-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ACqrhfzmmHgQswydhaK8ahlEZvYE1549MbJz+CKFzizyXtkhC4E8BbbCyk4uQ3SV 1yzCkSIRgkm9sXjHkgfujg== 0000950134-96-006028.txt : 19961115 0000950134-96-006028.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950134-96-006028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASH AMERICA INTERNATIONAL INC CENTRAL INDEX KEY: 0000807884 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [5900] IRS NUMBER: 752018239 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09733 FILM NUMBER: 96660613 BUSINESS ADDRESS: STREET 1: 1600 WEST 7TH STREET CITY: FT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173351100 MAIL ADDRESS: STREET 1: 1600 WEST 7TH STREET CITY: FORT WORTH STATE: TX ZIP: 76102 FORMER COMPANY: FORMER CONFORMED NAME: CASH AMERICA INVESTMENTS INC /TX/ DATE OF NAME CHANGE: 19920520 10-Q 1 FORM 10-Q PERIOD END SEPTEMBER 30, 1996 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ Commission File Number 1-9733 CASH AMERICA INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) TEXAS 75-2018239 (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 1600 WEST 7TH STREET FT. WORTH, TEXAS 76102 (Address of principal executive offices) (Zip Code) (817) 335-1100 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report.) 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 X NO ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: 28,759,494 common shares, $.10 par value, were outstanding as of October 31, 1996. ================================================================================ 2 CASH AMERICA INTERNATIONAL, INC. INDEX TO 10-Q PART I. FINANCIAL STATEMENTS Page Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets - September 30, 1996 and 1995, and December 31, 1995 . . . . . . . . . . . . . . . . . . . 1 Consolidated Statements of Income - Three Months and Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . 2 Consolidated Statements of Stockholders' Equity - Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . 3 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . 4 Notes to Consolidated Financial Statements . . . . . . . . . . . . . 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 8 PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 18 SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3 CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (UNAUDITED) - --------------------------------------------------------------------------------
September 30 Dec 31 1996 1995 1995 --------- --------- --------- ASSETS Current assets: Cash and cash equivalents $ 1,368 $ 6,980 $ 3,435 Service charges receivable 14,451 11,678 11,829 Loans 104,561 87,236 87,782 Inventory, net 51,310 59,085 56,647 Prepaid expenses and other 4,826 4,965 4,823 Deferred tax asset 12,255 12,891 12,710 --------- --------- --------- Total current assets 188,771 182,835 177,226 Property and equipment, net 60,797 66,138 64,987 Intangible assets, net 61,731 64,355 63,421 Other assets 10,497 8,532 8,473 --------- --------- --------- Total assets $ 321,796 $ 321,860 $ 314,107 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 10,104 $ 8,371 $ 9,584 Customer layaway deposits 3,684 4,453 3,524 Income taxes currently payable 3,491 1,706 2,585 Current portion of long-term debt 4,286 --------- --------- --------- Total current liabilities 21,565 14,530 15,693 Long-term debt: Bank lines of credit 70,689 85,738 73,462 Notes payable, net of current portion 45,714 50,000 50,000 --------- --------- --------- 116,403 135,738 123,462 Stockholders' equity: Common stock, $.10 par value per share, 80,000,000 shares authorized 3,024 3,024 3,024 Paid in surplus 121,878 121,828 121,840 Retained earnings 70,092 56,614 61,727 Notes receivable - stockholders (1,065) (1,071) Foreign currency translation adjustment (3,454) (3,097) (3,834) --------- --------- --------- 190,475 178,369 181,686 Less - shares held in treasury, at cost (6,647) (6,777) (6,734) --------- --------- --------- Total stockholders' equity 183,828 171,592 174,952 --------- --------- --------- Total liabilities and stockholders' equity $ 321,796 $ 321,860 $ 314,107 ========= ========= =========
