UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2009		Commission File No. 000-19424

EZCORP, INC.

(Exact name of registrant as specified in its charter)

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

1901 Capital Parkway
Austin, Texas 78746
(Address of principal executive offices)
Registrant’s telephone number: (512) 314-3400

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 (section 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 þ 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		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 one record holder who is an affiliate of the registrant. There is no trading market for the Class B Voting Common Stock.

As of March 31, 2009, 45,626,645 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, 2009, March 31, 2008 and September 30, 2008 (audited)			1
Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended March 31, 2009 and 2008			2
Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2009 and 2008			3
Notes to Interim Condensed Consolidated Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
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
CERTIFICATIONS
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

		March 31,				March 31,				September 30,
		2009				2008				2008
		(Unaudited)				(Unaudited)
		(In thousands)
Assets:
Current assets:
Cash and cash equivalents		$	55,244			$	35,551			$	27,444
Pawn loans			79,359				56,701				75,936
Payday loans, net			6,420				5,290				7,124
Auto title loans, net			874				—				1
Pawn service charges receivable, net			14,551				8,983				12,755
Signature loan fees receivable, net			4,417				4,781				5,406
Auto title loan fees receivable, net			72				—				—
Inventory, net			56,025				35,999				43,209
Deferred tax asset, net			15,826				9,006				10,926
Federal income tax receivable			495				—				—
Prepaid expenses and other assets			13,574				7,281				9,115
Total current assets			246,857				163,592				191,916
Investment in unconsolidated affiliate			34,725				36,904				38,439
Property and equipment, net			48,206				38,413				40,079
Deferred tax asset, non-current			8,452				5,346				8,139
Goodwill			99,008				24,422				24,376
Other assets, net			17,533				5,350				5,771
Total assets		$	454,781			$	274,027			$	308,720
Liabilities and stockholders’ equity:
Current liabilities:
Current maturities of long-term debt		$	10,000			$	—			$	—
Accounts payable and other accrued expenses			30,457				22,202				29,425
Customer layaway deposits			4,345				2,456				2,327
Federal income taxes payable			—				2,363				246
Total current liabilities			44,802				27,021				31,998
Long-term debt, less current maturities			30,000				—				—
Deferred gains and other long-term liabilities			3,462				3,003				3,672
Commitments and contingencies
Stockholders’ equity:
Class A Non-voting Common Stock, par value $.01 per share; Authorized 54 million shares; 45,636,645 issued and 45,626,645 outstanding at March 31, 2009; 38,454,875 issued and 38,427,776 outstanding at March 31, 2008; 38,564,331 issued and 38,554,331 outstanding at September 30, 2008			456				384				386
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			216,404				133,430				135,895
Retained earnings			167,318				107,312				134,170
Treasury stock, at cost; 10,000 shares at March 31, 2009 and September 30, 2008; 30,000 shares at March 31, 2008			(12	)			(35	)			(12	)
Accumulated other comprehensive income (loss)			(7,679	)			2,882				2,581
Total stockholders’ equity			376,517				244,003				273,050
Total liabilities and stockholders’ equity		$	454,781			$	274,027			$	308,720

See Notes to Interim Condensed Consolidated Financial Statements (unaudited).

Condensed Consolidated Statements of Operations (Unaudited)

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
		(In thousands, except per share amounts)
Revenues:
Sales		$	89,013			$	61,330			$	153,593			$	116,837
Pawn service charges			33,516				21,785				59,897				44,693
Signature loan fees			31,594				30,166				67,594				63,694
Auto title loan fees			415				—				636				—
Other			1,728				344				3,161				707
Total revenues			156,266				113,625				284,881				225,931
Cost of goods sold			56,426				36,731				96,851				70,272
Signature loan bad debt			5,072				6,632				14,556				16,302
Auto title loan bad debt			42				—				49				—
Net revenues			94,726				70,262				173,425				139,357
Operating expenses:
Operations			54,628				38,899				98,122				77,435
Administrative			9,794				8,451				20,205				16,891
Depreciation and amortization			3,151				3,119				6,217				5,946
(Gain) loss on sale / disposal of assets			(537	)			81				(821	)			243
Total operating expenses			67,036				50,550				123,723				100,515
Operating income			27,690				19,712				49,702				38,842
Interest income			(72	)			(137	)			(198	)			(194	)
Interest expense			471				75				636				156
Equity in net income of unconsolidated affiliate			(1,371	)			(1,118	)			(2,312	)			(2,165	)
Other			2				—				27				—
Income before income taxes			28,660				20,892				51,549				41,045
Income tax expense			10,340				7,876				18,401				15,474
Net income		$	18,320			$	13,016			$	33,148			$	25,571
Net income per common share:
Basic		$	0.38			$	0.31			$	0.72			$	0.62
Diluted		$	0.37			$	0.30			$	0.71			$	0.59
Weighted average shares outstanding:
Basic			48,560				41,382				46,084				41,360
Diluted			49,272				43,228				46,939				43,241

See Notes to Interim Condensed Consolidated Financial Statements (unaudited).

