 at September 30, 1997 subject to
the resolution of a dispute about whether a previous payment
should be credited toward the note. This debt accrues
interest at the rate of 10% per annum. In November 1997,
the Company accepted $26,677 as final payment on the note.
Please refer to Note H of the Financial Statements (Part II,
Item #8). Also, see "Executive Compensation - Employment
Agreements" for a discussion of other payment demands the
Company has made from Mr. Logue.
In connection with the Acquisition, the Company entered
into three separate lease agreements with Logue, Inc.
("LI"), which at the time was owned two-thirds by Mr. Logue
and one-third by Mr. Logue Sr. (the father of Mr. Logue),
and is currently owned entirely by Mr. Logue. The lease
agreements provide for the lease to the Company of land and
buildings used in the operation of three of the pawnshops
owned by the Company. Each lease provides for a ten-year
term, with an option to renew for a period of five years,
and requires the Company to pay, in addition to monthly
rental, all expenses of operating and maintaining the
buildings, as well as taxes and insurance on the buildings.
A fourth lease agreement between C Minus Corporation (a
Texas corporation wholly owned by Mr. Logue) and the
Predecessor was entered into on January 1, 1988 and provides
for a five-year term with an option to renew for a period of
five years; that renewal option was exercised effective
January 1, 1993. On an annualized basis, the aggregate
anticipated rentals (excluding taxes, insurance, maintenance
costs, etc.) accruing as a result of these leases: (1) to LI
will be approximately $156,000 for each of the first five
years of the leases; thereafter, rental rates, increase in
tandem with the Consumer Price Index published by the United
States Department of Commerce (the "CPI"); and (2) to C
Minus Corporation were approximately $42,000 for the first
year of the lease; thereafter, rental rates increase in
tandem with the CPI.
For information concerning the $729,113 loan from the
Company to Mr. Lambiase, and $1,500,000 loans from the
Company to each of Mr. Brinkley and Mr. Lambiase, see
"Executive Compensation - Employment Agreements."
The Company is the lessee under a lease agreement
through May 1998 for a pawnshop location in Houston, Texas
in which Mr. Logue has a 50% interest. On an annualized
basis, the Company pays $53,280 as lessee of this property,
of which Mr. Logue is entitled to receive $26,640.
The Company and Morgan Schiff & Co., Inc. ("Morgan
Schiff"), whose sole stockholder is Mr. Cohen, are parties
to a Financial Advisory Agreement renewed January 1, 1997,
pursuant to which Morgan Schiff receives certain fees for
its provision of financial advisory services to the Company.
These services include, among other matters, ongoing
consultation with respect to the business and financial
strategies of the Company. In Fiscal 1997, Morgan Schiff
received $33,333 per month for its services as a financial
advisor and received expense reimbursements of $190,152. The
Company anticipates renewing this agreement in fiscal 1998.
PART IV
Item 14. Financial Statement Schedules, Exhibits, and
Reports on Form 8-K
(a)(1)The following consolidated financial statements of
EZCORP, Inc. and subsidiaries are included in Item 8:
Consolidated Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets as of September 30, 1997
and 1996
Consolidated Statements of Operations for each of the
three years in the period ended
September 30, 1997
Consolidated Statements of Cash Flows for each of the
three years in the period ended
September 30, 1997
Consolidated Statements of Stockholders' Equity for
each of the three years in the period ended September
30, 1997
Notes to Consolidated Financial Statements.
(2)The following Financial Statement Schedule is
included herein:
Schedule VIII - Allowance for Valuation of Inventory
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore, have
been omitted.
(3)Listing of Exhibits (included herein)
(b) Through the fourth quarter ended September 30, 1997,
the Company has not filed any reports on Form 8-K.