- -------------------------------------------------------------------------------- See notes to consolidated financial statements. Page 1 4 CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (UNAUDITED) - --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30 September 30 ---------------------- --------------------- 1996 1995 1996 1995 PAWN SERVICE CHARGES $ 24,344 $ 20,106 $ 67,676 $ 58,158 GROSS PROFIT FROM SALES Sales 40,330 37,530 131,465 119,845 Cost of sales 25,379 21,749 82,078 69,784 --------- --------- --------- --------- Gross profit 14,951 15,781 49,387 50,061 --------- --------- --------- --------- NET REVENUES 39,295 35,887 117,063 108,219 --------- --------- --------- --------- OPERATING EXPENSES Operations 22,669 22,041 67,891 64,349 Administration 4,596 4,400 14,188 12,577 Amortization 871 893 2,658 2,742 Depreciation 3,114 3,000 9,324 8,598 --------- --------- --------- --------- Total operating expenses 31,250 30,334 94,061 88,266 --------- --------- --------- --------- Income from operations 8,045 5,553 23,002 19,953 Interest expense, net 2,341 2,713 7,078 7,700 Other (income)/expense 184 118 671 263 --------- --------- --------- --------- Income before income taxes 5,520 2,722 15,253 11,990 Provision for income taxes 2,057 1,119 5,810 4,613 --------- --------- --------- --------- Income before cumulative effect of a change in accounting principle 3,463 1,603 9,443 7,377 Cumulative effect on prior years (to December 31, 1994) of changing to a different revenue recognition method (Note 2) (19,772) --------- --------- --------- --------- NET INCOME (LOSS) $ 3,463 $ 1,603 $ 9,443 $ (12,395) ========= ========= ========= ========= - ------------------------------------------------------------------------------------------------- Amounts per common share: Income before cumulative effect of a change in accounting principle $ 0.12 $ 0.06 $ 0.33 $ 0.26 Cumulative effect on prior years (to December 31, 1994) of changing to a different revenue recognition method (0.68) --------- --------- --------- --------- Net income (loss) $ 0.12 $ 0.06 $ 0.33 $ (0.43) ========= ========= ========= ========= Weighted average shares - Fully diluted 28,981 28,815 28,971 28,914
- -------------------------------------------------------------------------------- See notes to consolidated financial statements. Page 2 5 CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Nine Months Ended September 30, 1996 and 1995 (In thousands, except share data) (UNAUDITED) - --------------------------------------------------------------------------------
COMMON STOCK TREASURY STOCK ---------------------- PAID IN RETAINED ---------------------- SHARES AMOUNT SURPLUS EARNINGS SHARES AMOUNT ---------- ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1995 30,235,164 $ 3,024 $ 121,840 $ 61,727 1,495,285 $ (6,734) Net income 9,443 Dividends declared (1,078) Treasury shares reissued 27 (19,615) 87 Tax benefit from exercise of option shares 11 Reduction in stockholders notes receivable Foreign currency translation adjustment ---------- ------- --------- -------- --------- -------- Balance at September 30, 1996 30,235,164 $ 3,024 $ 121,878 $ 70,092 1,475,670 $ (6,647) ========== ======= ========= ======== ========= ======== - ------------------------------------------------------------------------------------------------------------- Balance at December 31, 1994 30,235,164 $ 3,024 $ 121,481 $ 70,081 1,666,099 $ (7,460) Net loss (12,395) Dividends declared (1,072) Treasury shares reissued 285 (161,321) 683 Tax benefit from exercise of option shares 62 Foreign currency translation adjustment ---------- -------- --------- -------- --------- -------- Balance at September 30, 1995 30,235,164 $ 3,024 $ 121,828 $ 56,614 1,504,778 $ (6,777) ========== ======== ========= ======== ========= ======== NOTES FOREIGN RECEIVABLE CURRENCY STOCK- TRANSLATION HOLDERS ADJUSTMENT TOTAL ---------- ---------- ---------- Balance at December 31, 1995 $ (1,071) $ (3,834) $ 174,952 Net income 9,443 Dividends declared (1,078) Treasury shares reissued 114 Tax benefit from exercise of option shares 11 Reduction in stockholders notes receivable 6 6 Foreign currency translation adjustment 380 380 ---------- -------- --------- Balance at September 30, 1996 $ (1,065) $ (3,454) $ 183,828 ========== ======== ========= - ---------------------------------------------------------------------- Balance at December 31, 1994 $ - (3,692) $ 183,434 Net loss (12,395) Dividends declared (1,072) Treasury shares reissued 968 Tax benefit from exercise of option shares 62 Foreign currency translation adjustment 595 595 ---------- -------- --------- Balance at September 30, 1995 $ - (3,097) $ 171,592 ========== ======== ========= - ----------------------------------------------------------------------
See notes to consolidated financial statements. Page 3 6 CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (UNAUDITED)