Condensed Consolidated Statements of Cash Flows (Unaudited)

		Six Months Ended
		March 31,
		2009				2008
		(In thousands)
Operating Activities:
Net income		$	33,148			$	25,571
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			6,217				5,946
Payday loan and auto title loan loss provisions			3,980				3,612
Deferred taxes			946				(583	)
Net (gain)/ loss on sale or disposal of assets			(821	)			243
Share-based compensation			1,782				1,924
Income from investment in unconsolidated affiliate			(2,312	)			(2,165	)
Changes in operating assets and liabilities, net of business acquisitions:
Service charges and fees receivable, net			3,851				2,568
Inventory, net			733				618
Prepaid expenses, other current assets, and other assets, net			(1,319	)			(1,214	)
Accounts payable and accrued expenses			(6,319	)			(3,392	)
Customer layaway deposits			1,035				403
Deferred gains and other long-term liabilities			(131	)			84
Excess tax benefit from stock-based compensation			(1,709	)			(261	)
Federal income taxes			995				(2,277	)
Net cash provided by operating activities			40,076				31,077
Investing Activities:
Loans made			(194,458	)			(153,945	)
Loans repaid			138,730				102,279
Recovery of pawn loan principal through sale of forfeited collateral			76,316				57,160
Additions to property and equipment			(9,226	)			(9,625	)
Acquisitions, net of cash acquired			(39,217	)			(15,439	)
Dividends from unconsolidated affiliate			1,052				1,103
Net cash used in investing activities			(26,803	)			(18,467	)
Financing Activities:
Proceeds from exercise of stock options and warrants			4,749				147
Stock issuance costs related to acquisitions			(443	)			—
Excess tax benefit from stock-based compensation			1,709				261
Debt issuance costs			(1,103	)			—
Proceeds from bank borrowings			40,000				—
Payments on bank borrowings			(30,385	)			—
Net cash provided by financing activities			14,527				408
Change in cash and equivalents			27,800				13,018
Cash and equivalents at beginning of period			27,444				22,533
Cash and equivalents at end of period		$	55,244			$	35,551
Non-cash Investing and Financing Activities:
Pawn loans forfeited and transferred to inventory		$	71,484			$	54,880
Foreign currency translation adjustment		$	10,260			$	(280	)
Cumulative effect of adopting a new accounting principle		$	—			$	106
Acquisition-related stock issuance		$	72,783			$	—

See Notes to Interim Condensed Consolidated Financial Statements (unaudited).

EZCORP, Inc. and Subsidiaries

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, 2008. The balance sheet at September 30, 2008 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, 2009 (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 interest in Albemarle & Bond Holdings, plc 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.

CREDIT SERVICE REVENUE RECOGNITION: We earn credit service fees when we assist customers in obtaining 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. Credit service revenue is included in “Signature loan fees” on our statements of operations.

CREDIT SERVICE BAD DEBT: We issue letters of credit to enhance the creditworthiness of our credit service customers seeking 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 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. We account for the sale of defaulted accounts in the same manner as internal collections of defaulted accounts.

The majority of our credit service customers obtain short-term loans with a single maturity date. These short-term loans, with maturity dates averaging about 19 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.

CREDIT SERVICE ALLOWANCE FOR LOSSES: We also provide an allowance for losses we expect to incur under letters of credit for 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 loan principal, accrued interest, and insufficient funds fees, net of the amounts we expect to collect from borrowers (“Expected LOC Losses”). Changes in the allowance are charged to signature loan bad debt expense. We include the balance of Expected LOC Losses in “Accounts payable and other accrued expenses” on our balance sheets. At March 31, 2009, the allowance for Expected LOC Losses was $1.3 million and our maximum exposure for losses on letters of credit, if all brokered loans defaulted and none was collected, was $19.2 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 credit service fees we expect not to collect, and charge changes in this allowance to signature loan fee revenue.

PAYDAY LOAN REVENUE RECOGNITION: We accrue fees in accordance with state laws on the percentage of payday loans we believe to be collectible. Accrued fees related to defaulted loans reduce fee revenue upon loan default, and increase fee revenue upon collection. Payday loan fee revenue is included in “Signature loan fees” on our statements of operations.

