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Long-Term Debt and Capital Lease Obligations | 12 Months Ended
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Sep. 30, 2014
Debt Disclosure [Abstract] |
Long-Term Debt and Capital Lease Obligations | LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS The following table presents our long-term debt instruments and balances under capital lease obligations outstanding at September 30, 2014 and 2013. The non-recourse debt matures at various months in the years so indicated in the table below:
| September 30, 2014 |  | September 30, 2013
| Carrying Amount |  | Debt Premium (Discount) |  | Carrying Amount |  | Debt Premium
| (in thousands)
Recourse to EZCORP: |  |  |  |  |  |  |
Domestic line of credit up to $200 million due 2015 | $ | — |  |  | $ | — |  |  | $ | 140,900 |  |  | $ | — |
2.125% Cash Convertible Senior Notes Due 2019 | 185,693 |  |  | (44,307 | ) |  | — |  |  | — |
Cash Convertible Senior Notes Due 2019 embedded derivative | 36,994 |  |  | — |  |  | — |  |  | — |
Capital lease obligations | 418 |  |  | — |  |  | 924 |  |  | — |
Non-recourse to EZCORP: |  |  |  |  |  |  |
Secured foreign currency debt up to $4 million due 2014 | 63 |  |  | 3 |  |  | 1,207 |  |  | 99 |
Secured foreign currency debt up to $9 million due 2014 | 86 |  |  | — |  |  | — |  |  | — |
Secured foreign currency debt up to $5 million due 2015 | — |  |  | — |  |  | 6,281 |  |  | — |
Secured foreign currency debt up to $9 million due 2016 | 4,796 |  |  | — |  |  | — |  |  | — |
Secured foreign currency debt up to $23 million due 2017 | 22,240 |  |  | — |  |  | 22,822 |  |  | — |
Consumer loans facility due 2017 | — |  |  | — |  |  | 31,951 |  |  | — |
Consumer loans facility due 2019 | 54,045 |  |  | — |  |  | — |  |  | — |
10% unsecured notes due 2013 | — |  |  | — |  |  | 503 |  |  | — |
15% unsecured notes due 2013 | — |  |  | — |  |  | 12,884 |  |  | 244 |
10% unsecured notes due 2014 | 1,158 |  |  | — |  |  | 8,925 |  |  | — |
11% unsecured notes due 2014 | — |  |  | — |  |  | 110 |  |  | — |
9% unsecured notes due 2015 | 29,875 |  |  | — |  |  | 16,068 |  |  | — |
10% unsecured notes due 2015 | 943 |  |  | — |  |  | 418 |  |  | — |
11% unsecured notes due 2015 | 4,897 |  |  | — |  |  | — |  |  | — |
15% secured notes due 2015 | — |  |  | — |  |  | 4,185 |  |  | 381 |
10% unsecured notes due 2016 | 118 |  |  | — |  |  | 121 |  |  | — |
12% secured notes due 2016 | 3,881 |  |  | 174 |  |  | — |  |  | — |
12% secured notes due 2020 | 22,314 |  |  | — |  |  | — |  |  | — |
Total | 367,521 |  |  | (44,130 | ) |  | 247,299 |  |  | 724 |
Less current portion | 11,091 |  |  | 177 |  |  | 30,969 |  |  | 543 |
Total long-term debt and capital lease obligations | $ | 356,430 |  |  | $ | (44,307 | ) |  | $ | 216,330 |  |  | $ | 181 |
Domestic line of credit up to $200 million due 2015 On May 10, 2011, we entered into a senior secured credit agreement with a syndicate of five banks, replacing our previous credit agreement. Among other things, the new credit agreement provided for a four-year $175 million revolving credit facility that we could, under the terms of the agreement, request to be increased to a total of $225 million. Upon entering the new credit agreement, we repaid and retired our $17.5 million outstanding debt. On May 31, 2013, we amended the senior secured credit agreement to increase our revolving credit facility from $175 million to $200 million. No other terms of our senior secured credit agreement were modified. Pursuant to the credit agreement, we could choose to pay interest to the lenders for outstanding borrowings at LIBOR plus 200 to 275 basis points or the banks’ base rate plus 100 to 175 basis points, depending on our leverage ratio computed at the end of each calendar quarter. On the unused amount of the credit facility, we paid a commitment fee of 37.5 to 50.0 basis points depending on our leverage ratio calculated at the end of each quarter. Terms of the credit agreement required, among other things, that we meet certain financial covenants, restrict dividend payments and limit other and non-recourse debt. We used approximately $119.4 million of net proceeds from the 2.125% Cash Convertible Senior Notes offering, described below, to repay all outstanding borrowings under the senior secured credit agreement and terminated that agreement in June 2014. Debt extinguishment expense of $0.7 million, included in “Interest expense (income), net” in our consolidated statements of operations, was recognized in the fiscal year ended September 30, 2014 as a result of the recognition of deferred financing costs associated with the terminated senior secured credit agreement. 