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

For the transition period from                      to                     

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 (Address of principal executive offices)		78746 (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 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 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 December 31, 2010, 46,952,495 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 December 31, 2010, December 31, 2009 and September 30, 2010 (audited)		1
Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2010 and 2009		2
Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 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		17
Item 3. Quantitative and Qualitative Disclosures about Market Risk		28
Item 4. Controls and Procedures		30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		31
Item 1A. Risk Factors		31
Item 6. Exhibits		32
SIGNATURE		33
EXHIBIT INDEX		34
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

		December 31,				December 31,				September 30,
		2010				2009				2010
		(Unaudited)				(Unaudited)
						(In thousands)
Assets:
Current assets:
Cash and cash equivalents		$	23,908			$	17,032			$	25,854
Pawn loans			124,388				103,446				121,201
Signature loans, net			11,953				8,934				10,775
Auto title loans, net			3,307				2,110				3,145
Pawn service charges receivable, net			24,068				19,662				21,626
Signature loan fees receivable, net			6,141				6,044				5,818
Auto title loan fees receivable, net			1,600				827				1,616
Inventory, net			77,677				63,515				71,502
Deferred tax asset			23,248				15,671				23,208
Prepaid expenses and other assets			20,724				20,654				17,427
Total current assets			317,014				257,895				302,172
Investments in unconsolidated affiliates			108,959				90,455				101,386
Property and equipment, net			66,641				52,378				62,293
Deferred tax asset, non-current			—				5,011				60
Goodwill			128,181				101,134				117,305
Other assets, net			24,252				19,931				23,196
Total assets		$	645,047			$	526,804			$	606,412
Liabilities and stockholders’ equity:
Current liabilities:
Current maturities of long-term debt		$	10,000			$	10,000			$	10,000
Accounts payable and other accrued expenses			48,986				39,692				49,663
Customer layaway deposits			5,950				2,697				6,109
Federal income taxes payable			5,267				6,480				3,687
Total current liabilities			70,203				58,869				69,459
Long-term debt, less current maturities			12,500				22,500				15,000
Deferred tax liability			1,619				—				—
Deferred gains and other long-term liabilities			2,419				2,840				2,525
Total liabilities			86,741				84,209				86,984
Commitments and contingencies
Stockholders’ equity:
Class A Non-voting Common Stock, par value $.01 per share; Authorized 54 million shares; issued and outstanding: 46,952,495 at December 31, 2010; 45,761,998 at December 31, 2009; and 46,256,051 at September 30, 2010			469				458				463
Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; issued and outstanding: 2,970,171			30				30				30
Additional paid-in capital			229,789				218,284				225,374
Retained earnings			327,365				228,349				299,936
Accumulated other comprehensive loss			653				(4,526	)			(6,375	)
Total stockholders’ equity			558,306				442,595				519,428
Total liabilities and stockholders’ equity		$	645,047			$	526,804			$	606,412

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

Condensed Consolidated Statements of Operations (Unaudited)

		Three Months Ended
		December 31,
		2010				2009
		(In thousands, except per share
		amounts)
Revenues:
Sales		$	118,395			$	99,918
Pawn service charges			49,810				40,797
Signature loan fees			40,066				38,678
Auto title loan fees			6,244				3,102
Other			4,311				2,256
Total revenues			218,826				184,751
Cost of goods sold			73,566				62,570
Signature loan bad debt			10,046				8,790
Auto title loan bad debt			982				460
Net revenues			134,232				112,931
Operating expenses:
Operations			64,504				58,181
Administrative			26,138				12,297
Depreciation and amortization			4,179				3,356
Loss on sale / disposal of assets			7				211
Total operating expenses			94,828				74,045
Operating income			39,404				38,886
Interest income			(3	)			(8	)
Interest expense			300				365
Equity in net income of unconsolidated affiliates			(3,367	)			(1,283	)
Other			(61	)			(15	)
Income before income taxes			42,535				39,827
Income tax expense			15,106				14,120
Net income		$	27,429			$	25,707
Net income per common share:
Basic		$	0.55			$	0.53
Diluted		$	0.55			$	0.52
Weighted average shares outstanding:
Basic			49,698				48,722
Diluted			50,119				49,400

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

Condensed Consolidated Statements of Cash Flows (Unaudited)

