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Long-term Debt and Capital Lease Obligations | 6 Months Ended
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Mar. 31, 2016
Debt Disclosure [Abstract] |
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS | NOTE 7: LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS The following table presents our long-term debt instruments and balances under capital lease obligations outstanding as of March 31, 2016 and 2015 and September 30, 2015:
| March 31, 2016 |  | March 31, 2015 |  | September 30, 2015
| Carrying Amount |  | Debt (Discount) and (Issuance Costs) |  | Carrying Amount |  | Debt (Discount) Premium and (Issuance Costs) |  | Carrying Amount |  | Debt (Discount) and (Issuance Costs)
| (in thousands)
Recourse to EZCORP: |  |  |  |  |  |  |  |  |  |  |
2.125% Cash convertible senior notes due 2019 | $ | 192,565 |  |  | $ | (37,435 | ) |  | $ | 182,276 |  |  | $ | (47,724 | ) |  | $ | 187,471 |  |  | $ | (42,529 | )
Cash convertible senior notes due 2019 embedded derivative | 3,219 |  |  | — |  |  | 27,215 |  |  | — |  |  | 10,505 |  |  | — |
Capital lease obligations | — |  |  | — |  |  | 93 |  |  | — |  |  | — |  |  | — |
Non-recourse to EZCORP*: |  |  |  |  |  |  |  |  |  |  |
8.2% Secured foreign currency debt up to $14 million due 2016 (a) (b) | 82 |  |  | (101 | ) |  | 2,044 |  |  | (451 | ) |  | 938 |  |  | (204 | )
14.5% Secured foreign currency debt up to $17 million due 2017 (a) | 17,393 |  |  | — |  |  | 19,682 |  |  | — |  |  | 17,567 |  |  | — |
5.8% Consumer loans facility due 2019 (b) | 33,613 |  |  | (1,714 | ) |  | 44,837 |  |  | (2,989 | ) |  | 40,493 |  |  | (2,196 | )
8.5% Unsecured notes due 2015 | — |  |  | — |  |  | 12,329 |  |  | (187 | ) |  | 12,330 |  |  | (42 | )
10% Unsecured notes due 2015 | — |  |  | — |  |  | — |  |  | — |  |  | 1,500 |  |  | — |
11% Unsecured notes due 2015 | — |  |  | — |  |  | 4,334 |  |  | — |  |  | 3,868 |  |  | — |
17% Secured notes due 2015 consolidated from VIEs | — |  |  | — |  |  | 937 |  |  | — |  |  | — |  |  | — |
10% Unsecured notes due 2016 | 1,500 |  |  | — |  |  | 844 |  |  | — |  |  | 1,885 |  |  | — |
12% Secured notes due 2016 | — |  |  | — |  |  | 2,691 |  |  | 67 |  |  | 2,928 |  |  | — |
13% Unsecured notes due 2016 | — |  |  | — |  |  | 656 |  |  | — |  |  | 1,171 |  |  | — |
15% Unsecured notes due 2016 | 3,829 |  |  | — |  |  | — |  |  | — |  |  | 233 |  |  | — |
15% Secured notes due 2016 consolidated from VIEs | 3,192 |  |  | — |  |  | 7,755 |  |  | — |  |  | 5,397 |  |  | — |
18% Unsecured notes due 2016 | 5,797 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
10% Unsecured notes due 2017 | 174 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
11% Secured notes due 2017 consolidated from VIEs (c) | 37,901 |  |  | — |  |  | 76,545 |  |  | — |  |  | 56,113 |  |  | — |
12% Secured notes due 2017 | 2,898 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
13.5% Unsecured notes due 2017 | 5,797 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
14.5% Secured notes due 2017 consolidated from VIEs | 9,788 |  |  | — |  |  | 14,897 |  |  | — |  |  | 11,754 |  |  | — |
12.4% Secured notes due 2020 | 17,234 |  |  | (214 | ) |  | 19,389 |  |  | (358 | ) |  | 17,358 |  |  | (268 | )
Total | 334,982 |  |  | (39,464 | ) |  | 416,524 |  |  | (51,642 | ) |  | 371,511 |  |  | (45,239 | )
Less current portion | 82,174 |  |  | — |  |  | 71,564 |  |  | 67 |  |  | 74,345 |  |  | — |
Total long-term debt and capital lease obligations | $ | 252,808 |  |  | $ | (39,464 | ) |  | $ | 344,960 |  |  | $ | (51,709 | ) |  | $ | 297,166 |  |  | $ | (45,239 | )
* | Even though Grupo Finmart debt may be non-recourse to EZCORP, a default on more than $25 million of such debt could constitute an event of default under our Cash Convertible Notes (described below). See "Part II, Item 1A — Risk Factors."
(a) | Maximum amounts of debt are translated from Mexican pesos to United States dollars as of the most current period end date in which outstanding debt is presented.
(b) | Interest is charged at the Mexican Interbank Equilibrium rate (“TIIE”) plus an applicable margin. The rate presented is as of March 31, 2016.