PAYDAY LOAN BAD DEBT: We consider a loan defaulted if it has not been repaid or renewed by the maturity date. 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. We account for the sale of defaulted accounts in the same manner as internal collections of defaulted accounts.

PAYDAY LOAN ALLOWANCE FOR LOSSES: We also provide an allowance for losses on payday 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.

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, 2009, the inventory valuation allowance was $5.8 million, or 9.4% 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. 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 30 years for buildings and 2 to 8 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 $112.4 million at March 31, 2009.

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 investment in Albemarle & Bond is translated from the U.K. pound into U.S. dollars at the exchange rate as of Albemarle & Bond’s balance sheet date. The related interest in Albemarle & Bond’s net income is translated at the average exchange rate for each six-month period reported by Albemarle & Bond. 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 prevailing 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 Albemarle & Bond and Empeño Fácil 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 calculate the provision for federal income taxes based on our estimate of the effective tax rate for the full fiscal year. As part of the process of preparing the consolidated financial statements, we estimate income taxes in each jurisdiction in which we operate. This involves estimating the actual current tax liability and assessing temporary differences in recognition of income for tax and accounting purposes. These differences result in deferred tax assets and liabilities that we include in our balance sheet. We then assess the likelihood that the deferred tax assets will be recovered from future taxable income. If we determined we would not be able to realize all or part of our net deferred tax assets in the future, an increase to the valuation allowance would be charged to the income tax provision in that period. Likewise, if we determined we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a decrease to the valuation allowance would decrease the tax provision in that period. We assess the need for a deferred tax asset valuation allowance quarterly. Our valuation allowance was $0.2 million at March 31, 2009 and September 30, 2008, compared to $0.4 million at March 31, 2008. As a result of a taxable gain on the sale of property and the resulting utilization of a capital loss carry-forward that was previously reserved, we reduced the valuation allowance in the fourth quarter of fiscal 2008. We account for uncertainty in income taxes in accordance with Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”).

SHARE-BASED COMPENSATION: We account for share-based compensation in accordance with the fair value recognition provisions of 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.

SEGMENTS: We account for our operations in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” We manage our business operations and internal reporting as three reportable segments. See Note L for further discussion and separate data for each segment.

FAIR VALUE: We adopted SFAS No. 157, “Fair Value Measurements” and 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, SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure about the use of fair value to measure assets and liabilities. SFAS No. 159 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 SFAS No. 159, we elected not to measure any eligible items at fair value.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In December 2007, FASB issued SFAS No. 141, “Business Combinations — Revised” (“SFAS No. 141(R)”). SFAS No. 141(R) 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, SFAS No. 141(R) will require us to immediately expense transaction costs that have historically been included in the purchase price allocation under existing guidance. SFAS No. 141(R) will apply prospectively to any acquisitions we complete on or after October 1, 2009.

In April 2008, FASB issued 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 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 FSP FAS 142-3, 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 must adopt FSP FAS 142-3 in our fiscal year ending September 30, 2010. We do not expect adoption of FSP FAS 142-3 to have a material effect on our financial position, results of operations, or cash flows.

Note C: Acquisitions

On October 22, 2007, we completed the acquisition of twenty Mexico pawnshops from MMFS Intl., S.A. de C.V, a subsidiary of Mister Money Holdings, Inc., for $15.5 million cash and direct transaction costs. The initial valuation of $15.3 million increased to $15.5 million in the year ended September 30, 2008 due to additional professional fees related to the acquisition. The increase was recorded as an increase to goodwill. In the quarter ended March 31, 2008, we also increased the recorded balance of the non-compete agreement by $0.4 million upon finalizing our estimate of its fair value, and decreased goodwill by an offsetting amount.

The purchase price was allocated as follows, including the adjustments discussed above (in thousands):

Current assets:
Pawn loans		$	3,230
Pawn service charges receivable, net			224
Inventory, net			940
Deferred tax asset			41
Prepaid expenses and other assets			40
Total current assets			4,475
Property and equipment			800
Non-compete agreement			2,000
Goodwill			8,156
Other assets, net			131
Total assets		$	15,562
Liabilities:
Accrued liabilities		$	(30	)
Customer deposits			(65	)
Total liabilities			(95	)
Net assets acquired		$	15,467

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. The goodwill noted above was recorded in the Empeño Fácil Mexico pawn segment and is expected to be fully deductible for tax purposes over the fifteen years following the acquisition. The total net assets acquired, as presented above, differ from the acquisition related cash flows presented on our prior year statement of cash flows due to acquisition-related cash flows that occurred after the end of the prior year quarter but before the purchase price allocation was finalized one year after the acquisition.

On November 13, 2008, we acquired the operating assets of 11 pawnshops 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.