		Three Months Ended
		December 31,
		2010				2009
		(In thousands)
Operating Activities:
Net income		$	27,429			$	25,707
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			4,179				3,356
Signature loan and auto title loan loss provisions			4,205				2,938
Deferred taxes			1,639				1,300
Loss on sale or disposal of assets			7				211
Stock compensation			8,548				1,056
Income from investments in unconsolidated affiliates			(3,367	)			(1,283	)
Changes in operating assets and liabilities, net of business acquisitions:
Service charges and fees receivable, net			(2,417	)			(2,198	)
Inventory, net			(1,754	)			197
Prepaid expenses, other current assets, and other assets, net			(3,775	)			(5,659	)
Accounts payable and accrued expenses			(811	)			5,654
Customer layaway deposits			(234	)			(1,482	)
Deferred gains and other long-term liabilities			(108	)			(414	)
Excess tax benefit from stock compensation			(3,065	)			(23	)
Federal income taxes			4,675				5,967
Net cash provided by operating activities			35,151				35,327
Investing Activities:
Loans made			(152,860	)			(128,315	)
Loans repaid			91,380				77,849
Recovery of pawn loan principal through sale of forfeited collateral			50,833				45,256
Additions to property and equipment			(7,934	)			(4,470	)
Acquisitions, net of cash acquired			(13,700	)			(31	)
Investments in unconsolidated affiliates			—				(50,932	)
Dividends from unconsolidated affiliates			1,811				—
Net cash used in investing activities			(30,470	)			(60,643	)
Financing Activities:
Proceeds from exercise of stock options			204				61
Excess tax benefit from stock compensation			3,065				23
Taxes paid related to net share settlement of equity awards			(7,396	)			—
Payments on bank borrowings			(2,500	)			(2,500	)
Net cash used in financing activities			(6,627	)			(2,416	)
Change in cash and cash equivalents			(1,946	)			(27,732	)
Cash and cash equivalents at beginning of period			25,854				44,764
Cash and cash equivalents at end of period		$	23,908			$	17,032
Non-cash Investing and Financing Activities:
Pawn loans forfeited and transferred to inventory		$	54,405			$	44,872
Foreign currency translation adjustment		$	(6,537	)		$	(94	)
Acquisition-related stock issuance		$	—			$	(31	)

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

EZCORP, Inc. and Subsidiaries

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)
December 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, 2010. The balance sheet at September 30, 2010 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-month period ended December 31, 2010 (the “current quarter”) 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 investments 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 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 value of the property. We record sales revenue and the related cost when this inventory is sold, or when we receive the final payment on a layaway sale. Sales tax collected upon the sale of inventory is excluded from the amount recognized as sales and instead recorded as a liability in “Accounts payable and other accrued expenses” 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 fees and late fees. 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 loan principal, accrued interest, insufficient funds fees and late 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 December 31, 2010, the allowance for Expected LOC Losses on signature loans was $1.7 million and our maximum exposure for losses on letters of credit, if all brokered signature loans defaulted and none was collected, was $27.9 million. This amount includes principal, interest, insufficient funds fees and late 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 fees. 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 December 31, 2010, the allowance was $0.3 million and our maximum exposure for losses on letters of credit, if all brokered auto title loans defaulted and none was collected, was $8.0 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.

Cash and Cash Equivalents and Cash Concentrations: Cash and cash equivalents consist primarily of cash on deposit or highly liquid investments or mutual funds with original contractual maturities of three months or less. We hold cash at major financial institutions that often exceed FDIC insured limits. We manage our credit risk associated with cash and cash equivalents and cash concentrations by investing in high quality instruments or funds, concentrating our cash deposits in high quality financial institutions and by periodically evaluating the credit quality of the primary financial institutions issuing investments or holding such deposits. Historically, we have not experienced any losses due to such cash concentrations.

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 value, we record an allowance for excess, obsolete or slow-moving inventory based on the type and age of merchandise. At December 31, 2010, the inventory valuation allowance was $6.4 million or 7.6% 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 30 years for buildings and 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 $117.3 million at December 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, significant negative industry trends or legislative changes prohibiting us from offering our loan products. 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.

Fair Value of Financial Instruments: We have elected not to measure at fair value any eligible items for which fair value measurement is optional. 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. 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.