2.125% Cash Convertible Senior Notes Due 2019 In June 2014, we issued $200 million aggregate principal amount of 2.125% Cash Convertible Senior Notes Due 2019 (the “Convertible Notes”). We granted the initial purchasers the option to purchase up to an additional $30 million aggregate principal amount of Convertible Notes. Such option was exercised in full on June 27, 2014, and we issued an additional $30 million principal amount of Convertible Notes on July 2, 2014. All of the Convertible Notes were issued pursuant to an indenture dated June 23, 2014 (the "Indenture") by and between us and Wells Fargo Bank, National Association, as the trustee. The Convertible Notes were issued in a private offering under Rule 144A under the Securities Act of 1933. The Convertible Notes pay interest semi-annually in arrears at a rate of 2.125% per annum on June 15 and December 15 of each year, commencing on December 15, 2014, and will mature on June 15, 2019 (the "Maturity Date"). Prior to December 15, 2018, the Convertible Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time prior to the close of business on the second scheduled trading day immediately preceding the Maturity Date, as described below. At maturity, the holders of the Convertible Notes will be entitled to receive cash equal to the principal amount of the Convertible Notes plus unpaid accrued interest. The Convertible Notes will be our unsubordinated unsecured obligations and will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Convertible Notes; equal in right of payment with all of our other unsecured unsubordinated indebtedness; and effectively junior to all debt or other obligations (including trade payables) of our wholly-owned subsidiaries. The Indenture governing the Convertible Notes does not contain any financial covenants. We incurred transaction costs of approximately $9.9 million related to the issuance of the Convertible Notes, which we recorded as deferred financing costs and are included in “Intangible assets, net” in our consolidated balance sheets. Deferred financing costs are being amortized to interest expense using the effective interest method over the expected term of the Convertible Notes. Under the terms of our Convertible Notes, payment of dividends requires a conversion rate adjustment equal to the conversion rate in effect immediately prior to the open of business on the ex-dividend date for such dividend multiplied by the last reported sale price of the Class A Non-voting Common Stock (“Class A Common Stock”) on the trading day immediately preceding the ex-dividend date for such dividend, divided by the difference between the last reported sale price of the Class A Common Stock on the trading day immediately preceding the ex-dividend date for such dividend and the amount in cash per share we distribute to all or substantially all holders of Class A Common Stock. Should we pay dividends in the future, our certificate of incorporation provides that cash dividends on common stock, when declared, must be declared and paid at the same per share amounts on both classes of stock. Any future determination to pay cash dividends will be at the discretion of our Board of Directors. Convertible Notes Embedded Derivative We account for the cash conversion feature of the Convertible Notes as a separate derivative instrument (the “Convertible Notes Embedded Derivative”), which had a fair value of $46.5 million on the issuance date that was recognized as the original issue discount of the Convertible Notes. This original issue discount is amortized to interest expense over the term of the Convertible Notes using the effective interest method. As of September 30, 2014, the Convertible Notes Embedded Derivative is recorded as a non-current liability under long-term debt, less current maturities in our consolidated balance sheets, and will be marked to market in subsequent reporting periods. The classification of the Convertible Notes Embedded Derivative liability as current or non-current on the consolidated balance sheets corresponds with the classification of the net balance of the Convertible Notes as discussed below. The Convertible Notes are convertible into cash, subject to satisfaction of certain conditions and during the periods described below, based on an initial conversion rate of 62.2471 shares of Class A Common Stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $16.065 per share of our Class A Common Stock). Upon conversion of a note, we will pay cash based on a daily conversion value calculated on a proportionate basis for each trading day in the applicable 80 trading day