- ------------------------------------------------------------------------------------ Nine Months Ended September 30 ---------------------- 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Net Income (Loss) to Net Cash Provided By Operating Activities: Net income (loss) $ 9,443 $ (12,395) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of accounting change 19,772 Amortization 2,658 2,742 Depreciation 9,324 8,598 Increase in service charges receivable (2,524) (1,382) Decrease (increase) in inventory 5,456 (800) (Increase) decrease in prepaid expenses and other (10) 761 Increase (decrease) in accounts payable and accrued expenses 506 (5,388) Increase in layaway deposits, net 156 875 Increase (decrease) in income taxes payable 904 (2,092) Deferred taxes 2 (852) --------- --------- Net cash provided by operating activities 25,915 9,839 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Loans forfeited and transferred to inventory 68,617 61,421 Loans repaid or renewed 185,671 168,341 Loans made, including loans renewed (270,455) (237,117) --------- --------- Net increase in loans (16,167) (7,355) Acquisitions (799) (1,412) Investment in and advances to affiliates (2,100) (1,300) Purchases of property and equipment (5,215) (11,377) Proceeds from sales of property and equipment 145 --------- --------- Net cash used by investing activities (24,136) (21,444) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net payments under bank lines of credit (2,880) (5,950) Proceeds from issuance of long-term debt 20,000 Net payments of notes receivable stockholders 6 Proceeds from issuance of stock, net 114 526 Dividends paid (1,078) (1,072) --------- --------- Net cash (used) provided by financing activities (3,838) 13,504 --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (8) 254 --------- --------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,067) 2,153 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,435 4,827 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,368 $ 6,980 ========= ========= - ------------------------------------------------------------------------------------
See notes to consolidated financial statements. Page 4 7 CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (UNAUDITED) ================================================================================ NOTE 1 - BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Cash America International, Inc. and its wholly owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. At September 30, 1996, the Company had a 49% ownership interest, each, in Mr. Payroll Corporation ("Mr. Payroll") and Express Rent A Tire Ltd. ("Express") (see Note 4). These investments are being accounted for using the equity method of accounting, whereby the Company records its 49% share of earnings or losses of such affiliates in its consolidated financial statements. The financial statements as of September 30, 1996 and 1995, and for the three months and nine months then ended are unaudited, but in management's opinion, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such interim periods. Operating results for the three months and nine months are not necessarily indicative of the results that may be expected for the full fiscal year. These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1995 Annual Report to Stockholders. NOTE 2 - CHANGE IN ACCOUNTING PRINCIPLE Effective January 1, 1995, the Company changed its method of income recognition on pawn loans. The Company accrues pawn service charges for all loans that the Company deems collection is probable based on historical loan redemption statistics. For loans not repaid, the carrying value of the forfeited collateral ("inventory") is stated at the lower of cost (cash amount loaned) or market. The cumulative effect of the accounting change on years prior to January 1, 1995 of $19,772,000 (net of a tax benefit of $11,611,000) is included as a reduction of net income for the first quarter of 1995. Page 5 8 NOTE 3 - LONG-TERM DEBT The Company's long-term debt at September 30 consisted of:
1996 1995 - -------------------------------------------------------------------------------------------------- (In thousands) Debt Obligations: Revolving Line of Credit $125 million due June 30, 2001 $ 41,400 $ 57,750 Revolving Line of Credit L5 million due April 30, 1998 1,409 -0- Swedish Kronor term loan due September 30, 1998 27,880 27,988 8.33% senior unsecured notes due 2003 30,000 30,000 8.14% senior unsecured notes due 2007 20,000 20,000 --------- --------- 120,689 135,738 Less current portion 4,286 -0- --------- --------- Total long-term debt $ 116,403 $ 135,738 ========= =========
