UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-19424

EZCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware		74-2540145
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1901 Capital Parkway
Austin, Texas		78746
(Address of principal executive offices)		(Zip Code)

(512) 314-3400
Registrant’s telephone number, including area code:

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

The only class of voting securities of the registrant issued and outstanding is the Class B Voting Common Stock, par value $.01 per share, all of which is owned by an affiliate of the registrant. There is no trading market for the Class B Voting Common Stock.

As of March 31, 2010, 46,192,698 shares of the registrant’s Class A Non-voting Common Stock, par value $.01 per share, and 2,970,171 shares of the registrant’s Class B Voting Common Stock, par value $.01 per share, were outstanding.

 

 

EZCORP, INC.
INDEX TO FORM 10-Q

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2010, March 31, 2009 and September 30, 2009 (audited)			1
Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended March 31, 2010 and 2009			2
Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2010 and 2009			3
Notes to Interim Condensed Consolidated Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. Quantitative and Qualitative Disclosures about Market Risk			38
Item 4. Controls and Procedures			40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 6. Exhibits			41
SIGNATURE			42
EXHIBIT INDEX			43
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

		March 31,				March 31,				September 30,
		2010				2009				2009
		(Unaudited)				(Unaudited)
		(In thousands)
Assets:
Current assets:
Cash and cash equivalents		$	51,192			$	55,244			$	44,764
Pawn loans			89,040				79,359				101,684
Signature loans, net			7,287				6,420				8,357
Auto title loans, net			1,939				874				1,663
Pawn service charges receivable, net			16,353				14,551				18,187
Signature loan fees receivable, net			4,607				4,417				5,599
Auto title loan fees receivable, net			850				72				529
Inventory, net			56,403				56,025				64,001
Deferred tax asset			15,673				15,826				15,670
Federal income tax receivable			13,414				495				—
Prepaid expenses and other assets			15,625				13,574				16,927
Total current assets 272,383			246,857				277,381
Investments in unconsolidated affiliates			90,854				34,725				38,851
Property and equipment, net			54,044				48,206				51,154
Deferred tax asset, non-current			5,318				8,452				6,311
Goodwill			101,456				99,008				100,719
Other assets, net			22,223				17,533				18,101
Total assets		$	546,278			$	454,781			$	492,517
Liabilities and stockholders’ equity:
Current liabilities:
Current maturities of long-term debt		$	10,000			$	10,000			$	10,000
Accounts payable and other accrued expenses			38,592				30,457				33,838
Customer layaway deposits			4,487				4,345				4,175
Federal income taxes payable			—				—				572
Total current liabilities 53,079			44,802				48,585
Long-term debt, less current maturities			20,000				30,000				25,000
Deferred gains and other long-term liabilities			2,735				3,462				3,247
Total liabilities			75,814				78,264				76,832
Commitments and contingencies
Stockholders’ equity:
Class A Non-voting Common Stock, par value $.01 per share; Authorized 54 million shares; 46,192,698 issued and outstanding at March 31, 2010; 45,636,645 issued and 45,626,645 outstanding at March 31, 2009; 45,732,998 issued and outstanding at September 30, 2009			462				456				457
Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; 2,970,171 issued and outstanding			30				30				30
Additional paid-in capital			222,423				216,404				217,176
Retained earnings			252,122				167,318				202,642
Treasury stock, at cost; 10,000 shares at March 31, 2009			—				(12	)			—
Accumulated other comprehensive loss			(4,573	)			(7,679	)			(4,620	)
Total stockholders’ equity 470,464			376,517				415,685
Total liabilities and stockholders’ equity		$	546,278			$	454,781			$	492,517

See accompanying notes to interim condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Operations (Unaudited)

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
		(In thousands, except per share amounts)
Revenues:
Sales		$	99,311			$	89,013			$	199,229			$	153,593
Pawn service charges			38,306				33,516				79,103				59,897
Signature loan fees			31,642				31,594				70,320				67,594
Auto title loan fees			3,956				415				7,058				636
Other			3,369				1,728				5,625				3,161
Total revenues			176,584				156,266				361,335				284,881
Cost of goods sold			62,162				56,426				124,732				96,851
Signature loan bad debt			4,397				5,072				13,187				14,556
Auto title loan bad debt			320				42				780				49
Net revenues			109,705				94,726				222,636				173,425
Operating expenses:
Operations			58,205				54,628				116,386				98,122
Administrative			13,483				9,794				25,780				20,205
Depreciation and amortization			3,573				3,151				6,929				6,217
(Gain) loss on sale / disposal of assets			356				(537	)			567				(821	)
Total operating expenses			75,617				67,036				149,662				123,723
Operating income			34,088				27,690				72,974				49,702
Interest income			(8	)			(72	)			(16	)			(198	)
Interest expense			395				471				760				636
Equity in net income of unconsolidated affiliates			(3,306	)			(1,371	)			(4,589	)			(2,312	)
Other			12				2				(3	)			27
Income before income taxes			36,995				28,660				76,822				51,549
Income tax expense			13,222				10,340				27,342				18,401
Net income		$	23,773			$	18,320			$	49,480			$	33,148
Net income per common share:
Basic		$	0.49			$	0.38			$	1.01			$	0.72
Diluted		$	0.48			$	0.37			$	1.00			$	0.71
Weighted average shares outstanding:
Basic			48,987				48,560				48,853				46,084
Diluted			49,558				49,272				49,486				46,939

See accompanying notes to interim condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Cash Flows (Unaudited)