observation period as described in the Indenture. The conversion rate will not be adjusted for any accrued and unpaid interest. Holders may surrender their Convertible Notes for conversion into cash prior to December 15, 2018 only under the following circumstances (the “Early Conversion Conditions”): (1) during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2014 (and only during such fiscal quarter), if the last reported sale price of our Class A Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price, as defined in the Indenture, per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A Common Stock and the conversion rate on such trading day; or (3) upon the occurrence of specified corporate events, as defined in the Indenture. On or after December 15, 2018 until the close of business on the second scheduled trading day immediately preceding the Maturity Date, holders may convert their notes into cash at any time, regardless of the foregoing circumstances. If a holder elects to convert its Convertible Notes in connection with certain make-whole fundamental changes, as that term is defined in the Indenture, that occur prior to the Maturity Date, we will, in certain circumstances, increase the conversion rate for Convertible Notes converted in connection with such make-whole fundamental changes by a specified number of shares of Class A Common Stock. In addition, the conversion rate is subject to customary anti-dilution adjustments (for example, certain dividend distributions or tender or exchange offer of our Class A Common Stock). Upon the occurrence of a fundamental change, as defined in the Indenture, holders may require us to repurchase for cash all or any portion of the then outstanding Convertible Notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest. Impact of Early Conversion Conditions on Financial Statements As of September 30, 2014, the Convertible Notes are not convertible because the Early Conversion Conditions described above have not been met. Accordingly, the net balance of the Convertible Notes of $185.7 million is classified as a non-current liability in our consolidated balance sheets as of September 30, 2014. The classification of the Convertible Notes as current or non-current on the consolidated balance sheet is evaluated at each balance sheet date and may change from time to time depending on whether one of the Early Conversion Conditions has been met. If one of the Early Conversion Conditions is met in any future fiscal quarter, we would classify our net liability under the Convertible Notes as a current liability on the consolidated balance sheets as of the end of that fiscal quarter. If none of the Early Conversion Conditions have been met in a future fiscal quarter prior to the one-year period immediately preceding the Maturity Date, we would classify our net liability under the Convertible Notes as a non-current liability on the consolidated balance sheets as of the end of that fiscal quarter. If the note holders elect to convert their Convertible Notes prior to maturity, any unamortized discount and transaction costs will be expensed at the time of conversion. If the entire outstanding principal amount had been converted on September 30, 2014, we would have recorded an expense of $53.7 million associated with the conversion, comprised of $44.3 million of unamortized debt discount and $9.4 million of unamortized debt issuance costs. As of September 30, 2014, none of the note holders had elected to convert their Convertible Notes. Convertible Notes Hedges In connection with the issuance of the Convertible Notes, we purchased cash-settled call options (the “Convertible Notes Hedges”) in privately negotiated transactions with certain of the initial purchasers or their affiliates (in this capacity, the “option counterparties”). The Convertible Notes Hedges provide us with the option to acquire, on a net settlement basis, approximately 14.3 million shares of our Class A Common Stock at a strike price of $16.065, which is equal to the number of shares of our Class A Common Stock that notionally underlie the Convertible Notes and corresponds to the conversion price of the Convertible Notes. The Convertible Notes Hedges have an expiration date that is the same as the Maturity Date of the Convertible Notes, subject to earlier exercise. The Convertible Notes Hedges have customary anti-dilution provisions similar to the Convertible Notes. If we exercise the Convertible Notes Hedges, the aggregate amount of cash we will receive from the option counterparties to the Convertible Notes Hedges will cover the aggregate amount of cash that we would be required to