EZCORP, INC. AND SUBSIDIARIES
Schedule VIII - Allowance for Valuation of Inventory
(In millions)
Balance at Additions Balance at
Beginning Charged to Charged to End of
Description of Period Expense Other Accts. Deductions Period
- -------------------- --------- ---------- ------------ --------- ---------
Allowance for
valuation of inventory:
Year ended
September 30, 1995 $ 5.0 $12.3 - $ 3.3 $14.0
---- ---- ---- ---- ----
Year ended
September 30, 1996 $14.0 $ 5.4 - $11.5 $ 7.9
---- ---- ---- ---- ----
Year ended
September 30, 1997 $ 7.9 $ 5.4 - $ 6.4 $ 6.9
---- ---- ---- ---- ----
The Company does not determine its inventory valuation
allowance by specific inventory items; therefore, the
amount charged to expense and the deductions are based on
estimates of the beginning inventory sold during the period
and the portion of the beginning inventory valuation
allowance attributable to the items sold.
Listing of Exhibits
Page Number if Incorporated by
Number Description Filed herein Reference to
- ------- ------------------ -------------- ----------------
3.1 Amended and Restated Certificate Exhibit 3.1 to the Registra-
of Incorporation of the Company. tion Statement on Form S-1
effective August 23, 1991
(File No. 33-41317)
3.1A Certificate of Amendment to Exhibit 3.1A to the Registra-
Certificate of Incorporation tion Statement on
Form S-1 effective
of the Company July 15, 1996
(File No. 33-41317)
3.2 Bylaws of the Company. Exhibit 3.2 to the
Registration
Statement on Form
S-1 effect-
ive August 23,
1991
(File No. 33-41317)
3.3 Amendment to the By-laws. Exhibit 3.3 to
Registrant's
Quarterly Report
on Form 10-
Q for the quarter
ended June
30, 1994 (File No.
0-19424)
3.4 Amendment to the Certificate of Exhibit 3.4 to Registrant's
Incorporation of the Company. Quarterly Report on Form 10-
K for the year
ended Septem-
ber 30, 1994 (File
No. 0-19424)
3.5 Amendment to the Certificate of Exhibit 3.5 to Registrant's
Incorporation of the Company* Annual Report
on Form 10-K
for the year ended
60 September 30, 1997
4.1 Specimen of Class A Non-voting Exhibit 4.1 to the Registra-
Common Stock certificate of the tion Statement on Form S-1
Company. effective August
23, 1991 (File No. 33-41317)
10.1 Loan Agreement between the Exhibit 10.1 to Registrant's
Company and First Interstate Annual Report on Form 10-K
Bank of Texas, N.A., as Agent, re: for the year ended
$20 million Revolving Credit Loan September 30, 1992
convertible to $20 million Term (File No. 0-19424)
Loan.
10.2 $15 million Revolving Credit Note Exhibit 10.2 to Registrant's
-First Interstate Bank of Texas, Annual Report on Form 10-K
N.A. for the year ended
September 30, 1992
(File No. 0-19424)
10.3 $5 million Revolving Credit Note - Exhibit 10.3 to Registrant's
Franklin Federal Bancorp. Annual Report on
Form 10-K for the year ended
September 30, 1992
(File No. 0-19424)
Page Number if Incorporated by
Number Description Filed herein Reference to
- ------ ----------------------- ----------- -----------------
10.4 Security Agreement executed by Exhibit 10.4 to Registrant's
the Company, re: $20 million Re- Annual Report on Form 10-K
volving Credit Loan. for the year ended
September 30, 1992
(File No. 0-19424)
10.5 Security Agreement executed by Exhibit 10.5 to Registrant's
EZPAWN Texas, Inc. (substan- Annual Report on Form 10-K
tially the same agreement also for the year ended
was executed by EZPAWN Okla- September 30, 1992
homa, Inc.; EZPAWN Mississippi, (File No. 0-19424)
Inc.; EZPAWN Arkansas, Inc.;
EZPAWN Colorado, Inc.;
EZPAWN Alabama, Inc.;
EZPAWN Tennessee, Inc.; and
Houston Financial Corporation).