In the quarter ended March 31, 2009, the total purchase price increased approximately $23,000 due to additional transaction related costs that were not known at the point of acquisition. Additionally, the preliminary purchase price allocation was adjusted based on updated analyses by our external valuation specialists and based on facts learned after the acquisition.

The estimated fair values of the assets acquired and liabilities assumed are preliminary. We are gathering information to finalize the valuation of assets and liabilities and have engaged external valuation specialists to value acquired intangible assets. Any subsequent adjustments to separately identified tangible or intangible assets will be recorded with an offsetting adjustment to goodwill. We will complete the valuation within a year of the acquisition. Other assets recorded include the estimated $6.2 million value of pawn licenses acquired. As these are considered indefinite lived intangible assets, they will not be amortized but will be tested at least annually for potential impairment.

The factors contributing to the recognition of goodwill are 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 company 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.

The purchase price is preliminarily allocated as follows, including the adjustments discussed above (in thousands):

Current assets:
Pawn loans		$	5,442
Payday loans, net			55
Auto title loans, net			1,037
Pawn service charges receivable, net			1,231
Signature loan fees receivable, net			7
Auto title loan fees receivable, net			95
Inventory, net			2,860
Deferred tax asset, net			354
Prepaid expenses and other assets			75
Total current assets			11,156
Property and equipment, net			392
Goodwill			16,799
Other assets, net			6,231
Total assets		$	34,578
Liabilities:
Accounts payable and other accrued expenses		$	(33	)
Customer layaway deposits			(135	)
Total liabilities			(168	)
Net assets acquired		$	34,410

On December 31, 2008, we acquired through a merger all of the capital stock of Value Financial Services, Inc. (“VFS”) for a total estimated acquisition price of $77.6 million plus the assumption of VFS’s debt of $30.4 million, aggregating to approximately $108.0 million. VFS operated 67 pawn stores, located mostly in Florida. See our registration statement on Form S-4 (File number 333-153703), as amended and filed with the SEC on December 2, 2008, for a detailed description of the procedure for calculation and payment of the merger consideration to VFS shareholders.

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 $0.8 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.

In the quarter ended March 31, 2009, the total purchase price increased approximately $162,000 due to additional transaction related costs identified after the point of acquisition. Additionally, the preliminary purchase price allocation was adjusted based on updated analyses by our external valuation specialists and facts learned after the acquisition.

The estimated fair values of the assets acquired and liabilities assumed are preliminary. We are gathering information to finalize the valuation of assets and liabilities and have engaged external valuation specialists to value acquired intangible assets. Any subsequent adjustments to separately identified tangible or intangible assets will be recorded with an offsetting adjustment to goodwill. We will complete the valuation within a year of the acquisition. Other assets recorded include the estimated $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 will not be amortized but will be tested at least annually for potential impairment. The favorable lease assets will be amortized over the related lease terms used for straight-line rent purposes.

The factors contributing to the recognition of goodwill are 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 pawnshop 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.

The purchase price is preliminarily allocated as follows, including the adjustments discussed above (in thousands):

Current assets:
Pawn loans		$	17,886
Pawn service charges receivable, net			3,491
Inventory, net			16,265
Deferred tax asset, net			4,557
Federal income taxes receivable			27
Prepaid expenses and other assets			1,425
Total current assets			43,651
Property and equipment, net			5,700
Deferred tax asset, non-current			1,260
Goodwill			59,850
Other assets, net			5,829
Total assets		$	116,290
Current Liabilities:
Current maturities of long-term debt		$	(4,000	)
Accounts payable and other accrued expenses			(7,444	)
Customer layaway deposits			(872	)
Total Current liabilities			(12,316	)
Long-term debt		$	(26,385	)
Total Liabilities		$	(38,701	)
Net assets acquired		$	77,589

The total purchase price presented above excludes any contingent consideration paid or payable under the terms of the acquisition, which depends on the price at which VFS shareholders sell their EZCORP shares, should they choose to sell, by May 5, 2009. Between the closing of the acquisition and March 31, 2009, we paid $9.3 million of contingent consideration to VFS shareholders related to the sale of approximately 3.2 million EZCORP shares. At March 31, 2009, approximately 0.9 million shares remained eligible for contingent payments if the EZCORP shares are sold by May 5, 2009. In accordance with accounting rules for contingent payments based on the acquirer’s stock price, any contingent consideration paid must be recorded as a reduction of the additional paid-in capital recorded with the stock issuance and does not change the total recorded purchase price. See our registration statement on Form S-4 (File number 333-153703), as amended and filed with the SEC on December 2, 2008, for a detailed description of the procedure for calculation and payment of the contingent payments to VFS shareholders.