pay to the holders of the converted Convertible Notes, less the principal amount thereof. As of September 30, 2014, we have not purchased any shares under the Convertible Notes Hedges. The aggregate cost of the Convertible Notes Hedges was $46.5 million (or $21.3 million net of the total proceeds from the Warrants sold, as discussed below). The Convertible Notes Hedges are accounted for as a derivative asset and are recorded on the consolidated balance sheets at their estimated fair value in other assets, net. The fair value was $37.0 million as of September 30, 2014. The Convertible Notes Embedded Derivative liability and the Convertible Notes Hedges asset will be adjusted to fair value each reporting period and unrealized gains and losses will be reflected in the consolidated statements of operations. The Convertible Notes Embedded Derivative and the Convertible Notes Hedges are designed to have similar fair values. Accordingly, the changes in the fair values of these instruments are expected to offset and not have a net impact on the consolidated statements of operations. The classification of the Convertible Notes Hedges asset as current or long-term on the consolidated balance sheet corresponds with the classification of the Convertible Notes, which is evaluated at each balance sheet date and may change from time to time depending on whether one of the Early Conversion Conditions has been met. Convertible Notes Warrants In connection with the issuance of the Convertible Notes, we also sold net-share-settled warrants (the “Warrants”) in privately negotiated transactions with the option counterparties for the purchase of up to approximately 14.3 million shares of our Class A Common Stock at a strike price of $20.83 per share, for total proceeds of $25.1 million, net of issuance costs, which was recorded as an increase in stockholders' equity. The Warrants have customary anti-dilution provisions similar to the Convertible Notes. As a result of the Warrants, we will experience dilution to our diluted earnings per share if our average closing stock price exceeds $20.83 for any fiscal quarter. The Warrants expire on various dates from September 2019 through February 2020 and must be settled in net shares of our Class A Common Stock. Therefore, upon expiration of the Warrants, we will issue shares of Class A non-voting common stock to the purchasers of the Warrants that represent the value by which the price of the Class A Common Stock exceeds the strike price stipulated within the particular warrant agreement. As of September 30, 2014, there were 14.3 million warrants outstanding. Convertible Notes Interest Expense Total interest expense for the fiscal year ended September 30, 2014 was $3.5 million, composed of contractual interest expense and debt discount amortization of $1.4 million and $2.1 million, respectively. The effective interest rate for the fiscal year ended September 30, 2014 was 7%. As of September 30, 2014, the remaining unamortized issuance discount will be amortized over the next five years assuming no early conversion. Non-recourse debt to EZCORP, Inc. On January 30, 2012, we acquired a 60% ownership interest in Grupo Finmart. On June 30, 2014, we acquired an additional 16% of the ordinary shares outstanding of Grupo Finmart, increasing our ownership percentage from 60% to 76%. Non-recourse debt amounts in the table above represent Grupo Finmart’s third-party debt. All unsecured notes are collateralized with Grupo Finmart’s assets. All foreign currency debt is guaranteed by Grupo Finmart's loan portfolio or collateralized cash at Grupo Finmart’s option. As of September 30, 2014, Grupo Finmart’s foreign currency debt was guaranteed by consumer loans totaling $13.9 million, included in “Consumer loans, net” and “Non-current consumer loans, net” in our consolidated balance sheets, and collateralized cash totaling $37.7 million, included in “Restricted cash” and “Restricted cash, non-current” in our consolidated balance sheets. Interest on secured foreign currency debt due 2014 and 2016 is charged at the Mexican Interbank Equilibrium ("TIIE") plus a margin varying from 3% to 10%. The secured foreign currency debt due 2014 requires monthly payments of $0.1 million with remaining principal due at maturity. The 12% secured notes due 2016 and secured foreign currency line of credit due 2016 each requires monthly payments of $0.2 million, with the remaining principal due at maturity. The secured foreign currency debt due 2017 has a 14.5% interest rate, requires monthly payments of $1.9 million, and the remaining principal is due at maturity. The 12% secured notes due 2020 require