10.6 Guaranty Agreement executed by Exhibit 10.6 to Registrant's
EZPAWN Texas, Inc. (substan- Annual Report on Form 10-K
tially the same agreement also for the year ended
was executed by EZPAWN Okla- September 30, 1992
homa, Inc.; EZPAWN Mississippi, (File No. 0-19424)
Inc.; EZPAWN Arkansas, Inc.;
EZPAWN Colorado, Inc.;
EZPAWN Alabama, Inc.;
EZPAWN Tennessee, Inc.; and
Houston Financial Corporation).
10.7 Loan Agreement between the Exhibit 10.7 to Registrant's
Company, as Borrower, and Annual Report on Form 10-K
Franklin Federal Bancorp, FSB, for the year ended September
as lender, dated April 30, 1993. 30, 1993 (File No. 0-19424)
10.8 omitted N/A
10.9 Loan Agreement between the Exhibit 10.9 to the Registra-
Company, as Guarantor, tion Statement on Form S-2
EZPAWN Texas, Inc. as Borrower, effective March 16, 1992
and Franklin Federal Bancorp, A (File No. 33-45807)
Federal Savings Bank, as Lender,
dated December 17, 1991.
10.10 Letter agreement executed December Exhibit 10.10 to the Registra-
20, 1990 between Morgan tion Statement on Form S-1
Schiff & Co., Inc. ("Morgan Schiff") effective August 23, 1991
and the Company. (File No. 33-41317)
Page Number if Incorporated by
Number Description Filed herein Reference to
- ------ ---------------------- -------------- ---------------
10.11 Stock Purchase Agreement be- Exhibit 10.11 to the Registra-
tween the Company, Courtland L. tion Statement on Form S-1
Logue, Jr., Courtland L. Logue, effective August 23, 1991
Sr., James D. McGee, M. Frances (File No. 33-41317)
Spears, Porter A. Stratton and
Steve A. Stratton dated as of May
18, 1989.
10.12 Capitalization and Subscription Exhibit 10.12 to the Registra-
Agreement between MS Pawn tion Statement on Form S-1
Limited Partnership ("MS Pawn") effective August 23, 1991
and the Company, dated as of July (File No. 33-41317)
25, 1989.
10.13 omitted N/A
10.14 Consulting Agreement between Exhibit 10.14 to Registrant's
the Company and Courtland L. Annual Report on Form 10-K
Logue, Sr., dated February 15, 1993 for the year ended September
30, 1993 (File No.0-19424)
10.15 omitted N/A
10.16 Junior Subordinated Note due Exhibit 10.16 to Registra-
1996 issued July 25, 1989 to Court- tion Statement on Form S-1
land L. Logue, Sr. in the original effective August 23,1991
principal amount of $238,319.95. (File No. 33-41317)
10.17 omitted N/A
10.18 Warrant Certificate issued by the Exhibit 10.18 to the Registra-
Company to MS Pawn on July 25, tion Statement on Form S-1
1989. effective August 23, 1991
(File No. 33-41317)
10.19 Amendment to the Stock Purchase Exhibit 10.19 to the Registra-
Agreement dated as of June tion Statement on Form S-1
19, 1989 between the Company effective August 23, 1991
and the stockholders of the Prede- (File No. 33-41317)
cessor Company.
10.20 Second Amendment to Stock Pur- Exhibit 10.20to the Registra-
chase Agreement dated as of April tion Statement on Form S-1
20, 1990 between the Company effective August 23, 1991
and the stockholders of the Prede- (File No. 33-41317)
cessor Company.