Separate audited historical financial statements of VFS for the year ended December 31, 2007 and unaudited interim financial statements for the nine months ended September 30, 2008 are presented in our registration statement on Form S-4 (File number 333-153703) filed with the SEC on December 2, 2008.

The results of the acquired stores have been consolidated with our results since their acquisition. The following table summarizes unaudited pro forma combined financial information assuming the acquisition had occurred on the first day of fiscal 2008. Although VFS’s historical fiscal year ends on a different date than that of EZCORP, all VFS data presented in the Pro Forma Combined Statements of Operations are actual amounts for the periods indicated. We have not finalized our purchase price allocation, and accordingly, this pro forma information does not include all potential adjustments to that allocation or costs related to the acquisition.

We expect to realize operating synergies and administrative savings. These will 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 condensed combined statements of operations do not include any potential operating efficiencies or cost savings from expected synergies. The unaudited pro forma condensed combined statements of operations are 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. As VFS was acquired

December 31, 2008, the information presented below for the three months ended March 31, 2009 includes the results from VFS, requiring no pro forma adjustments for that period.

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
		(Unaudited and Pro Forma)
		(In thousands, except per share amounts)
Revenues:
Sales		$	89,013			$	83,158			$	181,508			$	163,234
Pawn service charges			33,516				29,394				68,747				59,646
Signature loan fees			31,594				30,166				67,594				63,694
Auto title loan fees			415				—				636				—
Other			1,728				693				3,633				1,522
Total revenues			156,266				143,411				322,118				288,096
Cost of goods sold			56,426				49,692				114,002				98,472
Signature loan bad debt			5,072				6,632				14,556				16,302
Auto title loan bad debt			42				—				49				—
Net revenues			94,726				87,087				193,511				173,322
Operating expenses:
Operations			54,628				48,945				108,997				96,771
Administrative			9,794				11,412				25,562				23,904
Depreciation and amortization			3,151				3,614				6,490				6,924
(Gain) loss on sale/disposal of assets			(537	)			82				(792	)			295
Total operating expenses			67,036				64,053				140,257				127,894
Operating income			27,690				23,034				53,254				45,428
Interest expense, net			399				411				911				908
Equity in net income of unconsolidated affiliate			(1,371	)			(1,118	)			(2,312	)			(2,165	)
Other			2				—				27				—
Income before income taxes			28,660				23,741				54,628				46,685
Income tax expense			10,340				9,017				19,587				17,532
Net income		$	18,320			$	14,724			$	35,041			$	29,153
Net income per common share:
Basic		$	0.38			$	0.32			$	0.73			$	0.64
Diluted		$	0.37			$	0.31			$	0.72			$	0.62
Weighted average shares outstanding:
Basic			48,560				45,440				48,113				45,418
Diluted			49,272				47,286				48,968				47,299

The table above includes an actual (for the period ended March 31, 2009) or pro forma loss of interest income from cash paid to former VFS shareholders through March 31, 2009 for contingent consideration. It does not include a pro forma loss of interest income for any contingent payments that will be required on the sale of the 0.9 million EZCORP shares remaining eligible for contingent consideration at March 31, 2009, as we do not yet know the amount of contingent consideration we will pay related to those shares.

The following items occurred in the quarter ended December 31, 2007 and, as a result, are included in pro forma results for the six-month period ended March 31, 2008 but are excluded from the quarter then ended. Included in pro forma administrative expense in the six months ended March 31, 2008 is a non-recurring $1.2 million charge for the write-off of costs related to VFS’s previously planned initial public offering, which it abandoned to pursue the acquisition by EZCORP. Included in the pro forma administrative expense in the six months ended March 31, 2008 is a non-recurring charge of $0.8 million for the write-off of VFS’s in-process development of a point of sale system that was abandoned and has been replaced by EZCORP’s point of sale system.

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.

Components of basic and diluted earnings per share are as follows (in thousands, except per share amounts):

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
Net income (A)		$	18,320			$	13,016			$	33,148			$	25,571
Weighted average outstanding shares of common stock (B)			48,560				41,382				46,084				41,360
Dilutive effect of stock options, warrants, and restricted stock			712				1,846				855				1,881
Weighted average common stock and common stock equivalents (C)			49,272				43,228				46,939				43,241
Basic earnings per share (A/B)		$	0.38			$	0.31			$	0.72			$	0.62
Diluted earnings per share (A/C)		$	0.37			$	0.30			$	0.71			$	0.59

Anti-dilutive options, warrants and restricted stock grants have been excluded from the computation of diluted earnings per share because the assumed proceeds upon exercise, as defined by 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.