In addition, the Company's wholly owned subsidiary in Sweden has an undrawn commitment as of September 30, 1996, for a 10,000,000 Swedish Kronor ("SEK") line of credit. On June 19, 1996, the Company modified the terms of its existing unsecured credit agreement, previously providing for a $100,000,000 line of credit maturing in 1998 and a $25,000,000 line of credit maturing in 1997, by providing for a $125,000,000 revolving unsecured line of credit with a maturity of June 30, 2001. The modified credit agreement requires that a fee of 1/4% per annum be paid quarterly on the amount of the unused commitment. The borrowing rate under the modified line of credit is, at the Company's option, either the base rate as specified by the Agent Bank, or a margin, 75 basis points as of September 30, 1996, over LIBOR based on the Company's debt-to-total capital ratio, measured quarterly. The modified credit agreement provides for financial covenants similar to those previously in effect. On June 2, 1995, the Company entered into a floating-to-fixed interest rate exchange agreement for a portion of the SEK 185,000,000 term loan. The agreement fixes the interest rate on SEK 118,750,000 (approximately $17,898,000 at September 30, 1996) at 10.9% through August 26, 1998. The overall effective rate of interest on the Swedish Term Loan at September 30, 1996, was 9.2% after taking into account the interest rate exchange agreement. NOTE 4 - INVESTMENTS IN AFFILIATES On July 13, 1994, the Company acquired a 49% interest in Mr. Payroll, a private company which sells franchises for check-cashing kiosks and service centers. In conjunction with its investment, the Company has entered into a revolving credit agreement with Mr. Payroll which provides for maximum Page 6 9 borrowings of $3.5 million from the Company. Interest is payable quarterly at a rate, reset monthly, that is equivalent to LIBOR plus 4%. The entire unpaid principal balance is due and payable in full on February 28, 1997. Mr. Payroll has granted the Company a security interest in all of its assets. As of September 30, 1996, Mr. Payroll had borrowings outstanding of $3,000,000. The amounts are included in other assets. On September 20, 1995, the Company acquired a 49% interest in Express, a private company which offers automobile and truck tires and wheels on a rent-to-own basis. In conjunction with its investment, the Company has entered into a revolving credit agreement with Express which provides for maximum borrowings of $3.0 million from the Company. Interest is payable quarterly at a rate, reset monthly, that is equivalent to LIBOR plus 4%. The entire unpaid principal balance is due and payable in full on February 28, 1998. Express has granted the Company a security interest in all of its assets. As of September 30, 1996, Express had borrowings outstanding of $1,900,000. The amounts are included in other assets. NOTE 5 - LITIGATION The Company is a defendant in certain lawsuits encountered in the ordinary course of its business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's financial position or results of operations. Page 7 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS THE COMPARABLE 1995 PERIODS SUMMARY CONSOLIDATED FINANCIAL DATA THIRD QUARTER ENDED SEPTEMBER 30, 1996 vs THIRD QUARTER ENDED SEPTEMBER 30, 1995 - -------------------------------------------------------------------------------- The following table sets forth selected consolidated financial data with respect to the Company for the three months ended September 30, 1996 and 1995.
1996 1995 Change ------- ------- ------- ($ in thousands) Pawn service charges $24,344 $20,106 21% Gross profit from sales Sales 40,330 37,530 7% Cost of sales 25,379 21,749 17% ------- ------- ------- Gross profit 14,951 15,781 (5)% ------- ------- ------- Net Revenues $39,295 $35,887 9% ------- ------- ------- Other Data: Annualized yield on loans 96% 95% 1% Average loan balance per average location in operation $ 266 $ 227 17% Average pawn loan amount at end of period (not in thousands) $ 94 $ 90 4% Gross profit as a percentage of sales 37.1% 42.0% (12)% Average annualized inventory turnover 2.1X 1.5X 40% Average inventory balance per average location in operation $ 130 $ 157 (17)% Expenses as a percentage of net revenues: Operations 57.7% 61.4% (6)% Administration 11.7% 12.3% (5)% Depreciation and amortization 10.1% 10.8% (6)% Interest, net 6.0% 7.6% (21)% Locations in Operation: Beginning of period 377 366 Acquired 1 -- Established 2 3 Combined -- -- ------- ------- End of period 380 369 3% ======= ======= ======= Average number of locations in operation during the period (a) 378 368 3% ======= ======= =======
(a) Averages based on accumulation of month-end balances and dividing aggregate total by total months in the period. Page 8 11 SUMMARY CONSOLIDATED FINANCIAL DATA NINE MONTHS ENDED SEPTEMBER 30, 1996 vs NINE MONTHS ENDED SEPTEMBER 30, 1995 - -------------------------------------------------------------------------------- The following table sets forth selected consolidated financial data with respect to the Company for the nine months ended September 30, 1996 and 1995.