Foreign Currency Translation: Our equity investments in Albemarle & Bond and Cash Converters are translated from British pounds and Australian dollars, respectively, into U.S. dollars at the exchange rates as of the investees’ balance sheet date. The 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 and the functional currency of our wholly-owned foreign subsidiary CASHMAX is the Canadian dollar. Empeño Fácil’s and CASHMAX’s balance sheet accounts are translated from their respective functional currencies into U.S. dollars at the exchange rate at the end of each quarter, and their earnings are translated into U.S. dollars at the average exchange rate each quarter. We present resulting translation adjustments from Albemarle & Bond, Cash Converters, Empeño Fácil and CASHMAX 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.

Stock Compensation: We account for stock compensation in accordance with the fair value recognition provisions of FASB ASC 718-10-25 (Compensation — Stock Compensation). 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. We have not granted any stock options since fiscal 2007. When granted, our policy is to 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 ratable basis over the options’ vesting periods.

Recently Issued Accounting Pronouncements: In June 2009, FASB amended ASC 810-10-65 (Consolidation). 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 adopted this amended standard October 1, 2010, resulting in no effect on our financial position, results of operations or cash flows.

In July 2010, FASB issued Accounting Standards Update (“ASU”) 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” This update amends FASB ASC 310 (Receivables) to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide new disclosures about its financing receivables and related allowance for credit losses. We adopted this amended standard on October 1, 2010, resulting in no effect on our financial position, results of operations or cash flows. The additional required disclosures are included in Note M.

Note C: Acquisitions

Between June and September 2010, we acquired, through asset purchases, five pawn stores located in the Chicago metropolitan area, eight pawn stores located in Central and South Florida, two pawn stores located in Corpus Christi, Texas and one pawn store in Las Vegas, Nevada for approximately $21.8 million in cash. The stores were acquired from five separate sellers. We recorded approximately $4.9 million of net tangible assets and $1.0 million of intangible assets attributable to non-compete agreements and a pawn license. Goodwill of $15.9 million, which is expected to be fully tax deductible, was recorded in the U.S. Pawn Operations segment as part of these acquisitions. The factors contributing to the recognition of goodwill were based on several strategic and synergistic benefits we expect to realize from the acquisitions. These benefits include our initial entry into Chicago, a greater presence in prime pawn markets and the ability to further leverage our expense structure through increased scale.

In the quarter ended December 31, 2010, we acquired three pawn stores located in the Chicago metropolitan area and one pawn store located in Marietta, Georgia for approximately $13.7 million in cash. The stores were acquired from four separate sellers. One of the stores in Chicago was acquired by purchasing all of the capital stock of the corporation that owned it, and the other three were acquired through asset purchases. We recorded approximately $2.8 million of net tangible assets, $0.1 million of intangible assets attributable to non-compete agreements and $10.8 million of goodwill, all of which was recorded in the U.S. Pawn Operations segment. Of the total goodwill, $6.1 million is expected to be fully tax deductible and $4.7 million is expected to be non-deductible. The factors contributing to the recognition of goodwill were based on several strategic and synergistic benefits we expect to realize from the acquisitions. These benefits include a greater presence in a prime pawn market and the ability to further leverage our expense structure through increased scale.

All stores were acquired as part of our continuing strategy to acquire domestic pawn stores to enhance and diversify our earnings. Transaction related expenses were not material and were expensed as incurred. The results of all acquired stores have been consolidated with our results since their acquisition. The purchase price allocation of stores acquired in the twelve months ended December 31, 2010 is preliminary as we continue to receive information

regarding the acquired assets. Pro forma results of operations have not been presented because the acquisitions were not significant on either an individual or an aggregate basis.

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 and restricted stock awards.

Potential common shares are required to be excluded from the computation of diluted earnings per share if the assumed proceeds upon exercise or vest, as defined by FASB ASC 718-10-25, are 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. In the periods presented, we had no such potential common shares that were anti-dilutive.

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

		Three Months Ended
		December 31,
		2010				2009
Net income (A)		$	27,429			$	25,707
Weighted average outstanding shares of common stock (B)			49,698				48,722
Dilutive effect of stock options, warrants, and restricted stock			421				678
Weighted average common stock and common stock equivalents (C)			50,119				49,400
Basic earnings per share (A/B)		$	0.55			$	0.53
Diluted earnings per share (A/C)		$	0.55			$	0.52
Potential common shares excluded from the calculation of diluted earnings per share			—				—

Note E: Strategic Investments and Fair Value of Financial Instruments

At December 31, 2010, we owned 16,644,640 common shares of Albemarle & Bond Holdings, PLC, representing almost 30% of its total outstanding shares. Our total cost for those shares was approximately $27.6 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 quarter ended December 31, 2010 represents our percentage interest in the estimated results of Albemarle & Bond’s operations from July 1, 2010 to September 30, 2010.