As described in Note C, we issued approximately 1.1 million shares of our Class A Non-voting Common Stock on November 13, 2008 and approximately 4.1 million shares on December 31, 2008 in conjunction with the completion of two acquisitions on those dates. The additional shares have been included in our calculations of weighted average shares outstanding since the dates of the acquisitions. The year-to-date dilutive effect of the additional shares will increase in the remainder of fiscal 2009 as they are outstanding for a larger portion of the year.

Note E: Investment in Unconsolidated Affiliate

At March 31, 2009, we owned 16,298,875 common shares of Albemarle & Bond Holdings, plc, or approximately 29.61% of Albemarle & Bond’s total outstanding shares. The investment is accounted for 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 interim and 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, 2009 represents our percentage interest in the results of Albemarle & Bond’s operations from July 1, 2008 to December 31, 2008.

Below is summarized financial information for Albemarle & Bond’s most recently reported results (using average exchange rates for the periods indicated):

		Six Months Ended December 31,
		2008				2007
		(in thousands)
Turnover (gross revenues)		$	45,977			$	50,660
Gross profit			34,859				36,574
Profit after tax (net income)			7,718				7,230

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

Certain revenues, expenses, gains and losses are excluded from net income and instead are included as a component of total stockholders’ equity. Comprehensive income includes these items plus all items recognized in net income. Comprehensive income for the quarter and year-to-date periods ended March 31, 2009 was $13.9 million and $22.9 million. For the comparable 2008 periods, comprehensive income was $12.9 million and $25.9 million. The difference between comprehensive income and net income results primarily from the effect of foreign currency translation adjustments determined in accordance with SFAS No. 52, “Foreign Currency Translation.” At March 31, 2009, the accumulated balance of foreign currency activity excluded from net income was $(11.8) million, net of tax of $4.1 million. The net $(7.7) million is presented as “Accumulated other comprehensive income (loss)” in the balance sheet at March 31, 2009.

Note H: Long-term Debt

Our syndicated credit agreement provides for, among other things, (i) an $80 million revolving credit facility, maturing 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. The term loan requires quarterly principal payments of $2.5 million plus accrued interest, the first of which was made April 3, 2009. At March 31, 2009, the full $40 million was outstanding under the term loan, but the $80 million revolving credit facility remained unused.

Pursuant to the credit agreement, we may choose either a Eurodollar rate or the base rate. From December 31, 2008 through the date we report to the lenders our interim results for the period ending June 30, 2009, we may choose to pay interest to the lenders for outstanding borrowings at the Eurodollar rate plus 250 basis points or the base rate plus 50 basis points, regardless of the leverage ratio during that period. After this initial period, interest accrues at the Eurodollar rate plus 175 to 250 basis points or the base rate plus 0 to 50 basis points, depending upon the leverage ratio computed at the end of each calendar quarter. On the unused amount of the revolving credit facility, we pay a commitment fee of 25 to 30 basis points depending on the 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, 2009 and expect to remain in compliance based on our current and anticipated performance. The payment of dividends is prohibited and additional debt is restricted.

Upon acquiring VFS, we assumed VFS’s outstanding debt of $30.4 million. Immediately after the acquisition, on December 31, 2008, we repaid and terminated VFS’s outstanding bank debt of $30.1 million plus accrued interest. The remaining $0.3 million of VFS’s debt we assumed in the acquisition was comprised of outstanding debentures that we repaid and retired in early January 2009 with no prepayment penalty.

Deferred financing costs of $1.0 million related to our credit agreement are included in Other assets, net in our March 31, 2009 balance sheet. These costs are being amortized to interest expense over their three-year estimated useful life.

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, 2009				March 31, 2008				September 30, 2008
		(In thousands)
Pawn licenses		$	7,749			$	1,549			$	1,549
Trade Name			4,870				—				—
Goodwill			99,008				24,422				24,376
Total		$	111,627			$	25,971			$	25,925

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, 2009								March 31, 2008								September 30, 2008
		Carrying				Accumulated				Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization				Amount				Amortization
		(In thousands)
License application fees		$	345			$	(329	)		$	345			$	(304	)		$	345			$	(318	)
Real estate finders’ fees			556				(353	)			556				(336	)			556				(345	)
Non-compete agreements			2,405				(945	)			2,917				(569	)			2,899				(829	)
Favorable lease asset			644				(23	)			—				—				—				—
Total		$	3,950			$	(1,650	)		$	3,818			$	(1,209	)		$	3,800			$	(1,492	)

Total amortization expense from definite-lived intangible assets for the quarter and year-to-date periods ended March 31, 2009 was approximately $114,000 and $238,000. For the comparable 2008 periods, amortization expense was approximately $152,000 and $268,000. The favorable lease asset is amortized to rent expense and is included in Operations Expense on our income statements. 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, 2008, including the effect of acquisitions in the six months ended March 31, 2009 (in thousands):

Fiscal Year		Amortization Expense
2009		$	460
2010		$	446
2011		$	439
2012		$	407
2013		$	29

As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates.