		Six Months Ended
		March 31,
		2010				2009
		(In thousands)
Operating Activities:
Net income		$	49,480			$	33,148
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			6,929				6,217
Signature loan and auto title loan loss provisions			4,530				3,980
Deferred taxes			992				946
Net (gain) loss on sale or disposal of assets			567				(821	)
Share-based compensation			2,344				1,782
Income from investments in unconsolidated affiliates			(4,589	)			(2,312	)
Changes in operating assets and liabilities, net of business acquisitions:
Service charges and fees receivable, net			2,559				3,851
Inventory, net			2,153				733
Prepaid expenses, other current assets, and other assets, net			(4,264	)			(1,319	)
Accounts payable and accrued expenses			4,469				(6,319	)
Customer layaway deposits			302				1,035
Deferred gains and other long-term liabilities			(525	)			(131	)
Excess tax benefit from share-based compensation			(1,645	)			(1,709	)
Federal income taxes			(12,223	)			995
Net cash provided by operating activities			51,079				40,076
Investing Activities:
Loans made			(243,563	)			(194,458	)
Loans repaid			169,503				138,730
Recovery of pawn loan principal through sale of forfeited collateral			89,013				76,316
Additions to property and equipment			(9,619	)			(9,226	)
Proceeds on disposal of assets			1,347				—
Acquisitions, net of cash acquired			(31	)			(39,217	)
(Investments in)/dividends from unconsolidated affiliates			(49,243	)			1,052
Net cash used in investing activities			(42,593	)			(26,803	)
Financing Activities:
Proceeds from exercise of stock options and warrants			1,294				4,749
Stock issuance costs related to acquisitions			—				(443	)
Excess tax benefit from share-based compensation			1,645				1,709
Debt issuance costs			3				(1,103	)
Proceeds from bank borrowings			—				40,000
Payments on bank borrowings			(5,000	)			(30,385	)
Net cash provided by (used in) financing activities			(2,058	)			14,527
Change in cash and equivalents			6,428				27,800
Cash and equivalents at beginning of period			44,764				27,444
Cash and equivalents at end of period		$	51,192			$	55,244
Non-cash Investing and Financing Activities:
Pawn loans forfeited and transferred to inventory		$	83,339			$	71,484
Foreign currency translation adjustment		$	(47	)		$	10,260
Acquisition-related stock issuance		$	(31	)		$	72,783

See accompanying notes to interim condensed consolidated financial statements (unaudited).

EZCORP, Inc. and Subsidiaries

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)
March 31, 2010

Note A: Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Our management has included all adjustments it considers necessary for a fair presentation. These adjustments are of a normal, recurring nature except for those related to acquired businesses (described in Note C). The accompanying financial statements should be read with the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 30, 2009. The balance sheet at September 30, 2009 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain prior period balances have been reclassified to conform to the current presentation.

Our business is subject to seasonal variations, and operating results for the three and six-month periods ended March 31, 2010 (the “current quarter” and “current year-to-date period”) are not necessarily indicative of the results of operations for the full fiscal year.

Note B: Significant Accounting Policies

CONSOLIDATION: The consolidated financial statements include the accounts of EZCORP, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. We account for our interests in Albemarle & Bond Holdings, PLC and Cash Converters International Limited using the equity method.

PAWN LOAN AND SALES REVENUE RECOGNITION: We record pawn service charges using the interest method for all pawn loans we believe to be collectible. We base our estimate of collectible loans on several factors, including recent redemption rates, historical trends in redemption rates and the amount of loans due in the following two to three months. Unexpected variations in any of these factors could change our estimate of collectible loans, affecting our earnings and financial condition. If a pawn loan is not repaid, we value the forfeited collateral (inventory) at the lower of cost (pawn loan principal) or market (net realizable value) of the property. We record sales revenue and the related cost when this inventory is sold. Sales tax collected upon the sale of inventory is excluded from the amount recognized as sales and instead is recorded as a liability in “Accounts payable and other accrued liabilities” on our balance sheets until remitted to the appropriate governmental authorities.

SIGNATURE LOAN CREDIT SERVICE FEE REVENUE RECOGNITION: We earn credit service fees when we assist customers in obtaining signature loans from unaffiliated lenders. We initially defer recognition of the fees we expect to collect, net of direct expenses, and recognize that deferred net amount over the life of the related loans. We reserve the percentage of credit service fees we expect not to collect. Accrued fees related to defaulted loans reduce credit service fee revenue upon loan default, and increase credit service fee revenue upon collection. Signature loan credit service fee revenue is included in “Signature loan fees” on our statements of operations.

SIGNATURE LOAN CREDIT SERVICE BAD DEBT: We issue letters of credit to enhance the creditworthiness of our customers seeking signature loans from unaffiliated lenders. The letters of credit assure the lenders that if borrowers default on the loans, we will pay the lenders, upon demand, the principal and accrued interest owed to the lenders by the borrowers plus any insufficient funds fee. Although amounts paid under letters of credit may be collected later, we charge those amounts to signature loan bad debt upon default. We record recoveries under the letters of credit as a reduction of bad debt at the time of collection. After attempting collection of bad debts internally, we occasionally sell them to an unaffiliated company as another method of recovery, and record the proceeds from such sales as a reduction of bad debt at the time of the sale.

The majority of our credit service customers obtain short-term signature loans with a single maturity date. These short-term loans, with maturity dates averaging about 16 days, are considered defaulted if they have not been repaid or renewed by the maturity date. Other credit service customers obtain installment loans with a series of payments due over as much as a five-month period. If one payment of an installment loan is delinquent, that one payment is considered defaulted. If more than one installment payment is delinquent at any time, the entire loan is considered defaulted.

