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EZCORP Inc. Reports Operating Results (10-Q)

February 08, 2011 | About:
10qk

10qk

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EZCORP Inc. (EZPW) filed Quarterly Report for the period ended 2010-12-31.

Ezcorp Inc. has a market cap of $1.29 billion; its shares were traded at around $27.59 with a P/E ratio of 12.9 and P/S ratio of 1.8. Ezcorp Inc. had an annual average earning growth of 25.6% over the past 10 years. GuruFocus rated Ezcorp Inc. the business predictability rank of 3.5-star.Hedge Fund Gurus that owns EZPW: Private Capital of Private Capital Management, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors. Mutual Fund and Other Gurus that owns EZPW: Pioneer Investments, Mario Gabelli of GAMCO Investors, Chuck Royce of Royce& Associates, Jeremy Grantham of GMO LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

In connection with our credit services, the unaffiliated lenders offer customers two types of signature loans. In all stores offering signature loan credit services, customers can obtain payday loans, with principal amounts up to $1,500 but averaging about $525. Terms of these loans are generally less than 30 days, averaging about 16 days, with due dates corresponding with the customers next payday. We typically earn a fee of 21.75% of the loan amount for our credit services offered in connection with payday loans. In 289 of the U.S. short-term consumer loan stores offering credit services, customers can obtain longer-term unsecured installment loans from the unaffiliated lenders. The installment loans offered in connection with our credit services typically carry terms of about five months with ten equal installment payments due on customers paydays. Installment loan principal amounts range from $1,525 to $3,000, but average about $2,020. With each semi-monthly or bi-weekly installment payment, we earn a fee of 10% of the initial loan amount. At December 31, 2010, payday loans comprised 95% of the balance of signature loans brokered through our credit services, and installment loans comprised the remaining 5%.

In 126 of our U.S. short-term consumer loan stores, we make installment loans subject to state law. Outside Colorado, these installment loans typically carry a term of five months, with ten equal installment payments due on customers paydays. On those loans, we typically charge a fee of 10% of the initial loan amount with each semi-monthly or bi-weekly installment payment. Outside Colorado, loan principal amounts range from $525 to $3,000 but average approximately $940. In August 2010, we stopped offering payday loans in Colorado following a legislative change and instead began offering six-month installment loans ranging from $100 to $500 in principal, with a 45% annual interest rate plus certain finance charges and maintenance fees. Including loans made in Colorado, installment loan principal amounts averaged approximately $535.

In the current quarter, consolidated total revenues increased 18%, or $34.1 million to $218.8 million, compared to the prior year quarter. Same store total revenues increased 13%, with the remainder of the increase coming from new and acquired stores. The overall increase in total consolidated revenues was comprised of an $18.5 million increase in merchandise and jewelry scrapping sales, a $9.0 million increase in pawn service charges, a $3.1 million increase in auto title loan fees, a $1.4 million increase in signature loan fees and a $2.1 million increase in other revenues.

In the current quarter, the U.S. Pawn Operations segment contributed $11.6 million greater store operating income compared to the prior year quarter, primarily as the result of a $7.5 million increase in pawn service charges, a $5.3 million increase in gross profit on sales and a $1.9 million increase in other revenues, partially offset by higher operating costs and lower signature and auto title loan fees. The Empeño Fácil segment contributed $1.6 million greater store operating income compared to the prior year quarter, primarily as the result of a $2.1 million increase in gross profit on sales and a $1.5 million increase in pawn service charges, partially offset by higher operating expenses at new stores. Our EZMONEY Operations segment contributed $1.8 million greater store operating income, primarily from auto title and installment loans, partially offset by an increase in bad debt as a percent of fees and higher operating expenses at new stores. After a $13.8 million increase in administrative expenses, a $0.8 million increase in depreciation and amortization and a $0.2 million decrease in loss on disposal of assets, operating income improved $0.5 million to $39.4 million. After a $2.1 million increase in our equity in the net income of unconsolidated affiliates, and a $1.0 million increase in income taxes and other smaller items, our consolidated net income improved 7% to $27.4 million from $25.7 million in the prior year quarter. Excluding the $10.9 million administrative expense charge and $3.8 million tax benefit related to the retirement of our former Chief Executive Officer, net income increased 34% to $34.5 million.

The U.S. Pawn Operations segment total revenues increased $22.6 million, or 16% from the prior year quarter to $160.8 million. Same store total revenues increased $15.8 million, or 12%, and new and acquired stores net of closed stores contributed $6.8 million. The overall increase in total revenues was comprised of a $13.3 million increase in merchandise and jewelry scrapping sales, a $7.5 million increase in pawn service charges and a $1.9 million increase in other revenues, partially offset by a $0.1 million decrease in signature and auto title loan revenues.

The current quarters gross profit on jewelry scrapping sales increased $3.5 million, or 25% from the prior year quarter to $17.5 million. Jewelry scrapping revenues increased $10.2 million, or 28% due to a 29% increase in proceeds realized per gram of jewelry scrapped, partially offset by a 2% decrease in volume. Jewelry scrapping sales include the sale of approximately $0.7 million in the current quarter and $0.3 million in the prior year quarter of loose diamonds removed from scrapped jewelry. As a result of the higher average cost per gram of jewelry scrapped, scrap cost of goods increased $6.7 million, or 29%. Gross margins on gold scrapping decreased 0.8 percentage points to 37.2% due to our more aggressive buying and lending programs designed to be competitive and maximize overall income including pawn service charges.

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