In its functional currency of British pounds, Albemarle & Bond’s total assets increased 7% from June 30, 2009 to June 30, 2010 and its net income improved 35% for the year ended June 30, 2010. 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 June 30 of each year for balance sheet items and average exchange rates for the income statement items for the periods indicated):

		As of June 30,
		2010				2009
		(In thousands)
Current assets		$	97,476			$	102,034
Non-current assets			52,325				51,980
Total assets		$	149,801			$	154,014
Current liabilities		$	17,898			$	13,247
Non-current liabilities			42,078				55,729
Shareholders’ equity			89,825				85,038
Total liabilities and shareholders’ equity		$	149,801			$	154,014

		Years ended June 30,
		2010				2009
		(in thousands)
Turnover (gross revenues)		$	129,794			$	89,712
Gross profit			84,850				68,572
Profit for the year (net income)			22,792				17,239

At December 31, 2010, we owned 124,418,000 shares, or approximately 33% of the total common shares of Cash Converters International Limited, which is a publicly traded company headquartered in Perth, Australia. We acquired the shares between November 2009 and May 2010 for approximately $57.8 million. Cash Converters franchises and operates a worldwide network of over 600 specialty financial services and retail stores that provide pawn loans, short-term unsecured loans and other consumer finance products, and buy and sell second-hand goods. Cash Converters has significant store concentrations in Australia and the United Kingdom.

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 quarter ended December 31, 2010 include our percentage interest in the estimated results of Cash Converters’ operations from July 1, 2010 to September 30, 2010. Our results for the quarter ended December 31, 2009 reflect no contribution from Cash Converters as the contribution was first reflected in our results three months after our initial investment date of November 6, 2009.

In its functional currency of Australian dollars, Cash Converters’ total assets increased 72% from June 30, 2009 to June 30, 2010 and its net income improved 34% for the year ended June 30, 2010. Below is summarized financial information for Cash Converters’ most recently reported results after translation to U.S. dollars (using the exchange rate as of June 30 of each year for balance sheet items and average exchange rates for the income statement items for the periods indicated):

		As of June 30,
		2010				2009
		(In thousands)
Current assets		$	96,489			$	37,477
Non-current assets			72,408				54,900
Total assets		$	168,897			$	92,377
Current liabilities		$	19,179			$	14,523
Non-current liabilities			10,199				11,467
Shareholders’ equity			139,519				66,387
Total liabilities and shareholders’ equity		$	168,897			$	92,377

		Years ended June 30,
		2010				2009
		(in thousands)
Gross revenues		$	112,733			$	70,916
Gross profit			85,811				52,984
Profit for the year (net income)			19,122				12,084

The table below summarizes the recorded value and fair value of each of these strategic investments at the dates indicated. These fair values are considered level one estimates within the fair value hierarchy of FASB ASC 820-10-50, and 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.

		December 31, 2010				December 31, 2009				September 30, 2010
		(In thousands of U.S. dollars)
Albemarle & Bond:
Recorded value		$	45,684			$	40,832			$	43,127
Fair value			81,630				69,091				75,520
Cash Converters:
Recorded value			63,275				49,623				58,259
Fair value			88,512				63,789				70,005

Included in “Other Assets, net” on our balance sheets are available for sale securities with a fair value of $5.2 million at December 31, 2010, $2.3 million at December 31, 2009 and $4.9 million at September 30, 2010. This is considered to be a level one measurement of fair value as it is based on the ending market price for the securities at that date, as quoted on an active public securities exchange.