1996 1995 Change --------- --------- --------- ($ in thousands) Pawn service charges $ 67,676 $ 58,158 16% Gross profit from sales Sales 131,465 119,845 10% Cost of sales 82,078 69,784 18% --------- --------- --------- Gross profit 49,387 50,061 (1)% --------- --------- --------- Net Revenues $ 117,063 $ 108,219 8% --------- --------- --------- Other Data: Annualized yield on loans 97% 96% 1% Average loan balance per average location in operation $ 247 $ 225 10% Average pawn loan amount at end of period (not in thousands) $ 94 $ 90 4% Gross profit as a percentage of sales 37.6% 41.8% (10)% Average annualized inventory turnover 2.1X 1.6X 31% Average inventory balance per average location in operation $ 138 $ 161 (14)% Expenses as a percentage of net revenues: Operations 58.0% 59.5% (3)% Administration 12.1% 11.6% 4% Depreciation and amortization 10.2% 10.5% (3)% Interest, net 6.0% 7.1% (15)% Locations in Operation: Beginning of period 373 340 Acquired 2 3 Established 7 28 Combined (2) (2) --------- --------- End of period 380 369 3% ========= ========= ========= Average number of locations in operation during the period (a) 376 359 5% ========= ========= =========
(a) Averages based on accumulation of month-end balances and dividing aggregate total by total months in the period. Page 9 12 IMPACT OF EXPANDING OPERATIONS The Company expanded its operations over the 21-month period from December 31, 1994, through September 30, 1996, with the addition of 45 pawnshops. Thirty-nine stores were new start-ups and six stores were acquired during the period, and five stores were combined into existing locations for a net addition of 40 stores during the 21-month period. At September 30, 1996, the Company operated 380 pawnshops--333 in 14 states in the United States, 37 in the United Kingdom operating under the name Harvey & Thompson, Ltd., and 10 in Sweden operating under the name Svensk Pantbelaning. Net revenues (total revenues less cost of sales) increased $3.4 million, or 9%, in the third quarter of 1996 over the same period of 1995, resulting primarily from a 9% gain on same stores (those in operation more than one year). Net revenues for the nine month period ended September 30, 1996, increased $8.8 million, or 8%, over the corresponding period in 1995. This increase resulted primarily from an 8% gain from same stores. PAWN SERVICE CHARGES Pawn service charges are impacted by changes in the average outstanding amount of pawn loans and average loan yields. Pawn service charges increased $4.2 million, or 21%, and $9.5 million, or 16%, for the three months and nine months ended September 30, 1996, respectively, over the comparable periods in 1995. These increases resulted primarily from same store increases in the average outstanding amount of pawn loans of 19% and 14% for the three and nine month periods ended September 30, 1996, respectively, over the comparable periods in 1995, combined with a slight increase in the average number of stores in operation. The average loan balance per average location increased 17% and 10% for the three and nine month periods ended September 30, 1996, respectively, over the comparable periods in 1995. These increases in average loan balances per average location were the combined result of domestic increases of 19% and 10%, respectively, increases in the Swedish stores of 22% and 23%, respectively, and a 5% increase and 3% decrease, respectively, for the Harvey & Thompson stores. The yield on loans outstanding increased in the three and nine month periods ending September 30, 1996, to approximately 96% and 97%, respectively, from 95% and 96%, respectively, for the same periods in 1995. The consolidated 96% annual yield represents a weighted average of the distinctive yields realized in the three different countries in which the Company operates. In its domestic operations the Company realized a slight increase of 1% in its loan yield to 124% in the third quarter of 1996 from 123% in the third quarter of 1995. Domestically, the loan yield for the nine months ended September 30, 1996, was 126% compared to 124% for the same period in 1995. Internationally, loans at Harvey & Thompson in the Page 10 13 United Kingdom yielded 69% and 71% for the three and nine month periods ended September 30, 1996, respectively, compared to 68% and 69%, respectively, for the same periods in 1995, while loans at Svensk Pantbelaning in Sweden