Note J: Common Stock, Warrants, Options, and Share-based Compensation

Our income includes the following share-based compensation expense, determined in accordance with the fair value provisions of SFAS No. 123(R):

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2009				2008				2009				2008
		(in thousands)
Gross compensation cost		$	723			$	1,068			$	1,782			$	1,924
Income tax benefit			(306	)			(331	)			(625	)			(599	)
Share-based compensation cost, net of tax benefit		$	417			$	737			$	1,157			$	1,325

Stock option and warrant exercises resulted in the issuance of 67,314 shares of Class A Non-voting Common Stock in the current quarter for total proceeds of $0.2 million. For the current year-to-date period, 1,447,414 shares of Class A Non-voting Common Stock were issued for total proceeds of approx. $4.7 million. Also, on October 2,

2008, restrictions lapsed on 324,000 restricted shares granted in October 2006 to our Chief Executive Officer and the Chairman of our Board of Directors. On January 14, 2009, restrictions lapsed on 120,000 restricted shares granted in January 2004 to our Chief Executive Officer. These restriction lapses resulted in the increase in the shares of Class A Non-voting Common Stock outstanding.

Effective October 1, 2008, the Compensation Committee of the Board of Directors approved an award of restricted stock to 54 key employees and the Board of Directors approved an award of restricted stock to our independent directors. In total, we awarded 143,500 shares of restricted stock. The key employees’ awards will vest October 1, 2011 and the independent directors’ awards will vest 50% per year on October 1, 2009 and 2010. The aggregate market value of the restricted stock on the award date was $2.6 million.

In conjunction with the November 13, 2008 acquisition of 11 pawnshops in the Las Vegas, Nevada area, we issued approximately 1.1 million shares of our Class A Non-voting Common Stock valued at $17.3 million. In conjunction with the December 31, 2008 acquisition of VFS, we issued approximately 4.1 million shares of our Class A Non-voting Common Stock valued at $64.6 million. Both of these acquisitions and the total consideration issued are described more fully in Note C, “Acquisitions.”

Note K: Income Taxes

Upon adoption of FIN 48 in October 2007, we recorded a liability for an uncertain state tax position of $0.1 million. The statutes of limitation related to this recorded liability expire between June 15, 2009 and June 15, 2011. In the fourth quarter of fiscal 2008, we recorded an additional liability for potential interest on an uncertain federal tax position of $0.4 million. In the quarter ended December 31, 2008, we filed a tax accounting method change with the IRS, absolving us of the exposure to this interest, and adjusted our effective tax rate to remove the $0.4 million additional liability recorded at September 30, 2008. The remaining FIN 48 liability at March 31, 2009 is the $0.1 million recorded upon adoption of FIN 48.

We are subject to U.S. and Mexican income taxes as well as various other state and local jurisdictions. With few exceptions, we are no longer subject to examinations by tax authorities for years before the tax year ended September 30, 2003.

The current quarter’s effective tax rate is 36.1% of pretax income compared to 37.7% for the prior year quarter. For the current year-to-date period, the effective tax rate is 35.7% compared to 37.7% in the prior year-to-date period. The decrease in effective tax rate between the current periods and the prior year periods is due primarily to a larger expected foreign tax credit related to Albemarle & Bond and a lower Texas margins tax than expected in the prior year-to-date period. Also decreasing the effective tax rate in the current year-to-date period was the $0.4 million reduction of the FIN 48 liability discussed above. Somewhat offsetting these rate reductions is a slight increase in the effective tax rate due to higher expected state taxes arising from the VFS acquisition.

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 domestic pawn stores, offers signature loans in 77 pawn stores and six EZMONEY stores and offers auto title loans in 32 pawn stores.
	•		The Empeño Fácil segment offers pawn related activities in 45 Mexico pawn stores.
	•		The EZMONEY Operations segment offers signature loans in 476 domestic EZMONEY stores and offers auto title loans in 139 of these 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, 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
Three Months Ended March 31, 2008:
Revenues:
Sales		$	59,747			$	1,583			$	—			$	61,330
Pawn service charges			20,720				1,065				—				21,785
Signature loan fees			672				—				29,494				30,166
Auto title loan fees			—				—				—				—
Other			341				3				—				344
Total revenues			81,480				2,651				29,494				113,625
Cost of goods sold			35,784				947				—				36,731
Signature loan bad debt			167				—				6,465				6,632
Auto title loan bad debt			—				—				—				—
Net revenues			45,529				1,704				23,029				70,262
Operations expense			23,978				904				14,017				38,899
Store operating income		$	21,551			$	800			$	9,012			$	31,363