Note F: Goodwill and Other Intangible Assets

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

		December 31, 2010				December 31, 2009				September 30, 2010
		(In thousands)
Pawn licenses		$	8,836			$	8,229			$	8,836
Trade name			4,870				4,870				4,870
Goodwill			128,181				101,134				117,305
Total		$	141,887			$	114,233			$	131,011

The following table presents the changes in the carrying value of goodwill, by segment, over the periods presented:

		U.S. Pawn								EZMONEY
		Operations				Empeño Fácil				Operations				Consolidated
		(in thousands)
Balance at September 30, 2010		$	110,255			$	7,050			$	—			$	117,305
Acquisitions			10,793				—				—				10,793
Effect of foreign currency translation changes			—				83				—				83
Balance at December 31, 2010		$	121,048			$	7,133			$	—			$	128,181

		U.S. Pawn								EZMONEY
		Operations				Empeño Fácil				Operations				Consolidated
		(in thousands)
Balance at September 30, 2009		$	94,192			$	6,527			$	—			$	100,719
Post-closing purchase price allocation adjustments for prior year acquisitions			193				—				—				193
Effect of foreign currency translation changes			—				222				—				222
Balance at December 31, 2009		$	94,385			$	6,749			$	—			$	101,134

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

		December 31, 2010								December 31, 2009								September 30, 2010
		Carrying				Accumulated				Carrying				Accumulated				Carrying				Accumulated
		Amount				Amortization				Amount				Amortization				Amount				Amortization
		(In thousands)
License application fees		$	345			$	(345	)		$	345			$	(342	)		$	345			$	(345	)
Real estate finders’ fees			1,029				(420	)			665				(377	)			948				(401	)
Non-compete agreements			3,216				(2,040	)			2,587				(1,354	)			3,081				(1,834	)
Favorable lease			644				(241	)			644				(126	)			644				(219	)
Other			46				(7	)			11				(1	)			48				(6	)
Total		$	5,280			$	(3,053	)		$	4,252			$	(2,200	)		$	5,066			$	(2,805	)

The amortization of most definite lived intangible assets is recorded as amortization expense. The favorable lease asset and other intangibles are amortized to Operations expense (rent expense) over the related lease terms. The following table presents the amount and classification of amortization recognized as expense in each of the periods presented (in thousands):

		Three Months Ended
		December 31,
		2010				2009
Amortization expense		$	212			$	126
Operations expense			23				32
Total expense from the amortization of definite-lived intangible assets		$	235			$	158

The following table presents our estimate of the amount and classification of amortization expense for definite-lived intangible assets for each of the five succeeding full fiscal years beginning October 1, 2010 (in thousands):

Fiscal Year		Amortization Expense				Operations Expense
2011		$	790			$	98
2012		$	635			$	75
2013		$	159			$	63
2014		$	74			$	52
2015		$	65			$	38

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

Note G: 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. Our term loan requires $2.5 million quarterly principal payments. At December 31, 2010, $22.5 million was outstanding under the term loan and bank

letters of credit totaling $5.0 were outstanding, leaving $75 million available on our revolving credit facility. The outstanding bank letters of credit secure 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 December 31, 2010. 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.

Deferred financing costs of $0.4 million related to our credit agreement are included in Other assets, net in our December 31, 2010 balance sheet. These costs are being amortized to interest expense over their three-year estimated useful life.

Note H: Stock Compensation

Our net income includes the following compensation costs related to our stock compensation arrangements:

		Three Months Ended December 31,
		2010				2009
		(in thousands)
Gross compensation cost		$	8,548			$	1,056
Income tax benefits			(2,974	)			(358	)
Stock compensation cost, net of tax benefit		$	5,574			$	698

Included in the compensation cost for the three months ended December 31, 2010 is $7.3 million for the accelerated vesting of restricted stock upon the retirement of our former Chief Executive Officer on October 31, 2010, and a related $2.5 million income tax benefit. Stock option exercises resulted in the issuance of 22,800 shares of our Class A Non-voting Common Stock in the current quarter for total proceeds of $0.2 million. All options and restricted stock relate to our Class A Non-voting Common Stock.

Note I: Income Taxes

The current quarter’s effective tax rate is 35.5% for both the current and prior year quarters.

Note J: 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 K: 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 quarters ended December 31, 2010 and 2009 was $34.5 million and $25.8 million. The difference between comprehensive income and net income results primarily from the effect of foreign currency translation adjustments and the unrealized gain or loss on available for sale securities. At December 31, 2010, the accumulated balance of net foreign currency and unrealized gain activity excluded from net income was $2.1 million, net of applicable tax of $1.4 million. The net $0.7 million is presented as “Accumulated other comprehensive income (loss)” in the balance sheet at December 31, 2010.