yielded 46% during both periods in 1996 and 1995. This produced a blended international yield of 56% for both respective periods in 1996 compared to 55% in the third quarter and 57% for the nine months ended September 30, 1995. SALES AND GROSS PROFIT Sales for the three months ended September 30, 1996, increased $2.8 million, or 7%, compared to the same period of 1995. The rise in sales was impacted by a same store sales increase of 4%, a $738,000 increase in sales of scrap gold and other precious metals at wholesale, and a slight increase in the average number of stores in operation during the period. Sales for the nine months ended September 30, 1996, increased $11.6 million, or 10%, compared to the same period of 1995. The rise in sales was impacted by a same store sales increase of 3%, a $4.7 million increase in sales of scrap gold and other precious metals at wholesale and a slight increase in the average number of stores in operation. Gross profit margins decreased to 37.1% and 37.6% for the three and nine months ended September 30, 1996, respectively, compared to 42.0% and 41.8% for the same periods in 1995. However, inventory turns increased from 1.5 times for the three months ended September 30, 1995, to 2.1 times for the three months ended September 30, 1996. Inventory turns for the nine months ended September 30, 1996, increased to 2.1 times from 1.6 times for the corresponding period in 1995. During the first quarter of 1996, the Company introduced a new incentive compensation program for its field operations personnel with a focus of rewarding the maximization of cash returns on capital employed. Management of the Company believes that the new incentive program has led to increased revenues, increased inventory turns, and decreased inventory levels while emphasizing increases in net revenues. This emphasis contributed to decreased gross profit margins for both the three month and nine month periods ended September 30, 1996. EXPENSES Operations and administrative expenses increased $824,000, or 3.1%, in the third quarter of 1996 over the third quarter of 1995. This increase consists of a 1% increase in same store operating expenses, an increase in the average number of stores in operation during the period and a decrease in recruiting and relocation expenses for administrative personnel. As a percentage of net revenues, this represents a decrease to 69% for 1996 compared to 74% in 1995. For the nine month period ended September 30, 1996, operations and administrative expenses increased $5.2 million over the same period in 1995, while the percentage of expenses to net revenues decreased from 71% in 1995 to 70% for the same period in 1996. Page 11 14 Domestic operations and administration expenses, as a percentage of domestic net revenues, decreased to 74% in the third quarter of 1996 from 77% in 1995. For the nine months ended September 30, 1996, the percentage decreased from 75% to 74% for the same period in 1995. Operations and administrative expenses related to foreign operations decreased as a percentage of foreign net revenues from 49% for the three month period ended September 30, 1995 to 44% in the three months ended September 30, 1996. For the nine months ended September 30, 1996, the percentage decreased from 47% to 46% for the same period in 1995. Depreciation and amortization, as a percentage of net revenues decreased to 10% from 11% for the three month periods ending September 30, 1996 and 1995, respectively, and was constant at 10% for the nine month periods ending September 30, 1996 and 1995. Net interest expense, as a percentage of net revenues, decreased to 6.0% for the three month and nine month period ended September 30, 1996, from 7.6% and 7.1% for the respective periods in 1995. This reduction resulted primarily from decreases in the average debt balance outstanding of 10% for the third quarter of 1996 compared to the third quarter of 1995, and a 9% reduction in the average debt balance outstanding for the nine months ended September 30, 1996, compared to the nine months ended September 30, 1995. In addition there was a slight decrease in the weighted average interest rates for the three month period ended September 30, 1996, and for the nine month period ended September 30, 1996, compared to the same periods for 1995. OTHER INCOME/(EXPENSE) During the third quarter of 1996 and 1995 the Company recorded losses from