Acquisitions

Crediamigo

On January 30, 2012, we acquired a 60% interest in Crediamigo, a specialty consumer finance company, headquartered in Mexico City, with 45 loan servicing locations throughout the country, for total consideration of $60.1 million, net of cash acquired. This amount includes contingent consideration related to two earn out payments. If certain financial performance targets are achieved, during calendar years 2012 and 2013, we will make a payment to the sellers of $12.0 million dollars, each year, for a total amount of $24.0 million dollars. The purchase price above includes a fair value amount of $23.0 million attributable to the contingent consideration payments. This amount was calculated using a probability-weighted discounted cash flow approach, in which all outcomes were successful. The significant inputs used for the valuation are not observable in the market, and thus this fair value measurement represents a Level 3 measurement within the fair value hierarchy.

Pursuant to the Master Transaction Agreement, the sellers have a put option with respect to their remaining shares of Crediamigo. Each seller has the right to sell their Crediamigo shares to EZCORP, Inc., during the exercise period commencing on the second anniversary of the acquisition closing date and ending on the fifth anniversary of the acquisition closing date, with no more than 50% of the seller’s shares being sold within a consecutive twelve -month period. Under the guidance in ASC 480-10-S99, securities that are redeemable for cash or other assets are to be classified outside of permanent equity; therefore, we have included the redeemable noncontrolling interest related to Crediamigo in temporary equity.

The fair value of the redeemable noncontrolling interest in Crediamigo was estimated by applying an income approach and a market approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Key assumptions include discount rates ranging from 10% to 18%, representing discounts for lack of control and lack of marketability that market participants would consider when estimating the fair value of the noncontrolling interest. The fair market value of Crediamigo was determined using a multiple of future earnings.

The nine-month period ended June 30, 2012, includes $18.2 million in revenues and $1.9 million in income related to the Crediamigo acquisition. The purchase price allocation is preliminary as we continue to receive information regarding the acquired assets. We have recorded provisional amounts for certain assets and liabilities for which we have not yet received all information necessary to finalize our assessment.

Cash Genie

On April 14, 2012, we acquired a 72% interest in Ariste Holding Limited and its affiliates, which provides online loans in the U.K under the name "Cash Genie." As this acquisition was individually immaterial, we present its related information, other than information related to the redeemable noncontrolling interest, on a combined basis.

Pursuant to the acquisition agreement, the seller has a put option with respect to his remaining shares of Cash Genie. The seller has the right to sell his Cash Genie shares to EZCORP, Inc, during the exercise period commencing on the second anniversary of the acquisition closing date and ending on the fourth anniversary of the acquisition closing date, with no more than 50% of the seller's shares being sold within a consecutive 12 month period. Under the guidance in ASC 480-10-S99, securities that are redeemable for cash or other assets are to be classified outside of permanent equity; therefore, we have included the redeemable noncontrolling interest related to Cash Genie in temporary equity.

The fair value of the Cash Genie redeemable noncontrolling interest was estimated by applying an income and market approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Key assumptions include discount rates ranging from 10% to 18%, representing discounts for lack of control and lack of marketability that market participants would consider when estimating the fair value of the noncontrolling interest. The fair market value of Cash Genie was determined using a multiple of future earnings.

Other

The nine-month period ended June 30, 2012, includes the acquisition of 48 locations in the U.S. and one in Canada. As these acquisitions, were individually immaterial, we present their related information on a combined basis.

The following tables provide information related to the acquisitions of domestic and foreign retail and financial services locations during the nine months ended June 30, 2012 and 2011:



	Nine Months Ended June 30,
	2012		2011
	Crediamigo	Other Acquisitions
Number of asset purchase acquisitions	0	6	7
Number of stock purchase acquisitions	1	4	3
U.S. stores acquired	0	48	32
Foreign stores acquired	45	1	0
Total stores acquired	45	49	32