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 396 U.S. pawn stores, offers signature loans in 29 pawn stores and six EZMONEY stores and offers auto title loans in 44 pawn stores.
	•		The Empeño Fácil segment offers pawn related activities in 132 Mexico pawn stores.
	•		The EZMONEY Operations segment offers signature loans in 442 U.S. EZMONEY stores and 56 Canadian CASHMAX stores. The segment also offers auto title loans in 403 of its U.S. 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 December 31, 2010:
Revenues:
Merchandise sales		$	62,341			$	5,389			$	—			$	67,730
Scrap sales			47,006				3,462				197				50,665
Pawn service charges			46,436				3,374				—				49,810
Signature loan fees			509				—				39,557				40,066
Auto title loan fees			393				—				5,851				6,244
Other			4,081				189				41				4,311
Total revenues			160,766				12,414				45,646				218,826
Merchandise cost of goods sold			38,197				3,114				—				41,311
Scrap cost of goods sold			29,538				2,638				79				32,255
Signature loan bad debt			165				—				9,881				10,046
Auto title loan bad debt			61				—				921				982
Net revenues			92,805				6,662				34,765				134,232
Operations expense			43,196				4,278				17,030				64,504
Store operating income		$	49,609			$	2,384			$	17,735			$	69,728
Three Months Ended December 31, 2009:
Revenues:
Merchandise sales		$	59,211			$	3,265			$	—			$	62,476
Scrap sales			36,823				607				12				37,442
Pawn service charges			38,941				1,856				—				40,797
Signature loan fees			553				—				38,125				38,678
Auto title loan fees			475				—				2,627				3,102
Other			2,167				89				—				2,256
Total revenues			138,170				5,817				40,764				184,751
Merchandise cost of goods sold			36,906				2,358				—				39,264
Scrap cost of goods sold			22,824				475				7				23,306
Signature loan bad debt			186				—				8,604				8,790
Auto title loan bad debt			70				—				390				460
Net revenues			78,184				2,984				31,763				112,931
Operations expense			40,199				2,164				15,818				58,181
Store operating income		$	37,985			$	820			$	15,945			$	54,750

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

		Three Months Ended
		December 31,
		2010				2009
Consolidated store operating income		$	69,728			$	54,750
Administrative expenses			26,138				12,297
Depreciation and amortization			4,179				3,356
Loss on sale / disposal of assets			7				211
Interest income			(3	)			(8	)
Interest expense			300				365
Equity in net income of unconsolidated affiliates			(3,367	)			(1,283	)
Other			(61	)			(15	)
Consolidated income before income taxes		$	42,535			$	39,827

The following table presents separately identified segment assets:

		U.S. Pawn				Empeño				EZMONEY
		Operations				Fácil				Operations				Consolidated
		(in thousands)
Assets at December 31, 2010:
Pawn loans		$	117,583			$	6,805			$	—			$	124,388
Signature loans, net			454				—				11,499				11,953
Auto title loans, net			700				—				2,607				3,307
Service charges and fees receivable, net			23,301				1,024				7,484				31,809
Inventory, net			71,865				5,761				51				77,677
Goodwill			121,048				7,133				—				128,181
Total separately identified recorded segment assets		$	334,951			$	20,723			$	21,641			$	377,315
Brokered signature loans outstanding from unaffiliated lenders		$	242			$	—			$	24,580			$	24,822
Brokered auto title loans outstanding from unaffiliated lenders		$	213			$	—			$	7,332			$	7,545
Assets at December 31, 2009:
Pawn loans		$	99,326			$	4,120			$	—			$	103,446
Signature loans, net			426				—				8,508				8,934
Auto title loans, net			756				—				1,354				2,110
Service charges and fees receivable, net			19,347				571				6,615				26,533
Inventory, net			60,899				2,614				2				63,515
Goodwill			94,385				6,749				—				101,134
Total separately identified recorded segment assets		$	275,139			$	14,054			$	16,479			$	305,672
Brokered signature loans outstanding from unaffiliated lenders		$	299			$	—			$	25,200			$	25,499
Brokered auto title loans outstanding from unaffiliated lenders		$	367			$	—			$	3,921			$	4,288
Assets at September 30, 2010:
Pawn loans		$	113,944			$	7,257			$	—			$	121,201
Signature loans, net			456				—				10,319				10,775
Auto title loans, net			651				—				2,494				3,145
Service charges and fees receivable, net			20,830				1,053				7,177				29,060
Inventory, net			66,542				4,935				25				71,502
Goodwill			110,255				7,050				—				117,305
Total separately identified recorded segment assets		$	312,678			$	20,295			$	20,015			$	352,988
Brokered signature loans outstanding from unaffiliated lenders		$	231			$	—			$	22,709			$	22,940
Brokered auto title loans outstanding from unaffiliated lenders		$	236			$	—			$	6,589			$	6,825

Brokered loans are not recorded as an asset on our balance sheets, 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.