10.21 Employment Agreement of Court- Exhibit 10.21 to the Registra-
land L. Logue, Jr. dated July 25, tion Statement on Form S-1
1989. effective August 23, 1991
(File No. 33-41317)
Page Number if Incorporated by
Number Description Filed herein Reference to
- ------- ---------------------- ------------ --------------
10.22 Amendment to Employment Exhibit 10.22 to the Registra-
Agreement of Courtland L. Logue, tion Statement on Form S-1
Jr. dated September 1990. effective August 23, 1991
(File No. 33-41317)
10.23 Employment Agreement of Gary Exhibit 10.23 to Registrant's
S. Kofnovec dated April 1, 1993. Annual Report on Form 10-K
for the year ended September
30, 1993 (File No.0-19424)
10.24 omitted N/A
10.25 omitted N/A
10.27 omitted N/A
10.28 omitted N/A
10.29 omitted N/A
10.30 omitted N/A
10.31 omitted N/A
10.32 omitted N/A
10.33 omitted N/A
10.34 omitted N/A
10.35 Stockholders' Agreement dated as Exhibit 10.35 to the Registra-
of July 25, 1989 between the Com- tion Statement on Form S-1
pany, MS Pawn and Courtland L. effective August 23, 1991
Logue, Jr. (File No. 33-41317)
10.36 Joinder Agreement to the Stock- Exhibit 10.36 to the Registra-
holders' Agreement dated as of tion Statement on Form S-1
May 1, 1991 between the Com- effective August 23, 1991
pany, MS Pawn, Mr. Kofnovec, (File No. 33-41317)
Mr. Gary, Mr. Ross and Ms.
Berger.
10.37 Incentive Stock Option Plan. Exhibit 10.37 to the Registra-
tion Statement on Form S-1
effective August 23, 1991
(File No. 33-41317)
10.38 401(k) Plan. Exhibit 10.38 to the Registra-
tion Statement on Form S-1
effective August 23, 1991
(File No. 33-41317)
Page Number if Incorporated by
Number Description Filed herein Reference to
- ------- ------------------------- ------------ ---------------
10.39 Section 125 Cafeteria Plan. Exhibit 10.39 to the Registra-
tion Statement on Form S-1
effective August 23, 1991
(File No. 33-41317)
10.40 Lease of 1970 Cessna 210K Air- Exhibit 10.40 to the Registra-
craft between Courtland L. Logue, tion Statement on Form S-1
Jr. and Transamerica Pawn Cor- effective August 23, 1991
poration, dated July 25, 1989. (File No. 33-41317)
10.41 omitted N/A
10.42 omitted N/A
10.43 omitted N/A
10.44 Lease of Cessna P210 Aircraft Exhibit 10.44 to the Registra-
between Courtland L. Logue, Jr. tion Statementon Form S-1
and Transamerica Pawn Corpo- effective August 23, 1991
ration, dated December 29, 1989. (File No. 33-41317)
10.45 Lease between Logue, Inc. and E-Z Exhibit 10.45 to the Registra-
Corporation for real estate located tion Statement on Form S-1
at 1166 Airport Boulevard, Austin, effective August 23, 1991
Texas, dated July 25, 1989. (File No. 33-41317)
10.46 Lease between Logue, Inc. and E-Z Exhibit 10.46 to the Registra-
Corporation for real estate located tion Statement on Form S-1
at 5415 North Lamar Boulevard, effective August 23, 1991
Austin, Texas, dated July 25, 1989 (File No. 33-41317)
10.47 Agreement of Lease between LDL Exhibit 10.47 to the Registra-
Partnership and Logue-Drouin tion Statement on Form S-1
Industries, Inc. for real property effective August 23, 1991
at 8540 Broadway Blvd., Houston, (File No. 33-41317)
Texas, dated May 3, 1988 and related
Assignment of Lease.
10.48 Lease Agreement between C Minus Exhibit 10.48 to the Registra-
Corporation and Logue-Drouin tion Statement on Form S-1
Industries, Inc. DBA E-Z Pawn #5 effective August 23, 1991
for real property located at 5209 (File No. 33-41317)
Cameron Road, Austin, Texas,
dated December 28, 1987.