	Nine Months Ended June 30,
	2012						2011
	(In thousands)
	Crediamigo			Other Acquisitions
Consideration:
Cash	$	45,001		$	91,843		$	65,844
Equity instruments	—			17,984			—
Deferred consideration	5,785			—			—
Contingent consideration	23,000			—			—
Fair value of total consideration transferred	73,786			109,827			65,844
Cash acquired	(13,641		)	(2,823		)	(1,051		)
Total purchase price	$	60,145		$	107,004		$	64,793



	Nine Months Ended June 30,
	(In thousands)
	2012				2011
	Crediamigo		Other Acquisitions
Current assets:
Pawn loans, net	$	—	$	6,351	$	6,865
Consumer loans, net	8,658		3,640		710
Service charges and fees receivable, net	18,844		1,839		1,136
Inventory, net	—		5,596		4,396
Deferred tax asset	—		217		449
Prepaid expenses and other assets	3,543		204		200
Total current assets	31,045		17,847		13,756
Property and equipment, net	2,326		3,965		861
Goodwill	54,765		96,946		49,231
Non-current consumer loans, net	52,228		—		—
Intangible assets	57,900		3,960		2,367
Other assets	16,833		291		82
Total assets	$	215,097	$	123,009	$	66,297
Current liabilities:
Accounts payable and other accrued expenses	$	6,852	$	5,335	$	1,038
Customer layaway deposits	—		764		167
Current maturities of long-term debt	22,810		—		4
Other current liabilities	1,010		257		22
Total current liabilities	30,672		6,356		1,231
Deferred gains and other long-term liabilities	937		—		—
Long-term debt, less current maturities	86,872		—		—
Deferred tax liability	171		92		273
Total liabilities	118,652		6,448		1,504
Redeemable noncontrolling interest	36,300		9,557		—
Net assets acquired	$	60,145	$	107,004	$	64,793
Goodwill deductible for tax purposes	$	—	$	45,786	$	26,935
Indefinite lived intangible assets acquired:
Trade name	$	2,200	$	2,706	$	—
Definite lived intangible assets acquired:
Favorable lease asset	$	—	$	404	$	111
Non-compete agreements	$	300	$	400	$	658
Contractual relationship	$	55,400	$	450	$	—
Franchise license rights	$	—	$	—	$	1,598

All acquisitions were made as part of our continuing strategy to enhance and diversify our earnings. 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 several markets and a greater presence in others, as well as the ability to further leverage our expense structure through increased scale. The purchase price allocation of assets acquired in the most recent twelve months is preliminary as we continue to receive information regarding the acquired assets. Transaction related expenses for the nine-month periods ended June 30, 2012 and 2011 of approximately $2.1 million and $0.8 million, respectively, were expensed as incurred and recorded as administrative expenses. These amounts exclude costs related to transactions that did not close and future acquisitions. The results of all acquisitions have been consolidated with our results since their respective closing. Pro forma results of operations have not been presented because it is impracticable to do so, as historical audited financial statements in U.S. GAAP are not readily available.

The amounts above for the nine months ended June 30, 2012 include the acquisition of a decision science model for the underwriting of consumer loans, a contractual relationship with an income tax return preparer to facilitate refund anticipation loans, an online lending business in the U.K. and 15 financial services stores in Hawaii and Texas, from FS Management, 1^st Money Centers, Inc. and 1429 Funding, Inc., companies owned partially by Brent Turner, the former President of our eCommerce and Card Services division and a former executive officer, for total consideration of $3.0 million in cash and 387,924 shares of our Class A Non-Voting common stock. Mr. Turner received $2.0 million in cash and 167,811 shares of stock in connection with these acquisitions. The basic terms of the acquisitions were agreed prior to the commencement of Mr. Turner’s employment (and, thus, prior to Mr. Turner’s becoming an executive officer), subject to our completion of appropriate due diligence and the execution of appropriate definitive documentation. Even though the terms of the acquisitions were agreed to prior to Mr. Turner’s becoming an executive officer, we treated the transactions as related party transactions. Consequently, pursuant to our Policy for Review and Evaluation of Related Party Transactions, the Audit Committee reviewed and evaluated the terms of the acquisitions and concluded that the transactions were fair to, and in the best interest of the company and its stockholders.