Note M: Allowance for Losses and Credit Quality of Financing Receivables

We offer a variety of loan products and credit services to customers who do not have cash resources or access to credit to meet their short-term cash needs. Our customers are considered to be in a higher risk pool with regard to creditworthiness when compared to those of typical financial institutions. As a result, our receivables do not have a credit risk profile that can be easily measured by the normal credit quality indicators used by the financial markets. We manage the risk through closely monitoring the performance of the portfolio and through our underwriting process. This process includes review of customer information, such as making a credit reporting agency inquiry, evaluating and verifying income sources and levels, verifying employment and verifying a telephone number where customers may be contacted. For auto title loans, we additionally inspect the automobile, title and reference to market values of used automobiles.

As described in Note B, “Significant Accounting Policies,” we consider a signature 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. Accrued fees related to defaulted loans reduce fee revenue upon loan default, and increase fee revenue upon collection. 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.

The accuracy of our allowance estimates is dependent upon several factors, including our ability to predict future default rates based on historical trends and expected future events. We base our estimates on observable trends and various other assumptions that we believe to be reasonable under the circumstances.

The following table presents changes in the allowance for credit losses as well as the recorded investment in our financing receivables by portfolio segment for the periods presented (in thousands):

		Allowance																Allowance				Financing
		Balance at																Balance at				Receivable
		Beginning																End of				End of
Description		of Period				Charge-offs				Recoveries				Provision				Period				Period
Allowance for losses on signature loans:
Three-months ended December 31, 2010		$	750			$	(4,260	)		$	1,496			$	3,224			$	1,210			$	13,163
Three-months ended December 31, 2009			532				(3,765	)			1,444				2,578				789				9,723
Allowance for losses on auto title loans:
Three-months ended December 31, 2010		$	1,137			$	(3,445	)		$	2,715			$	909			$	1,316			$	4,623
Three-months ended December 31, 2009			291				(1,551	)			1,538				301				579				2,689

The provision presented in the table above includes only principal and excludes items such as NSF fees, late fees, repossession fees, auction fees and interest. In addition, all credit service expenses and fees related to loans made by our unaffiliated lenders are excluded, as we do not own the loans made in connection with our credit services and they are not recorded as assets on our balance sheet.

Auto title loans are our only loans that remain as recorded investments when in delinquent/nonaccrual status. We consider an auto title loan past due if it has not been repaid or renewed by the maturity date. On auto title loans more than 90 days past due, we reserve the percentage we estimate will not be recoverable through auction and reserve 100% of loans for which we have not yet repossessed the underlying collateral. No fees are accrued on any auto title loans more than 90 days past due.

The following table presents an aging analysis of past due financing receivables by portfolio segment for the periods presented (in thousands):

																										Total				Recorded
		Days Past Due																Total				Current				Financing				Investment > 90
		1-30				31-60				61-90				>90				Past Due				Receivable				Receivable				Days & Accruing
December 31, 2010
Auto title loans		$	609			$	636			$	452			$	753			$	2,450			$	2,173			$	4,623			$	—
Reserve		$	109			$	218			$	217			$	696			$	1,240			$	76			$	1,316			$	—
Reserve %			18	%			34	%			48	%			92	%			51	%			3	%			28	%
December 31, 2009
Auto title loans		$	293			$	205			$	118			$	368			$	984			$	1,705			$	2,689			$	—
Reserve		$	50			$	111			$	85			$	282			$	528			$	51			$	579			$	—
Reserve %			17	%			54	%			72	%			77	%			54	%			3	%			22	%
September 30, 2010
Auto title loans		$	797			$	552			$	432			$	532			$	2,313			$	1,970			$	4,283			$	—
Reserve		$	188			$	229			$	256			$	367			$	1,040			$	97			$	1,137			$	—
Reserve %			24	%			41	%			59	%			69	%			45	%			5	%			27	%

Note N: Subsequent Events

On January 12 and 13, 2011, we acquired five pawn stores located in Central and South Florida for approximately $17.6 million in cash. The stores were acquired from two separate sellers. One of the stores was acquired by purchasing all of the capital stock of the corporation that owned it, and the other four were acquired through asset purchases. We preliminarily estimate we will record in the U.S. Pawn Operations segment approximately $2.6 million of net tangible assets and $15.0 million of goodwill related to these acquisitions. Of the total goodwill, $10.0 million is expected to be fully tax deductible and $5.0 million is expected to be non-deductible.