its investments in affiliates of $236,000 and $135,000, respectively. For the nine months ended September 30, 1996 and 1995, the Company recorded losses on these investments of $766,000 and $329,000, respectively. These losses were partially offset by rent income and other miscellaneous items. INCOME TAXES The Company's effective tax rate decreased to 37% in the third quarter of 1996 compared to 41% for the same period in 1995. The effective tax rate for the nine months ended September 30, 1996, remained constant at 38% compared to the corresponding period in 1995. The effective tax rate for the Company's domestic operations decreased to 41% from 49% for the three month periods ended September 30, 1996 and 1995, respectively, while the effective tax rate for its foreign operations decreased to 32% in the third quarter of 1996 compared to 36% for the same period in 1995. The Company's effective tax rate for domestic operations decreased to 41% for Page 12 15 the nine month period ending September 30, 1996, compared to 43% for the same period in 1995. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1996, cash and cash equivalents decreased to $1.4 million from $3.4 million at December 31, 1995. This decrease was caused by investments in increased loan balances of $16.2 million, purchases of $5.2 million of property and equipment, reduction of long-term debt of $2.9 million, advances to affiliates of $2.1 million, and payment of dividends and other activities of $1.5 million. These decreases were offset by $25.9 million of cash generated from operating activities. The Company currently has a $125 million unsecured revolving bank line of credit, of which $83.6 million was unused at September 30, 1996. The Company's wholly owned subsidiary, Harvey & Thompson, Ltd., has a committed 5 million pound sterling unsecured revolving line of credit from a UK based commercial bank, of which 4.1 million pounds sterling was unused at September 30, 1996. The Company's wholly owned subsidiary, Svensk Pantbelaning AB, has a SEK 10 million unsecured revolving line of credit with a commercial bank, all of which was unused at September 30, 1996. The Company believes that funds provided from operations, coupled with the Company's current working capital and available lines of credit, should be sufficient to meet its foreseeable cash requirements. Page 13 16 FOREIGN OPERATIONS The following table sets forth selected consolidated financial data for Harvey & Thompson and Svensk Pantbelaning as of September 30, 1996 and 1995, and for the three and nine month periods then ended. Balance sheet data for Harvey & Thompson has been translated from pounds sterling into U.S. dollars using the end of the period currency exchange rate of 1.565 at September 30, 1996, and 1.585 at September 30, 1995. Income statement data has been translated at an average exchange rate of 1.555 for the three month period ending September 30, 1996, compared to 1.583 for the same period in 1995. Balance sheet data for Svensk Pantbelaning has been translated from Swedish Kronor into U.S. dollars using the end of the period currency exchange rate of 6.635 at September 30, 1996, and 6.922 at September 30, 1995, respectively. Income statement data has been translated at an average exchange rate of 6.631 for the three month period ending September 30, 1996, compared to 7.180 for the comparable period in 1995.
Three Months Ended September 30, 1996 1995 Change --------- --------- ------ ($ in thousands) Income Statement Data: Pawn service charges $ 5,690 $ 4,764 19% Net revenues 5,825 4,852 20% Operating expenses 2,822 2,627 7% Income from operations 3,003 2,225 35% Other Data: Total average locations 47 44 7% Annualized yield on loans 55.8% 55.1% 1% Ending loan balance $ 41,420 $ 34,834 19% Average loan balance per average location in operation $ 863 $ 779 11% Expenses as a percentage of net revenues: Operations 33.7% 36.5% (8)% Administration 10.0% 12.8% (22)%
Page 14 17 Income statement data for Harvey & Thompson for the nine months ended September 30 has been translated from British pounds sterling into U.S. dollars at an average exchange rate of 1.538 for 1996, compared to 1.591 for 1995. Income statement data for Svensk Pantbelaning for the nine months ended September 30 has been translated from Swedish Kronor into U.S. dollars at average exchange rates of 6.699 for 1996, compared to 7.275 for 1995.