ALLOWANCE FOR LOSSES ON SIGNATURE LOAN CREDIT SERVICES: We provide an allowance for losses we expect to incur under letters of credit for brokered signature loans that have not yet matured. The allowance is based on recent loan default experience adjusted for seasonal variations. It includes all amounts we expect to pay to the unaffiliated lenders upon loan default, including principal, accrued interest, and insufficient funds fees, net of the amounts we expect to collect from borrowers (collectively, “Expected LOC Losses”). Changes in the allowance are charged to signature loan bad debt. We include the balance of Expected LOC Losses in “Accounts payable and other accrued expenses” on our balance sheets. At March 31, 2010, the allowance for Expected LOC Losses on signature loans was $0.8 million and our maximum exposure for losses on letters of credit, if all brokered signature loans defaulted and none was collected, was $18.9 million. This amount includes principal, interest, and insufficient funds fees. Based on the expected loss and collection percentages, we also provide an allowance for the signature loan credit service fees we expect not to collect, and charge changes in this allowance to signature loan fee revenue.

SIGNATURE LOAN REVENUE RECOGNITION: We accrue fees in accordance with state and provincial laws on the percentage of signature loans (payday loans and installment loans) we have made that we believe to be collectible. Accrued fees related to defaulted loans reduce fee revenue upon loan default, and increase fee revenue upon collection.

SIGNATURE LOAN BAD DEBT: We consider a payday loan defaulted if it has not been repaid or renewed by the maturity date. If one payment of an installment loan is delinquent, that one payment is considered defaulted. If more than one installment payment is delinquent at any time, the entire installment loan is considered defaulted. Although defaulted loans may be collected later, we charge the loan principal to signature loan bad debt upon default, leaving only active loans in the reported balance. We record collections of principal as a reduction of signature loan bad debt when collected. After attempting collection of bad debts internally, we occasionally sell them to an unaffiliated company as another method of recovery and record the proceeds from such sales as a reduction of bad debt at the time of the sale.

SIGNATURE LOAN ALLOWANCE FOR LOSSES: We provide an allowance for losses on signature loans that have not yet matured and related fees receivable, based on recent loan default experience adjusted for seasonal variations. We charge any changes in the principal valuation allowance to signature loan bad debt. We record changes in the fee receivable valuation allowance to signature loan fee revenue.

AUTO TITLE LOAN CREDIT SERVICE FEE REVENUE RECOGNITION: We earn auto title credit service fees when we assist customers in obtaining auto title loans from unaffiliated lenders. We recognize the fee revenue ratably over the life of the loan, and reserve the percentage of fees we expect not to collect. Auto title loan credit service fee revenue is included in “Auto title loan fees” on our statements of operations.

BAD DEBT AND ALLOWANCE FOR LOSSES ON AUTO TITLE LOAN CREDIT SERVICES: We issue letters of credit to enhance the creditworthiness of our customers seeking auto title loans from unaffiliated lenders. The letters of credit assure the lenders that if borrowers default on the loans, we will pay the lenders, upon demand, all amounts owed to the lenders by the borrowers plus any late fee. Through a charge to auto title loan bad debt, we provide an allowance for losses we expect to incur under letters of credit for brokered auto title loans, and record actual charge-offs against this allowance. The allowance includes all amounts we expect to pay to the unaffiliated lenders upon loan default, including principal, accrued interest and late fees, net of the amounts we expect to collect from borrowers or through the sale of repossessed vehicles. We include the allowance for expected losses in “Accounts payable and other accrued expenses” on our balance sheets. At March 31, 2010, the allowance was $0.1 million and our maximum exposure for losses on letters of credit, if all brokered auto title loans defaulted and none was collected, was $4.1 million.

AUTO TITLE LOAN REVENUE RECOGNITION: We accrue fees in accordance with state laws on the percentage of auto title loans we have made that we believe to be collectible. We recognize the fee revenue ratably over the life of the loan.

AUTO TITLE LOAN BAD DEBT AND ALLOWANCE FOR LOSSES: Based on historical collection experience, the age of past-due loans and amounts we expect to receive through the sale of repossessed vehicles, we provide an allowance for losses on auto title loans and related fees receivable. We charge any increases in the principal valuation allowance to auto title loan bad debt and charge uncollectable loans against this allowance. We record changes in the fee receivable valuation allowance to auto title loan fee revenue.

INVENTORY: If a pawn loan is not redeemed, we record the forfeited collateral at cost (the principal amount of the pawn loan). We do not record loan loss allowances or charge-offs on the principal portion of pawn loans, as they are fully collateralized. In order to state inventory at the lower of cost (specific identification) or market (net realizable value), we record an allowance for shrinkage and excess, obsolete, or slow-moving inventory. The allowance is based on the type and age of merchandise and recent sales trends and margins. At March 31, 2010, the inventory valuation allowance was $5.5 million or 8.8% of gross inventory. We record changes in the inventory valuation allowance as cost of goods sold.

INTANGIBLE ASSETS: Goodwill and other intangible assets having indefinite lives are not subject to amortization. They are tested for impairment each July 1^st, or more frequently if events or changes in circumstances indicate that they might be impaired, based on cash flows and other market valuation methods. We recognized no impairment of our intangible assets in the current or prior year periods. We amortize intangible assets with definite lives over their estimated useful lives, using the straight-line method.

PROPERTY AND EQUIPMENT: We record property and equipment at cost. We depreciate these assets on a straight-line basis using estimated useful lives of 2 to 7 years for furniture, equipment, and software development costs. We depreciate leasehold improvements over the shorter of their estimated useful life (typically 10 years) or the reasonably assured lease term at the inception of the lease. Property and equipment is shown net of accumulated depreciation of $107.6 million at March 31, 2010.

VALUATION OF TANGIBLE LONG-LIVED ASSETS: We assess the impairment of tangible long-lived assets whenever events or changes in circumstances indicate that the net recorded amount may not be recoverable. The following factors could trigger an impairment review: significant underperformance relative to historical or projected future cash flows, significant changes in the manner of use of the assets or the strategy for the overall business, or significant negative industry trends. When we determine that the net recorded amount of tangible long-lived assets may not be recoverable, we measure impairment based on the excess of the assets’ net recorded amount over the estimated fair value. No impairment of tangible long-lived assets was recognized in the current or prior year periods.