(c) | Grupo Finmart has entered into foreign exchange forward contracts to mitigate the VIE's currency risk, as described in Notes 15 and 16, and EZCORP has guaranteed the future cash outflows of the forward contracts. See "Part II, Item 1A — Risk Factors."
2.125% Cash Convertible Senior Notes Due 2019 In June 2014 ("Original Issuance Date"), we issued $200 million aggregate principal amount of 2.125% Cash Convertible Senior Notes due 2019 (the “Cash Convertible Notes”). We granted the initial purchasers the option to purchase up to an additional $30 million aggregate principal amount of Cash Convertible Notes. That option was exercised in full on June 27, 2014, and we issued an additional $30 million principal amount of Cash Convertible Notes on July 2, 2014. All of the Cash 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 Cash Convertible Notes were issued in a private offering and resold under Rule 144A under the Securities Act of 1933. The Cash 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 December 15, 2014, and will mature on June 15, 2019 (the "Maturity Date"). Prior to December 15, 2018, the Cash 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. At maturity, the holders of the Cash Convertible Notes will be entitled to receive cash equal to the principal amount of the Cash Convertible Notes plus unpaid accrued interest. The Cash Convertible Notes are unsubordinated unsecured obligations and rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Cash 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 Cash Convertible Notes does not contain any financial covenants. We incurred transaction costs of approximately $8.8 million related to the issuance of the Cash Convertible Notes, which we recorded as deferred financing costs and have included as a deduction to the corresponding debt liability. Deferred financing costs are being amortized to interest expense using the effective interest method over the expected term of the Cash Convertible Notes. Under the terms of our Cash 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. Cash Convertible Notes Embedded Derivative We account for the cash conversion feature of the Cash Convertible Notes as a separate derivative instrument (the “Cash 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 Cash Convertible Notes. This original issue discount is being amortized to interest expense over the term of the Cash Convertible Notes using the effective interest method. As of March 31, 2016 and 2015 and September 30, 2014, the Cash Convertible Notes Embedded Derivative was recorded as a non-current liability under "Long-term debt, less current maturities" in our condensed consolidated balance sheets, and will be marked to market in subsequent reporting periods. The classification of the Cash Convertible Notes Embedded Derivative liability as current or non-current on the condensed consolidated balance sheets corresponds with the classification of the net balance of the Cash Convertible Notes as discussed below. The Cash 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 Cash 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 Cash 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 Cash 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 Cash 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 Cash 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 March 31, 2016, the Cash Convertible Notes were not convertible because the Early Conversion Conditions described above had not been met. Accordingly, the net balance of the Cash Convertible Notes was classified as a non-current liability in our condensed consolidated balance sheets as of March 31, 2016 and 2015 and September 30, 2015. The classification of the Cash Convertible Notes as current or non-current in the condensed consolidated balance sheets is evaluated at each balance sheet date and may change from time to time depending on whether any of the Early Conversion Conditions has been met. If any of the Early Conversion Conditions is met in any future fiscal quarter, we would classify our net liability under the Cash Convertible Notes as a current liability in the condensed 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 Cash Convertible Notes as a non-current liability in the condensed consolidated balance sheets as of the end of that fiscal quarter. If the note holders elect to convert their Cash 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 March 31, 2016, we would have recorded an expense of $37.4 million associated with the conversion, comprised of $31.7 million of unamortized debt discount and $5.7 million of unamortized debt issuance costs. As of March 31, 2016, none of the note holders had elected to convert their Cash Convertible Notes. Cash Convertible Notes Hedges In connection with the issuance of the Cash Convertible Notes, we purchased cash-settled call options (the “Cash Convertible Notes Hedges”) in privately negotiated transactions with certain of the initial purchasers or their affiliates (in this capacity, the “Option Counterparties”). The Cash 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 Cash Convertible Notes and corresponds to the Conversion Price of the Cash Convertible Notes. The Cash Convertible Notes Hedges have an expiration date that is the same as the Maturity Date of the Cash Convertible Notes, subject to earlier exercise. The Cash Convertible Notes Hedges have customary anti-dilution provisions similar to the Cash Convertible Notes. If we exercise the Cash Convertible Notes Hedges, the aggregate amount of cash we will receive from the option counterparties to the Cash Convertible Notes Hedges will cover the aggregate amount of cash that we would be required to pay to the holders of the converted Cash Convertible Notes, less the principal amount thereof. As of March 31, 2016, we have not purchased any shares under the Cash Convertible Notes Hedges. The aggregate cost of the Cash Convertible Notes Hedges was $46.5 million (or $21.3 million net of the total proceeds from the Warrants sold, as discussed below). The Cash Convertible Notes Hedges are accounted for as a derivative asset and are recorded