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, including those identified in “Part II, Item 1A — Risk Factors” of this report.

Three Months Ended December 31, 2010 vs. Three Months Ended December 31, 2009

The following table presents selected, unaudited, consolidated financial data for our three-month periods ended December 31, 2010 and 2009 (the current and prior year quarters):

		Three Months Ended December 31,								Percentage
		2010				2009				Change
		(in thousands)
Net revenues:
Sales		$	118,395			$	99,918				18.5	%
Pawn service charges			49,810				40,797				22.1	%
Signature loan fees			40,066				38,678				3.6	%
Auto title loan fees			6,244				3,102				101.3	%
Other			4,311				2,256				91.1	%
Total revenues			218,826				184,751				18.4	%
Cost of goods sold			73,566				62,570				17.6	%
Signature loan bad debt			10,046				8,790				14.3	%
Auto title loan bad debt			982				460				113.5	%
Net revenues		$	134,232			$	112,931				18.9	%
Net income		$	27,429			$	25,707				6.7	%

Consolidated signature loan data (combined payday loan, installment loan and related credit service activities) are as follows:

		Three Months Ended
		December 31,
		2010				2009
		(Dollars in thousands)
Fee revenue		$	40,066			$	38,678
Bad debt:
Net defaults, including interest on brokered loans			8,904				8,379
Insufficient funds fees, net of collections			223				219
Change in valuation allowance			868				120
Other related costs			51				72
Net bad debt			10,046				8,790
Fee revenue less bad debt		$	30,020			$	29,888
Average signature loan balance outstanding during period (a)		$	34,182			$	31,988
Signature loan balance at end of period (a)		$	36,775			$	34,433
Participating stores at end of period			533				556
Signature loan bad debt, as a percent of fee revenue			25.1	%			22.7	%
Net default rate (a) (b)			4.9	%			4.5	%

Overview

We are a leading provider of specialty consumer financial services. We provide collateralized, non-recourse loans, commonly known as pawn loans, and a variety of short-term consumer loans including payday loans, installment loans and auto title loans, or fee-based credit services to customers seeking loans.

At December 31, 2010, we operated a total of 1,032 locations, consisting of 396 U.S. pawn stores (operating as EZPAWN or Value Pawn), 132 pawn stores in Mexico (operating as Empeño Fácil or Empeñe su Oro), 448 U.S. short-term consumer loan stores (operating primarily as EZMONEY) and 56 short-term consumer loan stores in Canada (operating as CASHMAX). We also own almost 30% of Albemarle & Bond Holdings, PLC, one of the U.K.’s largest pawnbroking businesses with over 130 stores, and almost 33% of Cash Converters International Limited, which franchises and operates a worldwide network of over 600 locations that provide financial services and buy and sell second-hand goods.

We manage our business as three segments. The U.S. Pawn Operations segment operates only in the United States. The Empeño Fácil segment operates only in Mexico. The EZMONEY Operations segment operates 442 stores in the United States and 56 stores in Canada. The following tables present store data and products offered in each segment:

						Three Months Ended December 31, 2010
		U.S. Pawn				Empeño				EZMONEY
		Operations				Fácil				Operations				Consolidated
Stores in operation:
Beginning of period			396				115				495				1,006
New openings			3				17				5				25
Acquired			4				—				—				4
Sold, combined, or closed			(1	)			—				(2	)			(3	)
End of period			402				132				498				1,032
Average number of stores during the period			398				125				496				1,019
Composition of ending stores:
Pawn			396				132				—				528
Short-term consumer loan stores			6				—				498				504
Total stores in operation			402				132				498				1,032
Stores offering payday loans (a)			35				—				464				499
Stores offering installment loans (a)			—				—				415				415
Stores offering auto title loans (a)			44				—				403				447