10.49 Lease Agreement between Logue, Exhibit 10.49 to the Registra-
Inc. and E-Z Corporation for real tion Statement on Form S-1
property located at 901 E. 1st St., effective August 23, 1991
Austin, Texas, dated July 25, 1989. (File No. 33-41317)
Page Number if Incorporated by
Number Description Filed herein Reference to
- ------- -------------------------- ----------- -----------------
10.50 Agreements between the Company Exhibit 10.50 to the Registra-
and MS Pawn dated February 18, tion Statement on Form S-1
1992 for the payment of $1.377 effective March 16, 1992
million of Series A Increasing Rate (File No. 33-45807)
Senior Subordinated Notes held by
MS Pawn.
10.51 Agreement Regarding Reservation Exhibit 10.51 to Registrant's
of Shares. Quarterly Report on Form 10-
Q for the quarter ended June
30, 1993 (File No.0-19424)
10.52 First Amendment to Loan Agreement Exhibit 10.52 to Registrant's
between the Company and First Quarterly Report on Form 10-
Interstate Bank of Texas, N.A. as Agent, Q for the quarter ended June
re: $20 million Revolving Credit Loan 30, 1993 (File No. 0-19424)
Convertible to $20 million Term Loan.
10.53 Second Amendment to Loan Agreement Exhibit 10.53 to Registrant's
between the Company and First Interstate Quarterly Report on Form 10-
Bank of Texas, N.A. as Agent, re: $20 Q for the quarter ended June
million Revolving Credit Loan Convertible 30, 1993 (File No. 0-19424)
to $20 million Term Loan.
10.54 Third Amendment to Loan Agreement Exhibit 10.54 to Registrant's
between the Company and First Interstate Quarterly Report on Form 10-
Bank of Texas, N.A. as Agent, re: IncreasingQ for the quarter ended June
$40 million the Revolving Credit Loan 30, 1993 (File No. 0-19424)
Convertible to $40 million Term Loan.
10.55 Fifth Amendment to Loan Agreement Exhibit 10.55 to Registrant's
between the Company and First Interstate Quarterly Report on Form 10-
Bank of Texas, N.A. as Agent, re: $50 Q for the quarter ended March
million Revolving Credit Loan. 31, 1994 (File No. 0-19424)
10.56 Consent Waiver and Amendment to loan Exhibit 10.56 to Registrant's
agreement between the Company and First Annual Report on Form 10-K
Interstate Bank of Texas, N.A. as Agent, re:for the year ended September
$50 million Revolving Credit Loan. 30, 1995 (File No. 0-19424)
10.57 Seventh Amendment to Loan Agreement Exhibit 10.57 to Registrant's
between the Company and First Interstate Annual Report on Form 10-K
Bank of Texas, N.A. as Agent, re: $50 for the year ended September
million Revolving Credit Loan. 30, 1995 (File No. 0-19424)
10.58 Amended and restated Loan Agreement Exhibit 10.58 to Registrant's
between the Company and First Interstate Annual Report on Form 10-K
Bank of Texas, N.A. as Agent, re: $75 for the year ended September
million Revolving Credit Loan. 30, 1995 (File No. 0-19424)
Page Number if Incorporated by
Number Description Filed herein Reference to
- ----- ----------------------------- ----------- ---------------
10.59 July 12, 1994 Amendment to Employment Exhibit 10.59 to Registrant's
Agreement between the Company Annual Report on Form 10-K
and Courtland L. Logue, Jr. for the year ended September
30, 1995 (File No. 0-19424)
10.60 Loan Agreement between Sterling B. Exhibit 10.60 to Registrant's
Brinkley and the Company dated Annual Report on Form 10-K
October 7, 1994 (an identical document for the year ended September
exists with respect to Vincent A. Lambiase).30, 1995 (File No. 0-19424)
10.61 Promissory Note between Sterling Exhibit 10.61 to Registrant's
B. Brinkley and the Company in Annual Report on Form 10-K
the original principal amount of for the year ended September
$1,500,000 attached thereto (an 30, 1995 (File No. 0-19424)
identical document exists with respect to Vincent A. Lambiase).