monthly payments of $1.2 million with the remaining principal due at maturity. At acquisition, we performed a valuation to determine the fair value of Grupo Finmart's debt. As a result, we recorded a debt premium on Grupo Finmart’s debt. This debt premium is being amortized as a reduction of interest expense over the life of the debt. The fair value was determined by using an income approach, specifically the discounted cash flows method based on the contractual terms of the debt and risk adjusted discount rates. Consumer loans facility due 2017 On July 10, 2012, Grupo Finmart entered into a securitization transaction to transfer the collection rights of certain eligible consumer loans to a bankruptcy remote trust in exchange for cash on a non-recourse basis. The trust received financing as a result of the issuance of debt securities and delivered the proceeds of the financing to Grupo Finmart. The securitization agreement calls for a two-year revolving period in which the trust will use principal collections of the consumer loan portfolio to acquire additional collection rights up to $115.4 million in eligible loans from Grupo Finmart. Upon the termination of the lending period, the collection received by the trust will be used to repay the debt. Grupo Finmart will continue to service the underlying loans in the trust. On February 17, 2014, Grupo Finmart repaid this facility. In connection with this repayment, we wrote off the deferred financing costs related to this facility. Consumer loans facility due 2019 On February 17, 2014, Grupo Finmart entered into a new securitization transaction to transfer collection rights of certain eligible consumer loans to a bankruptcy remote trust in exchange for cash. The trust received financing as a result of the issuance of debt securities and delivered the proceeds of the financing to Grupo Finmart. The unrestricted cash received from this borrowing in the amount of $35.5 million was primarily used to repay the previous securitization borrowing facility due 2017 and the transaction costs associated with this transaction. The cash proceeds of approximately $20.6 million is restricted primarily for $17.9 million of collection rights on the additional eligible loans from Grupo Finmart, which Grupo Finmart expects to deliver to the trust within the next 12 months, and $2.7 million of interest and trust maintenance costs to be recovered at repayment. The restricted cash proceeds of $17.9 million are recourse to Grupo Finmart unless additional eligible loans are delivered within the two year period specified in the agreement. The borrowing facility has a two year lending period and matures on March 19, 2019. Upon the termination of the lending period, Grupo has an option to start prepaying the principle early from the collection received by the trust. Grupo Finmart will continue to service the underlying loans in the trust. Deferred financing costs related to the new consumer loans facility totaling approximately $2.6 million are included in “Intangible assets, net” on our consolidated balance sheets and are being amortized to interest expense over the term of the agreement. Grupo Finmart is the primary beneficiary of the securitization trust because Grupo Finmart has the power to direct the most significant activities of the trust through its role as servicer of all the receivables held by the trust and through its obligation to absorb losses or receive benefits that could potentially be significant to the trust. Consequently, we consolidate the trust. As of September 30, 2014, borrowings under the securitization borrowing facility due 2019 amounted to $54 million. Interest is charged at TIIE plus a 2.5% margin, or a total of 5.8% as of September 30, 2014. 9% unsecured notes due 2015 On May 15, 2013, Grupo Finmart issued and sold $30 million of 9% Global Registered Notes due November 16, 2015. Notes with an aggregate principal amount of $14 million were purchased by EZCORP and, therefore, eliminated in consolidation in prior periods. On March 31, 2014, EZCORP sold its outstanding notes in the amount of $11.7 million to an outside party, thereby increasing the total consolidated notes balances. As a result of this transaction we recorded a loss of $0.7 million, which is included under “(Gain) loss on sale or disposal of assets” in our consolidated statements of operations as of September 30, 2014. Grupo Finmart used a portion of the net proceeds of the offering to repay existing indebtedness, and used the remaining portion for general operating purposes.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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