FOREIGN CURRENCY TRANSLATION: Our equity investments in Albemarle & Bond and Cash Converters are translated from their functional currencies of the British pound and the Australian dollar into U.S. dollars at the exchange rates as of the investees’ balance sheet date. Our related interest in the investees’ net income is translated at the average exchange rates for each six-month period reported by the investees. The functional currency of our wholly-owned Empeño Fácil pawn segment is the Mexican peso. Empeño Fácil’s balance sheet accounts are translated into U.S. dollars at the exchange rate at the end of each quarter, and its earnings are translated into U.S. dollars at the average exchange rate each quarter. We present resulting translation adjustments from our foreign operations and foreign equity investments as a separate component of stockholders’ equity. Foreign currency transaction gains and losses have not been significant, and are reported as “Other” expense in our statements of operations.

INCOME TAXES: We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying value of assets and liabilities and their tax basis and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted.

SHARE-BASED COMPENSATION: We account for share-based compensation in accordance with the fair value recognition provisions of FASB ASC 718-10-25 (formerly SFAS No. 123(R), “Share-based Payment”). We estimate the grant-date fair value of options using the Black-Scholes-Merton option-pricing model and amortize that fair value to compensation expense on a straight-line basis over the options’ vesting periods. The fair value of restricted shares is measured as the closing market price of our stock on the date of grant, which is amortized over the vesting period for each grant.

FAIR VALUE: We adopted FASB ASC 820-10 (formerly SFAS No. 157, “Fair Value Measurements”) and ASC 825-10 (formerly SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”) on October 1, 2008, resulting in no impact on our financial position, results of operations or cash flows. Among other requirements, FASB ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosure about the use of fair value to measure assets and liabilities. FASB ASC 825-10 permits entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”) and requires an entity to report in earnings at each subsequent reporting date those unrealized gains and losses on items for which the fair value option has been elected. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. Upon adoption of FASB ASC 825-10, we elected not to measure any eligible items at fair value.

We determine the fair value of financial instruments by reference to various market data and other valuation techniques, as appropriate. Unless otherwise disclosed, the fair values of financial instruments approximate their recorded values, due primarily to their short-term nature. We consider investments with maturities of 90 days or less when purchased to be cash equivalents. The recorded value of our outstanding debt is assumed to estimate its fair value, as it has no prepayment penalty and a floating interest rate based on market rates.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In December 2007, FASB issued ASC 805-10-65 (formerly SFAS No. 141(R), “Business Combinations — Revised”). FASB ASC 805-10-65 establishes principles and requirements for how an acquirer in a business combination: (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in an acquiree, (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase price, and (3) determines what information to disclose to enable users of the consolidated financial statements to evaluate the nature and financial effects of the business combination. Among other changes, FASB ASC 805-10-65 will require us to immediately expense transaction costs that have historically been included in the purchase price allocation under existing guidance. FASB ASC 805-10-65 will apply prospectively to any acquisitions we complete on or after October 1, 2009.

In April 2008, FASB issued ASC 350-30-65 (formerly FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets”), which amends the list of factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB ASC 350-10-05 (formerly SFAS No. 142, “Goodwill and Other Intangible Assets”). The new guidance applies to (1) intangible assets that are acquired individually or with a group of other assets and (2) intangible assets acquired in both business combinations and asset acquisitions. Under FASB ASC 350-30-65, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension. We adopted this standard on October 1, 2009, resulting in no effect on our financial position, results of operations, or cash flows.

In June 2009, FASB amended ASC 810-10-65 (formerly SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”). Amended ASC 810-10-65 relates to the consolidation of variable interest entities. It eliminates the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. This guidance also requires additional disclosures about an enterprise’s involvement in variable interest entities. We must adopt this amended standard in our fiscal year beginning October 1, 2010. We expect adoption of amended ASC 810-10 will have no effect on our financial position, results of operations or cash flows.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, “Fair Value Measurements and Disclosures, Measuring Liabilities at Fair Value,” which amends FASB ASC 820-10, “Fair Value Measurements and Disclosures — Overall,” for the fair value measurement of liabilities. This update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, an entity is required to measure fair value using a valuation technique that uses a quoted price of the identical liability when traded as an asset, a quoted price for similar liabilities or similar liabilities when traded as an asset, or another valuation technique that is consistent with the principles of FASB ASC 820. We adopted this ASU on October 1, 2009, resulting in no effect on our financial position, results of operations, or cash flows.

Note C: Acquisitions

On November 13, 2008, we acquired the operating assets of 11 pawn stores in the Las Vegas, Nevada area that operated under the Pawn Plus, Pawn Place and ASAP Pawn brands for approximately $34.4 million. The purchase price was paid by issuing approximately 1.1 million shares of our Class A Non-voting Common Stock valued at $17.3 million, paying $17.0 million to the seller and incurring $0.1 million in transaction costs. We estimated the fair value of the stock issued in the asset purchase at $15.45 per share, based on the market price of our stock surrounding the closing date of the acquisition.

We allocated the purchase price as follows (in thousands):

Current assets:
Pawn loans		$	5,442
Payday loans			55
Auto title loans			1,105
Pawn service charges receivable			1,231
Signature loan fees receivable			7
Auto title loan fees receivable			84
Inventory			2,860
Deferred tax asset			334
Prepaid expenses and other assets			79
Total current assets			11,197
Property and equipment			392
Goodwill			16,297
Other assets			6,711
Total assets		$	34,597
Liabilities:
Accounts payable and other accrued expenses		$	(27	)
Customer layaway deposits			(135	)
Total liabilities			(162	)
Net assets acquired		$	34,435

Included in the amount allocated above to “Other assets” is the $6.7 million value of pawn licenses acquired. As these are considered indefinite lived intangible assets, they are not amortized but are tested at least annually for potential impairment.