		U.S. Pawn				Empeño				EZMONEY
		Operations				Fácil				Operations				Consolidated
		(in thousands)
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
Six Months Ended March 31, 2008:
Revenues:
Sales		$	113,948			$	2,889			$	—			$	116,837
Pawn service charges			42,710				1,983				—				44,693
Signature loan fees			1,481				—				62,213				63,694
Auto title loan fees			—				—				—				—
Other			703				4				—				707
Total revenues			158,842				4,876				62,213				225,931
Cost of goods sold			68,552				1,720				—				70,272
Signature loan bad debt			539				—				15,763				16,302
Auto title loan bad debt			—				—				—				—
Net revenues			89,751				3,156				46,450				139,357
Operations expense			48,000				1,745				27,690				77,435
Store operating income		$	41,751			$	1,411			$	18,760			$	61,922

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,
		2009				2008				2009				2008
		(in thousands)
Consolidated store operating income		$	40,098			$	31,363			$	75,303			$	61,922
Administrative expenses			9,794				8,451				20,205				16,891
Depreciation and amortization			3,151				3,119				6,217				5,946
(Gain) / loss on sale / disposal of assets			(537	)			81				(821	)			243
Interest income			(72	)			(137	)			(198	)			(194	)
Interest expense			471				75				636				156
Equity in net income of unconsolidated affiliate			(1,371	)			(1,118	)			(2,312	)			(2,165	)
Other			2				—				27				—
Consolidated income before income taxes		$	28,660			$	20,892			$	51,549			$	41,045

The following table presents separately identified segment assets:

		U.S. Pawn				Empeño				EZMONEY
		Operations				Fácil				Operations				Consolidated
		(in thousands)
Assets at March 31, 2009:
Pawn loans		$	76,092			$	3,267			$	—			$	79,359
Payday loans, net			422				—				5,998				6,420
Auto title loans, net			759				—				115				874
Inventory, net			53,273				2,752				—				56,025
Total separately identified recorded segment assets		$	130,546			$	6,019			$	6,113			$	142,678
Brokered loans outstanding from unaffiliated lenders		$	233			$	—			$	17,818			$	18,051
Assets at March 31, 2008:
Pawn loans		$	53,243			$	3,458			$	—			$	56,701
Payday loans, net			392				—				4,898				5,290
Auto title loans, net			—				—				—				—
Inventory, net			34,484				1,515				—				35,999
Total separately identified recorded segment assets		$	88,119			$	4,973			$	4,898			$	97,990
Brokered loans outstanding from unaffiliated lenders		$	339			$	—			$	19,877			$	20,216
Assets at September 30, 2008:
Pawn loans		$	71,393			$	4,543			$	—			$	75,936
Payday loans, net			472				—				6,652				7,124
Auto title loans, net			—				—				1				1
Inventory, net			40,357				2,852				—				43,209
Total separately identified recorded segment assets		$	112,222			$	7,395			$	6,653			$	126,270
Brokered loans outstanding from unaffiliated lenders		$	384			$	—			$	23,169			$	23,553

Brokered loans are not recorded as an asset on our balance sheet, as we do not own a participation in the loans made by independent lenders. We monitor the principal balance of these loans, as our credit service fees and bad debt are directly related to their volume due to the letters of credit we issue on these loans. The balances shown above are the gross principal balances of the loans outstanding at the specified dates.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion in this section contains forward-looking statements that are based on our current expectations. Actual results could differ materially from those expressed or implied by the forward-looking statements due to a number of risks, uncertainties and other factors identified in Part II, Item 1A, “Risk Factors” of this report.

Three Months Ended March 31, 2009 vs. Three Months Ended March 31, 2008

The following table presents selected, unaudited, consolidated financial data for our three-month periods ended March 31, 2009 and 2008 (the current and prior year quarters):

		Three Months Ended March 31,								Percentage
		2009				2008				Change
		(in thousands)
Net revenues:
Sales		$	89,013			$	61,330				45.1	%
Pawn service charges			33,516				21,785				53.8	%
Signature loan fees			31,594				30,166				4.7	%
Auto title loan fees			415				—				N/A
Other			1,728				344				402.3	%
Total revenues			156,266				113,625				37.5	%
Cost of goods sold			56,426				36,731				53.6	%
Signature loan bad debt			5,072				6,632				(23.5	)%
Auto title loan bad debt			42				—				N/A
Net revenues		$	94,726			$	70,262				34.8	%
Net income		$	18,320			$	13,016				40.7	%