NOTE 6: STRATEGIC INVESTMENTS

Cash Converters International Limited

As of September 30, 2016, we owned 151,948,000 shares, or approximately 31% of Cash Converters International shares. Our total investment in Cash Converters International was acquired between November 2009 and December 2014 for approximately $80.9 million.

In fiscal 2016 and 2015 our equity in Cash Converters International’s net loss was $0.3 million and $5.5 million, respectively. In fiscal 2014 our equity in Cash Converters International’s net income was $7.1 million. Additionally, in fiscal 2016, 2015 and 2014, we recorded dividends from Cash Converters International of $2.2 million, $4.8 million and $5.1 million, respectively. Cash Converters International’s accumulated undistributed after-tax earnings included in our consolidated retained earnings were $6.5 million as of September 30, 2016.

The following tables present summary financial information for Cash Converters International’s most recently reported results as of September 30, 2016, 2015 and 2014 as applicable after translation to United States dollars:



	June 30,
	2016		2015

	(in thousands)
Current assets	$	173,830	$	186,472
Non-current assets	141,028		151,287
Total assets	$	314,858	$	337,759

Current liabilities	$	83,275	$	86,374
Non-current liabilities	51,873		51,044
Shareholders’ equity:
Equity attributable to owners of the parent	$	179,709	$	200,340
Noncontrolling interest	1		1
Total liabilities and shareholders’ equity	$	314,858	$	337,759



	Fiscal Year Ended June 30,
	2016			2015			2014

	(in thousands)
Gross revenues*	$	221,973		$	241,584		$	304,432
Gross profit*	158,952			174,101			195,325
(Loss) profit attributable to:
Owners of the company	$	(3,839	)	$	(17,980	)	$	22,206
Noncontrolling interest	—			(169		)	(2,809		)
(Loss) profit for the year	$	(3,839	)	$	(18,149	)	$	19,397

Cash Converters International announced during its fiscal 2016 that certain of its United Kingdom operations would be discontinued, including a historical recasting of such operations as discontinued operations. We have recast the above information pertaining to the year ended June 30, 2015 to reflect this historical recasting. We have not recast the above information pertaining to the year ended June 30, 2014, however, as such historical results including discontinued operations have not been reported by Cash Converters International.

The loss of $3.8 million presented above for fiscal 2016 includes total discrete charges before allocation to EZCORP for restructuring costs of $24.5 million, the compliance accrual discussed below of $9.2 million and other items totaling $4.2 million, translated using applicable exchange rates in effect for EZCORP’s year ended September 30, 2016.

We monitor the fair value of our investment in Cash Converters International as compared to its carrying value each reporting period and consider the guidance in FASB ASC 320-10-S99-1 FASB ASC 323-10-35 in evaluating whether any impairments are other-than-temporary and whether to measure and recognize any other-than-temporary impairment.

As of September 30, 2016, the fair value of our investment in Cash Converters International continued to decline from September 30, 2015 and remained below its carrying value as of September 30, 2016. As of September 30, 2016, we determined that our investment was impaired and that such impairment was other-than-temporary. In reaching this conclusion, we considered all available evidence, including the following: (i) Cash Converters International continued to be negatively impacted by current regulatory requirements in the United Kingdom during its fiscal 2016; (ii) Cash Converters International announced in August 2016 an accrual ultimately totaling $9.2 million using applicable exchange rates in effect for EZCORP’s year ended September 30, 2016 pertaining to potential compliance issues in its credit assessment processes under the National Consumer Credit Protection Act; (iii) Cash Converters International released its results for the six-months ended June 30, 2016 in August 2016 including substantial restructuring and other one-time costs; and (v) there has a been a prolonged drop in Cash Converters International’s stock price primarily as a result of the above factors. As a result, we recognized an other-than-temporary impairment in Cash Converters International of $11.0 million ($7.2 million, net of taxes) in fiscal 2016, which increased the difference between the amount at which the investment was carried and the amount of underlying equity in net assets of Cash Converters International as discussed in Note 1. This impairment charge was recorded under “Impairment of investment” in the consolidated statements of operations in the “Other International” segment.

As of September 30, 2015, the fair value of our investment in Cash Converters International was below the carrying value. We determined that our investment was impaired and that such impairment was other-than-temporary. In reaching this conclusion, we considered all available evidence, including the following: (i) Cash Converters International had been negatively impacted by current regulatory requirements in the United Kingdom during its fiscal 2015; (ii) Cash Converters International reached an agreement in June 2015 to pay $17.7 million toward settlement of a class-action lawsuit brought by its customers alleging that Cash Converters International charged excessive interest on short-term loans; (iii) Cash Converters International’s primary banking facility, Westpac Banking Corporation, informed Cash Converters International that it was ceasing to provide services to the company in August 2015, and as of September 30, 2015 Cash Converters International had yet to find an alternative funding source; (iv) Cash Converters International failed to declare its final year-end dividend; and (v) there has a been a prolonged drop in Cash Converters International’s stock price primarily as a result of the above factors. As a result, we recognized an other-than-temporary impairment in Cash Converters International of $26.8 million ($17.4 million, net of taxes) in fiscal 2015, which caused a difference between the amount at which the investment was carried and the amount of underlying equity in net assets of Cash Converters International as discussed in Note 1. This impairment charge was recorded under “Impairment of investment” in the consolidated statements of operations in the “Other International” segment.

We continue to monitor the fair value of our investment in Cash Converters International for other-than-temporary impairments in future reporting periods and may record additional impairment charges should the fair value of our investment in Cash Converters International further decline below its carrying value for an extended period of time. See Note 7 for the fair value and carrying value of our investment in Cash Converters International.

Albemarle & Bond Holdings, PLC

Prior to its bankruptcy reorganization, Albemarle & Bond was primarily engaged in pawnbroking, retail jewelry sales, check cashing and lending in the United Kingdom. In fiscal 2014 we owned 16,644,640 ordinary shares of Albemarle & Bond, representing almost 30% of its total outstanding shares.

In fiscal 2014 our equity in Albemarle & Bond’s net loss was $1.2 million and we received no dividends.

In March 2014, Albemarle & Bond entered into bankruptcy reorganization in the United Kingdom, and on April 15, 2014 Albemarle & Bond announced that the majority of its business and assets had been sold. In fiscal 2014 we recognized other-than-temporary impairments of $7.9 million ($5.4 million, net of taxes), which brought our carrying value of this investment to zero as of September 30, 2014.