The factors contributing to the recognition of goodwill were based on several strategic and synergistic benefits we expect to realize from the acquisition. These benefits include a greater presence in a prime pawn market, a meaningful entry into the auto title loan business, increased scale and the ability to implement certain processes and practices at the acquired stores in our existing and planned other operations. The goodwill arising from this acquisition was recorded in the U.S. Pawn segment and is expected to be fully deductible for tax purposes over the fifteen years following the acquisition.

The results of the acquired stores have been consolidated with our results since their acquisition. Pro forma results of operations have not been presented because the acquisition was not material to our consolidated financial position or results of operations.

On December 31, 2008, we acquired through a merger all of the capital stock of Value Financial Services, Inc. (“VFS”) for a total acquisition price of $77.7 million plus the assumption of VFS’s debt of $30.4 million, aggregating to approximately $108.1 million. VFS operated 67 pawn stores, located mostly in Florida.

The total purchase price was comprised of the issuance of approximately 4.1 million shares of EZCORP’s Class A Non-voting Common Stock originally valued at $64.6 million, $13.6 million of cash paid to VFS shareholders, and transaction costs of $0.9 million, less $1.4 million of cash acquired. We estimated the fair value of the stock issued in the acquisition at $15.92 per share, based on the average daily closing market price of our stock from two days before to two days after the announcement of the merger agreement. Since the date of acquisition, the total purchase price increased approximately $0.3 million due to additional transaction related costs identified after the point of acquisition.

Other assets recorded include the $4.9 million fair value of the acquired trademark and trade names and $0.6 million of favorable lease assets. As we expect to use the trademark and trade names indefinitely, they are not amortized but are tested at least annually for potential impairment. We are amortizing the favorable lease assets over the related lease terms used for straight-line rent purposes.

The factors contributing to the recognition of goodwill were based on several strategic and synergistic benefits we expect to realize from the acquisition. These benefits include a greater presence in prime pawn markets including making us the largest pawn store operator in Florida, expected administrative savings, increased scale and the ability to implement certain processes and practices at the acquired company in our existing and future operations. The goodwill arising from this acquisition was recorded in the U.S. Pawn segment and is not expected to be deductible for tax purposes due to the acquisition being a stock acquisition rather than an asset acquisition.

We allocated the purchase price as follows (in thousands):

Current assets:
Pawn loans		$	17,886
Pawn service charges receivable			3,491
Inventory			16,265
Deferred tax asset			4,394
Prepaid expenses and other assets			1,438
Total current assets			43,474
Property and equipment			5,584
Deferred tax asset, non-current			690
Goodwill			61,877
Other assets			5,719
Total assets		$	117,344
Current Liabilities:
Current maturities of long-term debt		$	(4,000	)
Accounts payable and other accrued expenses			(8,404	)
Customer layaway deposits			(872	)
Total Current liabilities			(13,276	)
Long-term debt			(26,385	)
Total liabilities			(39,661	)
Net assets acquired		$	77,683

The total purchase price presented above excludes contingent consideration paid under the terms of the acquisition, which depended on the price at which VFS shareholders sold their EZCORP shares. After the closing of the acquisition, we paid $10.7 million of contingent consideration to VFS shareholders related to the sale of approximately 3.9 million EZCORP shares. In accordance with accounting rules for contingent payments based on the acquirer’s stock price, all contingent consideration paid was recorded as a reduction of the additional paid-in capital recorded with the stock issuance and did not change the total recorded purchase price.

The results of the acquired stores have been consolidated with our results since their acquisition. The following table summarizes unaudited pro forma condensed combined statements of operations assuming the acquisition had occurred on the first day of fiscal 2009. The pro forma results equal our actual results for the three month periods ended March 31, 2010 and 2009 and for the six month period ended March 31, 2010 as we owned and consolidated the VFS stores for those periods. Although VFS’s historical fiscal year ended on a different date than that of EZCORP, all VFS data included in the pro forma information are actual amounts for the periods indicated.

We expect and have realized operating synergies and administrative savings. These come primarily from using the best practices from EZCORP and VFS in each business, economies of scale, reduced administrative support staff and the closure of VFS’s corporate offices. The pro forma information does not include any potential operating efficiencies or cost savings from expected synergies. The pro forma information is not necessarily an indication of the results that would have been achieved had the acquisition been completed as of the date indicated or that may be achieved in the future.

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
		(Unaudited and Pro Forma)
		(In thousands, except per share amounts)
Revenues:
Sales		$	99,311			$	89,013			$	199,229			$	181,508
Pawn service charges			38,306				33,516				79,103				68,747
Signature loan fees			31,642				31,594				70,320				67,594
Auto title loan fees			3.956				415				7,058				636
Other			3,369				1,728				5,625				3,633
Total revenues			176,584				156,266				361,335				322,118
Cost of goods sold			62,162				56,426				124,732				114,002
Signature loan bad debt			4,397				5,072				13,187				14,556
Auto title loan bad debt			320				42				780				49
Net revenues			109,705				94,726				222,636				193,511
Operating expenses:
Operations			58,205				54,628				116,386				108,991
Administrative			13,483				9,794				25,780				25,562
Depreciation and amortization			3,573				3,151				6,929				6,490
(Gain) loss on sale/disposal of assets			356				(537	)			567				(792	)
Total operating expenses			75,617				67,036				149,662				140,251
Operating income			34,088				27,690				72,974				53,260
Interest expense, net			387				399				744				927
Equity in net income of unconsolidated affiliate			(3,306	)			(1,371	)			(4,589	)			(2,312	)
Other			12				2				(3	)			27
Income before income taxes			36,995				28,660				76,822				54,618
Income tax expense			13,222				10,340				27,342				19,584
Net income		$	23,773			$	18,320			$	49,480			$	35,034
Net income per common share:
Basic		$	0.49			$	0.38			$	1.01			$	0.73
Diluted		$	0.48			$	0.37			$	1.00			$	0.72
Weighted average shares outstanding:
Basic			48,987				48,560				48,853				48,113
Diluted			49,558				49,272				49,486				48,968

Note D: Earnings per Share

We compute basic earnings per share on the basis of the weighted average number of shares of common stock outstanding during the period. We compute diluted earnings per share on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options, warrants and restricted stock awards.