Three Months Ended September 30, 1996 1995 Change --------- --------- ------ ($ in thousands) Income Statement Data: Pawn service charges $ 16,046 $ 13,995 15% Net revenues 16,410 14,432 14% Operating expenses 8,289 7,397 12% Income from operations 8,121 7,035 15% Other Data: Total average locations 46 43 7% Annualized yield on loans 56.2% 56.6% (1)% Average loan balance per average location in operation $ 829 $ 769 8% Expenses as a percentage of net revenues: Operations 34.5% 34.2% 1% Administration 11.0% 12.3% (11)%
Page 15 18 DOMESTIC OPERATIONS Presented below is selected financial data for the Company's domestic operations as of September 30, 1996 and 1995, and for the three months then ended:
1996 1995 Change ------- ------- ------- ($ in thousands) Pawn service charges $18,654 $15,342 22% Gross profit from sales Sales 39,975 37,231 7% Cost of sales 25,159 21,538 17% ------- ------- ------- Gross profit 14,816 15,693 (6)% ------- ------- ------- Net Revenues $33,470 $31,035 8% ------- ------- ------- Other Data: Annualized yield on loans 124% 123% 1% Average loan balance per average location in operation $ 181 $ 152 19% Average pawn loan amount at end of period (not in thousands) $ 72 $ 69 4% Gross profit as a percentage of sales 37.1% 42.2% (12)% Average annualized inventory turnover 2.1X 1.5X 33% Average inventory balance per average location in operation $ 148 $ 178 (17)% Expenses as a percentage of net revenues: Operations 61.9% 65.3% (5)% Administration 12.0% 12.2% (2)% Depreciation and amortization 11.1% 11.8% (6)% Interest, net 4.9% 6.8% (28)% Domestic Locations in Operation: Beginning of period 330 322 Acquired 1 -- Established 2 3 Combined -- -- ------- ------- End of period 333 325 2% ======= ======= ======= Average number of locations in operation during the period (a) 331 324 2% ======= ======= =======
(a) Averages based on accumulation of month-end balances and dividing aggregate total by total months in the period. Page 16 19 DOMESTIC OPERATIONS Presented below is selected financial data for the Company's domestic operations as of September 30, 1996 and 1995, and for the nine months then ended:
1996 1995 Change --------- --------- --------- ($ in thousands) Pawn service charges $ 51,630 $ 44,163 17% Gross profit from sales Sales 130,439 118,765 10% Cost of sales 81,416 69,141 18% --------- --------- --------- Gross profit 49,023 49,624 (1)% --------- --------- --------- Net Revenues $ 100,653 $ 93,787 7% --------- --------- --------- Other Data: Annualized yield on loans 126% 124% 2% Average loan balance per average location in operation $ 166 $ 151 10% Average pawn loan amount at end of period (not in thousands) $ 72 $ 69 4% Gross profit as a percentage of sales 37.6% 41.8% (10)% Average annualized inventory turnover 2.1X 1.6X 31% Average inventory balance per average location in operation $ 156 $ 182 (14)% Expenses as a percentage of net revenues: Operations 61.8% 63.3% (2)% Administration 12.3% 11.5% 7% Depreciation and amortization 11.1% 11.4% (3)% Interest, net 4.9% 6.5% (25)% Domestic Locations in Operation: Beginning of period 327 300 Acquired 2 3 Established 5 24 Combined (1) (2) --------- --------- End of period 333 325 2% ========= ========= ========= Average number of locations in operation during the period (a) 330 316 4% ========= ========= =========
(a) Averages based on accumulation of month-end balances and dividing aggregate total by total months in the period. Page 17 20 PART II Item 1. LEGAL PROCEEDINGS See Note 5 of Notes to Consolidated Financial Statements Item 2. CHANGES IN SECURITIES Not Applicable Item 3. DEFAULTS UPON SENIOR NOTES Not Applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable Item 5. OTHER INFORMATION Not Applicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K - None Page 18 21 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CASH AMERICA INTERNATIONAL, INC. ------------------------------------ (Registrant) BY: /S/ James H. Kauffman -------------------------------- James H. Kauffman Executive Vice President and Chief Financial Officer Date: November 11, 1996 Page 19 22 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 - Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1,368 0 119,012 0 51,310 188,771 107,621 46,824 321,796 21,565 116,403 0 0 3,024 180,804 321,796 131,465 199,141 82,078 149,969 26,170 0 7,078 15,253 5,810 9,443 0 0 0 9,443 .33 .33
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