10.62 July 1, 1994 Employment Agreement Exhibit 10.62 to Registrant's
between the Company and Vincent Annual Report on Form 10-K
A. Lambiase and Promissory Note in for the year ended September
the amount of $729,112.50 in 30, 1995 (File No. 0-19424)
connection therewith.
10.71 Amended and restated Loan Agreement Exhibit 10.71 to Registrant's
between the Company, as Borrower, and Quarterly Report on Form 10-
Franklin Federal Bancorp, FSB, as Lender, Q for the quarter ended March
dated March 17, 1994. 31, 1994 (File No.0-19424)
10.72 First Amendment to Amended and Restated Form 10-Q for the quarter
Loan Agreement between the Company and ended December 31, 1994
First Interstate Bank of Texas, N.A. as Agent,(File No. 0-19424)
re: Revolving Credit Loan.
10.73 Second Amendment to Amended and Restated Form 10-Q for the quarter
Loan Agreement between the Company and ended June 30, 1995 (File
First Interstate Bank of Texas, N.A. as Agent,No. 0-19424)
re: Revolving Credit Loan.
10.74 Third Amendment to Amended and Restated Form 10-Q for the quarter
Loan Agreement between the Company and ended June 30, 1996 (File
Wells Fargo Bank (Texas), N.A. as Agent, No. 0-19424)
re: Revolving Credit Loan.
10.75 Fourth Amendment to Amended and Restated Form 10-Q for the quarter
Loan Agreement between the Company and ended March 31, 1997 (File
Wells Farto Bank (Texas), N.A. as Agent, No. 0-19424)
re: Revolving Credit Loan.
11.1 Statement regarding computation of 61 N/A
per share earnings (loss).*
22.1 Subsidiaries of Registrant.* 62 N/A
Page Number if Incorporated by
Number Description Filed herein Reference to
- ------ ---------------------------- ----------- -------------------
23.1 Consent of Ernst & Young LLP.* 63 N/A
27 Financial Data Schedule* N/A
- --------------------------
* Filed herewith.
Exhibit 3.5
EZCORP, INC.
Unanimous Written Consent of the Board of Directors of the
Corporation
Adopted as of August 4, 1997
The undersigned, being all the members of the Board of
Directors (the "Board") of EZCORP, Inc., a Delaware
corporation (the "Company"), hereby unanimously consent
pursuant to the provisions of Section 141(f) of the General
Corporation Law of the State of Delaware to the adoption of
the following resolutions without the holding of a meeting:
RESOLVED, that the Certificate of Incorporation of the
Corporation is hereby amended, with effect upon filing with
the Secretary of State of the State of Delaware, 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-six million four hundred eighty
four thousand four hundred and seven (46,484,407)
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) one
million four hundred eighty four thousand four
hundred and seven (1,484,407) shares of Class B
Voting Common Stock par value $.01 per share
("Class B Voting Common Stock")."
This Unanimous Written Consent in Lieu of a Meeting may be
executed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures
thereto and hereto were upon the same instruments.
IN WITNESS WHEREOF, the undersigned, being all the directors
of the corporation, have duly adopted the foregoing
resolutions by Unanimous Written Consent as of this August
4, 1997.
/s/Sterling B. Brinkley /s/Dan N. Tonissen
- ------------------------------ -------------------------
Sterling B. Brinkley, Director Dan N. Tonissen, Director
/s/Vincent A. Lambiase /s/Mark C. Pickup
- ----------------------------- -------------------------
Vincent A. Lambiase, Director Mark C. Pickup, Director
/s/J. Jefferson Dean /s/ Richard D. Sage
- ----------------------------- -------------------------
J. Jefferson Dean, Director Richard D. Sage, Director
/s/John E. Cay, III
- -----------------------------
John E. Cay, III, Director
Exhibit 11.1
STATEMENT REGARDING CALCULATION OF PER SHARE EARNINGS
Years Ended September 30,
1995 1996 1997
-----------------------------------
Primary and Fully Diluted:
Weighted average number of
common shares outstanding
during the year 11,977,480 11,988,222 11,995,049
=========== ========== ==========
Net income (loss)
available to common
stockholders $(15,849,307)$ 3,542,728 $ 8,433,118
=========== ========== ==========
Net income (loss)
per common share $ (1.32) $ 0.30 $ 0.70
========== ========== ==========
EZCORP, Inc.