Certain potential common shares have been excluded from the computation of diluted earnings per share because the assumed proceeds upon exercise or vest, as defined by FASB ASC 718-10-25 (formerly SFAS No. 123(R)), were greater than the cost to re-acquire the same number of shares at the average market price, and therefore the effect would be anti-dilutive. All outstanding warrants expired July 25, 2009 and are no longer dilutive.

Components of basic and diluted earnings per share and excluded anti-dilutive potential common shares are as follows (in thousands except per share amounts):

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
Net income (A)		$	23,773			$	18,320			$	49,480			$	33,148
Weighted average outstanding shares of common stock (B)			48,987				48,560				48,853				46,084
Dilutive effect of stock options, warrants, and restricted stock			571				712				633				855
Weighted average common stock and common stock equivalents (C)			49,558				49,272				49,486				46,939
Basic earnings per share (A/B)		$	0.49			$	0.38			$	1.01			$	0.72
Diluted earnings per share (A/C)		$	0.48			$	0.37			$	1.00			$	0.71
Potential common shares excluded from the calculation of diluted earnings per share			2				145				1				145

Note E: Strategic Investments

At March 31, 2010, we owned 16,619,640 common shares of Albemarle & Bond Holdings, PLC, representing almost 30% of its total outstanding shares. We acquired a combined 16,298,875 of the shares in 1998 and 2007 at a cost of $26.2 million and we acquired 320,765 additional shares in the quarter ended December 31, 2009 at a cost of approximately $1.3 million. Albemarle & Bond is primarily engaged in pawnbroking, retail jewelry sales, check cashing and lending in the United Kingdom. We account for the investment using the equity method. Since Albemarle & Bond’s fiscal year ends three months prior to ours, we report the income from this investment on a three-month lag. Albemarle & Bond files semi-annual financial reports for its fiscal periods ending December 31 and June 30. The income reported for our year-to-date period ended March 31, 2010 represents our percentage interest in the results of Albemarle & Bond’s operations from July 1, 2009 to December 31, 2009.

In its functional currency of British pounds, Albemarle & Bond’s total assets increased 3% from December 31, 2008 to December 31, 2009 and its net income improved 75% for the six months ended December 31, 2009. Below is summarized financial information for Albemarle & Bond’s most recently reported results after translation to U.S. dollars (using the exchange rate as of December 31 of each year for balance sheet items and average exchange rates for the income statement items for the periods indicated):

		As of December 31,
		2009				2008
		(In thousands)
Current assets		$	104,537			$	92,849
Non-current assets			53,128				46,093
Total assets		$	157,665			$	138,942
Current liabilities		$	21,128			$	10,809
Non-current liabilities			48,025				63,461
Equity shareholders’ funds			88,512				64,672
Total liabilities and equity shareholders’ funds		$	157,665			$	138,942

		Six Months Ended December 31,
		2009				2008
		(in thousands)
Turnover (gross revenues)		$	64,572			$	45,977
Gross profit			43,054				34,859
Profit after tax (net income)			12,752				7,718

On November 6, 2009, we acquired 108,218,000 newly issued shares, or approximately 30% of the capital stock of Cash Converters International Limited, a publicly traded company headquartered in Perth, Australia. We paid AUS $0.50 per share, for a total cash investment of AUS $54.1 million (approximately $49.6 million U.S. including direct transaction costs). Cash Converters franchises and operates a worldwide network of over 500 specialty financial services and retail stores, which provide pawn loans, short-term unsecured loans and other consumer finance products, and buy and sell used merchandise. Cash Converters’ most recent public reports indicate it owns and operates 18 locations in Australia and 26 locations in the United Kingdom, and has more than 450 franchised stores in 21 countries, including 121 in Australia, 121 in the United Kingdom and significant presences in Spain, South Africa and France.

We account for our investment in Cash Converters using the equity method. Since Cash Converters’ fiscal year ends three months prior to ours, we report the income from this investment on a three-month lag. Cash Converters files semi-annual financial reports for its fiscal periods ending December 31 and June 30. Due to the three-month lag, our results for the current quarter and six-month period ended March 31, 2010 include our share of Cash Converters’ 56 days of earnings from November 6, 2009 to December 31, 2009. This amount was estimated through daily proration of Cash Converters’ reported results for the six months ended December 31, 2009. This is the first quarter in which our earnings include any contribution from Cash Converters’ results of operations.

In its functional currency of Australian dollars, Cash Converters’ total assets increased 71% from December 31, 2008 to December 31, 2009 and its net income improved 27% for the six months ended December 31, 2009. Below is summarized financial information for Cash Converters’ most recently reported results after translation to U.S. dollars (using the exchange rate as of December 31 of each year for balance sheet items and average exchange rates for the income statement items for the periods indicated):

		As of December 31,
		2009				2008
		(In thousands)
Current assets		$	96,680			$	27,929
Non-current assets			64,212				44,979
Total assets		$	160,892			$	72,908
Current liabilities		$	19,251			$	11,330
Non-current liabilities			11,010				7,835
Equity shareholders’ funds			130,631				53,743
Total liabilities and equity shareholders’ funds		$	160,892			$	72,908

		Six Months Ended December 31,
		2009				2008
		(in thousands)
Gross revenues		$	51,609			$	34,816
Gross profit			38,315				25,895
Profit for the year (net income)			8,759				6,209

The table below summarizes the recorded value and fair value of each of these strategic investments at the dates indicated. Fair values were calculated as (a) the quoted stock price on each company’s principal market multiplied by (b) the number of shares we owned multiplied by (c) the applicable foreign currency exchange rate at the dates indicated. We included no control premium for owning a large percentage of outstanding shares.