in the condensed consolidated balance sheets at their estimated fair value under "Other assets, net." The Cash Convertible Notes Embedded Derivative liability and the Cash Convertible Notes Hedges asset will be adjusted to fair value each reporting period and unrealized gains and losses will be reflected in the condensed consolidated statements of operations. The Cash Convertible Notes Embedded Derivative and the Cash 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 condensed consolidated statements of operations. The classification of the Cash Convertible Notes Hedges asset as current or long-term on the condensed consolidated balance sheets corresponds with the classification of the Cash Convertible Notes, which is evaluated at each balance sheet date and may change from time to time depending on whether any of the Early Conversion Conditions has been met. Cash Convertible Notes Warrants In connection with the issuance of the Cash 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 Cash 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 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 March 31, 2016, there were 14.3 million warrants outstanding. Cash Convertible Notes Interest Expense Total interest expense attributable to the Cash Convertible Notes for the three-months ended March 31, 2016 and 2015 was $4.0 million and $3.8 million, respectively, comprised of contractual interest expense of $1.2 million and $1.2 million, respectively, and debt discount and deferred financing cost amortization of $2.8 million and $2.6 million, respectively. Total interest expense attributable to the Cash Convertible Notes for the six-months ended March 31, 2016 and 2015 was $7.7 million and $7.4 million, respectively, comprised of contractual interest expense of $2.4 million and $2.5 million, respectively, and debt discount and deferred financing cost amortization of $5.3 million and $4.9 million, respectively. The effective interest rate approximates 8% after inclusion of deferred financing costs upon adoption of ASU 2015-03, from the effective interest rate of approximately 7% during fiscal 2015. As of March 31, 2016, the remaining unamortized issuance discount and costs will be amortized over the next three years assuming no early conversion. Non-Recourse Debt to EZCORP Non-recourse debt amounts in the table above represent Grupo Finmart’s third-party debt, including secured notes consolidated from VIEs. Amounts due in Mexican pesos are translated each reporting period. Effective interest rates approximate stated rates. Secured Foreign Currency Debt, Secured Notes not Consolidated from VIEs and Unsecured Notes Foreign currency debt and secured notes (not including secured notes consolidated from VIEs, which are discussed below) are secured by Grupo Finmart's loan portfolio or collateralized cash at Grupo Finmart’s option. As of March 31, 2016 and 2015, Grupo Finmart’s secured foreign currency debt and notes, excluding secured notes consolidated from VIEs, were secured by consumer loans totaling $36.5 million and $24.9 million, respectively, included in “Consumer loans, net” and “Non-current consumer loans, net” in our condensed consolidated balance sheets, and collateralized cash totaling $3.0 million and $19.2 million, respectively, included in “Restricted cash” and “Restricted cash, non-current” in our condensed consolidated balance sheets. All unsecured notes are collateralized with Grupo Finmart’s assets. During the six-months ended March 31, 2016, Grupo Finmart issued $6.1 million of 13.5% unsecured notes due September 2016 (repayment term extended through 2017 during the three-months ended March 31, 2016), $6.1 million of 18% unsecured notes due September 2016 and $2.3 million of 20% unsecured notes due March 2016 (repaid in full during the three-months ended March 31, 2016). Amounts of debt issued are stated at exchange rates in effect at time of issuance. During the six-months ended March 31, 2016, Grupo Finmart repaid the following amounts of debt that were outstanding as of September 30, 2015: the remaining $0.9 million 8.2% secured foreign currency debt due 2016; $12.3 million 8.5% unsecured notes due 2015; $1.5 million 10% unsecured notes due 2015; $3.9 million 11% unsecured notes due 2015; $2.9 million 12% secured notes due 2016; and $1.2 million 13% unsecured notes due 2016. Such amounts include the impact of foreign exchange effects and amortization of deferred costs. In addition, portions of other debt amounts still outstanding as of March 31, 2016 were repaid. Notes Consolidated from VIEs During the year ended September 30, 2014, Grupo Finmart entered into three separate agreements with third party investors and variable interest entities (“VIEs”) to securitize selected loans providing asset backed financing for operations. The VIEs issued promissory notes to the third party first beneficiaries of the VIEs. The debt described below is collateralized by all of the assets of the VIEs as presented in our condensed consolidated balance sheets described in Note 16. The secured notes consolidated from VIEs contain certain prepayment clauses. Where the collections on consumer loans held by the VIEs are greater than anticipated in future reporting periods, we expect an accelerated repayment of the secured notes. See “Assets and Liabilities of Consolidated Variable Interest Entities” included in our condensed consolidated balance sheets. During the six-months ended March 31, 2016, the VIEs repaid a net $22.4 million of debt that was outstanding as of September 30, 2015, including the impact of foreign exchange effects and amortization of deferred costs. 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 as discussed in Note 16. In addition to the initial net payment of $6.9 million during the six-months ended March 31, 2016, including the impact of foreign exchange effects and amortization of deferred costs, the facility began amortizing at a monthly rate of $1.0 million beginning March 2016, which includes principal and interest at TIIE plus an applicable margin, through maturity of the facility in 2019.

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