Exhibit 22.1
Form 10-K for Fiscal Year Ended September 30, 1997
Subsidiaries of EZCORP, Inc.
1. EZPAWN Colorado, Inc.
2. EZPAWN Arkansas, Inc.
3. EZPAWN Mississippi, Inc. (1)
4. EZPAWN Oklahoma, Inc.
5. EZPAWN Tennessee, Inc. (2)
6. EZPAWN Alabama, Inc.
7. EZPAWN Kansas, Inc.
8. EZPAWN Missouri, Inc.
9. EZPAWN Florida, Inc.
10. EZPAWN Georgia, Inc.
11. EZPAWN Indiana, Inc.
12. EZPAWN North Carolina, Inc.
13. EZPAWN South Carolina, Inc.
14. EZPAWN Construction, Inc.
15. EZPAWN Kentucky, Inc.
16. EZPAWN Nevada, Inc.
17. EZPAWN Louisiana, Inc.
18. EZPAWN Holdings, Inc. (1)(3)
19. Texas EZPAWN Management, Inc. (3)
-----------------------
(1) EZPAWN Mississippi, Inc.
merged with EZPAWN Holdings,
Inc. on January 1, 1995,
leaving EZPAWN Holdings, Inc.
as the surviving entity.
(2) EZ Car Sales, Inc. is a
subsidiary of EZPAWN
Tennessee, Inc.
(3) EZPAWN Texas, Inc. transferred
all its assets to Texas
EZPAWN, L.P., a Texas limited
partnership, of which EZPAWN
Holdings, Inc., formerly
EZPAWN Texas, Inc. is the
limited partner, and Texas
EZPAWN Management, Inc. is the
sole general partner and holds
a certificate of authority to
conduct business in Texas.
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-63078) pertaining to
the 1991 EZCORP, Inc. Stock Incentive Plan and the
Registration Statement (Form S-8 No. 33-63082) pertaining to
the EZCORP, Inc. 401(k) Plan of our report dated November
13, 1997 with respect to the consolidated financial
statements and schedule of EZCORP, Inc. and subsidiaries
included in the Form 10-K for the year ended September 30,
1997.
ERNST & YOUNG LLP
Austin, Texas
December 18, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
December 22, 1997 By: /s/ Vincent A. Lambiase
---------------------------
(Vincent A. Lambiase)
(President & Chief Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
and on the dates indicated.
Signature Title Date
/s/ Sterling B. Brinkley Chairman of the Board December 22, 1997
- ------------------------- of Directors
Sterling B. Brinkley
/s/ Vincent A. Lambiase President, Chief December 22, 1997
- ------------------------- Executive Officer
Vincent A. Lambiase & Director
(Principal Executive
Officer)
/s/ Daniel N. Tonissen Senior Vice President, December 22, 1997
- ------------------------- Chief Financial Officer
Daniel N. Tonissen & Director
(Principal Financial and
Accounting Officer)
/s/ J. Jefferson Dean Vice President Strategic December 22, 1997
- ------------------------- Planning & Business
J. Jefferson Dean Development & Director
/s/ Mark C. Pickup Director December 22, 1997
- -------------------------
Mark C. Pickup
/s/ Richard D. Sage Director December 22, 1997
- -------------------------
Richard D. Sage
/s/ John E. Cay, III Director December 22, 1997
- -------------------------
John E. Cay, III