		March 31, 2010				March 31, 2009				September 30, 2009
		(In thousands of U.S. dollars)
Albemarle & Bond:
Recorded value		$	41,606			$	34,725			$	38,851
Fair value			61,235				46,100				61,504
Cash Converters:
Recorded value			49,248				—				—
Fair value			57,714				—				—

Note F: Contingencies

Currently and from time to time, we are defendants in various legal and regulatory actions. While we cannot determine the ultimate outcome of these actions, we believe their resolution will not have a material adverse effect on our financial condition, results of operations or liquidity. However, we cannot give any assurance as to their ultimate outcome.

Note G: Comprehensive Income

Comprehensive income includes net income and other revenues, expenses, gains and losses that are excluded from net income but are included as a component of total stockholders’ equity. Comprehensive income for the fiscal quarter and year-to-date period ended March 31, 2010 was $23.7 million and $49.5 million. For the comparable 2009 periods, comprehensive income was $13.9 million and $22.9 million. The difference between comprehensive income and net income results primarily from the effect of foreign currency translation adjustments. At March 31, 2010, the accumulated balance of foreign currency activity excluded from net income was $(5.7) million, net of applicable tax of $1.1 million. The net $(4.6) million is presented as “Accumulated other comprehensive loss” in the balance sheet at March 31, 2010.

Note H: Long-term Debt

Our syndicated credit agreement provides for, among other things, (i) an $80 million revolving credit facility, expiring December 31, 2011, that we may, under the terms of the agreement, request to be increased to a total of $110 million and (ii) a $40 million term loan, maturing December 31, 2012. Our term loan requires $2.5 million quarterly principal payments. At March 31, 2010, $30.0 million was outstanding under the term loan and a $3.0 million bank letter of credit was outstanding, leaving $77 million available on our revolving credit facility. The outstanding bank letter of credit secures our obligations under letters of credit we issue to unaffiliated lenders as part of our credit service operations.

Pursuant to the credit agreement, we may choose either a Eurodollar rate or the base rate. We may choose to pay interest to the lenders for outstanding borrowings at the Eurodollar rate plus 175 to 250 basis points or the bank’s base rate plus 0 to 50 basis points, depending on our leverage ratio computed at the end of each calendar quarter. Our rates are currently at the minimum of the range. On the unused amount of the revolving credit facility, we pay a commitment fee of 25 to 30 basis points depending on our leverage ratio calculated at the end of each quarter. Terms of the credit agreement require, among other things, that we meet certain financial covenants. We were in compliance with all covenants at March 31, 2010 and expect to remain in compliance based on our current and anticipated performance. The payment of dividends and additional debt are restricted. The recorded value of our debt approximates its fair value as it is all variable rate debt and carries no pre-payment penalty.

Note I: Goodwill and Other Intangible Assets

The following table presents the balance of each major class of indefinite-lived intangible asset at the specified dates:

		March 31, 2010				March 31, 2009				September 30, 2009
		(In thousands)
Pawn licenses		$	8,229			$	7,749			$	8,229
Trade Name			4,870				4,870				4,870
Goodwill			101,456				99,008				100,719
Total		$	114,555			$	111,627			$	113,818

The following table presents the changes in goodwill over the periods presented and the amount of goodwill allocated to each segment:

		U.S. Pawn								EZMONEY
		Operations				Empeño Fácil				Operations				Consolidated
		(in thousands)
Balance at September 30, 2009		$	94,192			$	6,527			$	—				100,719
Acquisitions — adjustments to initial estimate			193				—				—				193
Effect of foreign currency translation changes			—				544				—				544
Balance at March 31, 2010		$	94,385			$	7,071			$	—			$	101,456

		U.S. Pawn								EZMONEY
		Operations				Empeño Fácil				Operations				Consolidated
		(in thousands)
Balance at September 30, 2008		$	16,211			$	8,165			$	—			$	24,376
Acquisitions			76,649				—				—				76,649
Effect of foreign currency translation changes			—				(2,017	)			—				(2,017	)
Balance at March 31, 2009		$	92,860			$	6,148			$	—			$	99,008

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible asset at the specified dates:

		March 31, 2010								March 31, 2009								September 30, 2009
		Carrying				Accumulated				Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization				Amount				Amortization
		(In thousands)
License application fees		$	345			$	(344	)		$	345			$	(329	)		$	345			$	(339	)
Real estate finders’ fees			699				(382	)			556				(353	)			609				(367	)
Non-compete agreements			2,666				(1,514	)			2,405				(945	)			2,497				(1,192	)
Favorable lease			644				(158	)			644				(23	)			644				(95	)
Other			39				(3	)			—				—				11				—
Total		$	4,393			$	(2,401	)		$	3,950			$	(1,650	)		$	4,106			$	(1,993	)

Total amortization expense from definite-lived intangible assets for the quarter and year-to-date period ended March 31, 2010 was $156,000 and $282,000. For the comparable 2009 periods, amortization expense was approximately $114,000 and $238,000. The favorable lease asset and other intangibles are amortized to rent expense and are included in Operations expense on our statements of operations. The following table presents our estimate of amortization expense for definite-lived intangible assets for each of the five succeeding fiscal years as of October 1, 2009 (in thousands):

Fiscal Year		Amortization Expense
2010		$	541
2011		$	505
2012		$	470
2013		$	47
2014		$	31

These amounts exclude amortization of other intangible assets and the favorable lease asset, which are amortized to rent expense over the related lease terms. As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates.

Note J: Share-based Compensation

Our income includes the following compensation costs related to our share-based compensation arrangements:

		Three Months Ended March 31,								Six Months Ended March 31,
		2010				2009				2010				2009
		(in thousands)
Gross compensation cost		$	1,288			$	723			$	2,344			$	1,782
Income tax benefits			(473	)			(306	)			(831	)			(625	)
Share-based compensation cost, net of tax benefit		$	815			$	417			$	1,513			$	1,157

Stock option exercises resulted in the issuance of 424,700 shares of our Class A Non-voting Common Stock in the current quarter for total proceeds of $1.2 million. For the current year-to-date period, 446,200 shares of Class A Non-voting Common Stock were issued for total proceeds of $1.3 million. All options and restricted stock relate to our Class A Non-voting Common Stock.

Note K: Income Taxes

The current quarter’s effective tax rate is 35.7% of pretax income compared to 36.1% for the prior year quarter. For the current year-to-date period, the effective tax rate is 35.6% compared to 35.7% in the prior year-to-date period. The decrease in effective tax rates is primarily due to an increase in the foreign tax credit on overseas earnings less the valuation allowance established for the expected operating losses in our Canada operations during their start-up period in the current year.

Note L: Operating Segment Information

We manage our business and internal reporting as three reportable segments with operating results reported separately for each segment.

•

The U.S. Pawn Operations segment offers pawn related activities in our 371 U.S. pawn stores, offers signature loans in 54 pawn stores and six EZMONEY stores and offers auto title loans in 54 pawn stores.

•

The Empeño Fácil segment offers pawn related activities in 79 Mexico pawn stores.

•

The EZMONEY Operations segment offers signature loans in 456 U.S. EZMONEY stores and 20 Canadian CASHMAX stores. The segment offers auto title loans in 391 of its U.S. EZMONEY stores.

There are no inter-segment revenues, and the amounts below were determined in accordance with the same accounting principles used in our consolidated financial statements. The following tables present operating segment information:

		U.S. Pawn				Empeño				EZMONEY
		Operations				Fácil				Operations				Consolidated
		(in thousands)
Three Months Ended March 31, 2010:
Revenues:
Sales		$	94,364			$	4,895			$	52			$	99,311
Pawn service charges			36,256				2,050				—				38,306
Signature loan fees			434				—				31,208				31,642
Auto title loan fees			427				—				3,529				3,956
Other			3,243				126				—				3,369
Total revenues			134,724				7,071				34,789				176,584
Cost of goods sold			58,541				3,597				24				62,162
Signature loan bad debt			101				—				4,296				4,397
Auto title loan bad debt			52				—				268				320
Net revenues			76,030				3,474				30,201				109,705
Operations expense			39,912				2,573				15,720				58,205
Store operating income		$	36,118			$	901			$	14,481			$	51,500
Three Months Ended March 31, 2009:
Revenues:
Sales		$	86,808			$	2,205			$	—			$	89,013
Pawn service charges			32,265				1,251				—				33,516
Signature loan fees			557				—				31,037				31,594
Auto title loan fees			351				—				64				415
Other			1,727				1				—				1,728
Total revenues			121,708				3,457				31,101				156,266
Cost of goods sold			55,072				1,354				—				56,426
Signature loan bad debt			108				—				4,964				5,072
Auto title loan bad debt			36				—				6				42
Net revenues			66,492				2,103				26,131				94,726
Operations expense			38,367				1,299				14,962				54,628
Store operating income		$	28,125			$	804			$	11,169			$	40,098

		U.S. Pawn				Empeño				EZMONEY
		Operations				Fácil				Operations				Consolidated
		(in thousands)
Six Months Ended March 31, 2010:
Revenues:
Sales		$	190,398			$	8,767			$	64			$	199,229
Pawn service charges			75,197				3,906				—				79,103
Signature loan fees			987				—				69,333				70,320
Auto title loan fees			902				—				6,156				7,058
Other			5,410				215				—				5,625
Total revenues			272,894				12,888				75,553				361,335
Cost of goods sold			118,271				6,430				31				124,732
Signature loan bad debt			287				—				12,900				13,187
Auto title loan bad debt			122				—				658				780
Net revenues			154,214				6,458				61,964				222,636
Operations expense			80,111				4,737				31,538				116,386
Store operating income		$	74,103			$	1,721			$	30,426			$	106,250
Six Months Ended March 31, 2009:
Revenues:
Sales		$	148,975			$	4,618			$	—			$	153,593
Pawn service charges			57,149				2,748				—				59,897
Signature loan fees			1,243				—				66,351				67,594
Auto title loan fees			561				—				75				636
Other			3,160				1				—				3,161
Total revenues			211,088				7,367				66,426				284,881
Cost of goods sold			94,010				2,841				—				96,851
Signature loan bad debt			344				—				14,212				14,556
Auto title loan bad debt			42				—				7				49
Net revenues			116,692				4,526				52,207				173,425
Operations expense			65,045				2,583				30,494				98,122
Store operating income		$	51,647			$	1,943			$	21,713			$	75,303

The following table reconciles store operating income, as shown above, to our consolidated income before income taxes:

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2010				2009				2010				2009
		(in thousands)
Consolidated store operating income		$	51,500			$	40,098			$	106,250			$	75,303
Administrative expenses			13,483				9,794				25,780				20,205
Depreciation and amortization			3,573				3,151				6,929				6,217
(Gain) loss on sale / disposal of assets			356				(537	)			567				(821	)
Interest income			(8	)			(72	)			(16	)			(198	)
Interest expense			395				471				760				636
Equity in net income of unconsolidated affiliate			(3,306	)			(1,371	)			(4,589	)			(2,312	)
Other			12				2				(3	)			27
Consolidated income before income taxes		$	36,995			$	28,660			$	76,822			$	51,549