-----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, IafMmSzp1WYGa1LHVd70PoOtMaQ4PruUSwVxcChcOmW0ugBOW6vQxgYXIGm1UAx2 0BO1LGO79hFx55cvmVLAwg== 0000950134-99-004246.txt : 19990517 0000950134-99-004246.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950134-99-004246 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 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: SEC FILE NUMBER: 001-09733 FILM NUMBER: 99624190 BUSINESS ADDRESS: STREET 1: 1600 W 7TH ST 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 FOR QUARTER ENDED MARCH 31, 1999 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 March 31, 1999 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 FORT 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: 25,445,726 common shares, $.10 par value, were outstanding as of April 30, 1999 =============================================================================== 2 CASH AMERICA INTERNATIONAL, INC. INDEX TO 10-Q
PART I. FINANCIAL STATEMENTS Page Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets - March 31, 1999 and 1998 and December 31, 1998...........................1 Consolidated Statements of Income - Three Months Ended March 31, 1999 and 1998............................2 Consolidated Statements of Stockholders' Equity - Three Months Ended March 31, 1999 and 1998...............3 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1999 and 1998...............4 Notes to Consolidated Financial Statements...............5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition......9 PART II. OTHER INFORMATION.........................................22 SIGNATURE...........................................................23
3 CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (UNAUDITED)
......................................................................................................................... March 31, December 31, 1999 1998 1998 - ------------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 5,769 $ 2,574 $ 4,417 Loans 120,845 108,907 128,637 Merchandise held for disposition, net 63,125 51,585 65,417 Inventory 1,213 4,468 3,093 Finance and service charges receivable 18,304 16,449 19,733 Prepaid expenses and other 7,398 5,941 7,129 Income taxes recoverable 5,422 -- 5,870 Deferred tax assets 7,487 11,561 10,134 - ------------------------------------------------------------------------------------------------------------------------- Total current assets 229,563 201,485 244,430 Property and equipment, net 62,132 66,108 73,347 Intangible assets, net 89,570 74,259 88,284 Other assets 3,993 4,675 4,762 Investment in and advances to unconsolidated subsidiary 18,832 -- -- - ------------------------------------------------------------------------------------------------------------------------- Total assets $ 404,090 $ 346,527 $ 410,823 - ------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 18,036 $ 19,655 $ 19,848 Customer deposits 4,750 4,217 4,151 Income taxes currently payable 2,344 4,230 2,133 Current portion of long-term debt 4,693 4,286 4,686 - ------------------------------------------------------------------------------------------------------------------------- Total current liabilities 29,823 32,388 30,818 Deferred tax liabilities 1,381 -- 3,273 Long-term debt 180,048 141,968 189,288 - ------------------------------------------------------------------------------------------------------------------------- Stockholders' equity: Common stock, $.10 par value per share, 80,000,000 shares authorized 3,024 3,024 3,024 Paid in surplus 126,991 122,243 126,615 Retained earnings 107,207 95,566 102,722 Accumulated other comprehensive loss (3,774) (2,015) (2,414) Notes receivable - stockholders (3,510) (2,384) (3,263) - ------------------------------------------------------------------------------------------------------------------------- 229,938 216,434 226,684 Less -- shares held in treasury, at cost (37,100) (44,263) (39,240) - ------------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 192,838 172,171 187,444 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 404,090 $ 346,527 $ 410,823 - -------------------------------------------------------------------------------------------------------------------------
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 March 31, 1999 1998 - ------------------------------------------------------------------------------------------------------ REVENUE Finance and service charges $ 31,495 $ 27,863 Proceeds from disposition of merchandise 61,221 54,138 Check cashing machine sales 82 800 Check cashing royalties and fees 1,438 840 Rental operations 1,450 553 - ------------------------------------------------------------------------------------------------------ TOTAL REVENUE 95,686 84,194 - ------------------------------------------------------------------------------------------------------ COSTS OF REVENUE Disposed merchandise 40,416 34,614 Cost of check cashing machines sold 38 734 Rental operations 323 148 - ------------------------------------------------------------------------------------------------------ NET REVENUE 54,909 48,698 - ------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Lending operations 30,125 26,591 Check cashing operations 1,728 1,235 Rental operations 511 209 Administration 7,360 6,254 Depreciation 3,913 3,217 Amortization 1,188 862 - ------------------------------------------------------------------------------------------------------ Total operating expenses 44,825 38,368 - ------------------------------------------------------------------------------------------------------ INCOME FROM OPERATIONS 10,084 10,330 Interest expense, net 3,331 3,007 Equity in loss of unconsolidated subsidiary 587 80 Gain from issuance of subsidiary's stock (net of income taxes) (1,128) -- - ------------------------------------------------------------------------------------------------------ Income before income taxes 7,294 7,243 Provision for income taxes 2,494 2,709 - ------------------------------------------------------------------------------------------------------ NET INCOME $ 4,800 $ 4,534 - ------------------------------------------------------------------------------------------------------ Net income per share: Basic $ .19 $ .19 Diluted .18 .18 - ------------------------------------------------------------------------------------------------------ Weighted average shares: Basic 25,191 24,429 Diluted 26,419 25,633 - ------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. Page 2 5 CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (In thousands, except share data) (UNAUDITED)
......................................................................................................................... COMMON STOCK ---------------------------- PAID IN RETAINED COMPREHENSIVE SHARES AMOUNT SURPLUS EARNINGS INCOME - ------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 30,235,164 $ 3,024 $ 126,615 $ 102,722 Comprehensive income: Net income 4,800 $ 4,800 -------- Other comprehensive income - Foreign currency translation adjustments (1,360) -------- Comprehensive income $ 3,440 -------- Dividends declared (315) Treasury shares acquired Treasury shares reissued (232) Tax benefit from exercise of option shares 608 Change in notes receivable - stockholders - ------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 1999 30,235,164 $ 3,024 $ 126,991 $ 107,207 - ------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1997 30,235,164 $ 3,024 $ 122,155 $ 91,337 Comprehensive income: Net income 4,534 $ 4,534 -------- Other comprehensive income - Foreign currency translation adjustments 443 -------- Comprehensive income $ 4,977 -------- Dividends declared (305) Treasury shares acquired Treasury shares reissued 1 Tax benefit from exercise of option shares 87 Change in notes receivable - stockholders - ------------------------------------------------------------------------------------------------------------------------- Balance at March 31, 1998 30,235,164 $ 3,024 $ 122,243 $ 95,566 - -------------------------------------------------------------------------------------------------------------------------
................................................................................................................ ACCUMULATED NOTES OTHER RECEIVABLE - TREASURY STOCK COMPREHENSIVE STOCK- ---------------------------------- INCOME (LOSS) HOLDERS SHARES AMOUNT - ---------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 $ (2,414) $ (3,263) 5,114,218 $ (39,240) Comprehensive income: Net income Other comprehensive income - Foreign currency translation adjustments (1,360) Comprehensive income Dividends declared Treasury shares acquired (750) 3 Treasury shares reissued (279,939) 2,137 Tax benefit from exercise of option shares Change in notes receivable - stockholders (247) - ---------------------------------------------------------------------------------------------------------------- Balance at March 31, 1999 $ (3,774) $ (3,510) 4,833,529 $ (37,100) - ---------------------------------------------------------------------------------------------------------------- Balance at December 31, 1997 $ (2,458) $ (2,362) 5,812,519 $ (44,400) Comprehensive income: Net income Other comprehensive income - Foreign currency translation adjustments 443 Comprehensive income Dividends declared Treasury shares acquired 13,377 (177) Treasury shares reissued (41,187) 314 Tax benefit from exercise of option shares Change in notes receivable - stockholders (22) - ---------------------------------------------------------------------------------------------------------------- Balance at March 31, 1998 $ (2,015) $ (2,384) 5,784,709 $ (44,263) - ----------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. Page 3 6 CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (UNAUDITED)
.............................................................................................................. Three Months Ended March 31, 1999 1998 - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,800 $ 4,534 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,913 3,217 Amortization 1,188 862 Equity in loss of unconsolidated subsidiary 587 80 Gain from issuance of subsidiary's stock (1,128) -- Changes in operating assets and liabilities- Merchandise held for disposition and inventory 1,238 1,311 Finance and service charges receivable 1,282 1,242 Prepaid expenses and other 174 (1,946) Accounts payable and accrued expenses 675 4,525 Customer deposits, net 599 392 Current income taxes 1,326 470 Deferred taxes, net 817 616 - -------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 15,471 15,303 - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Loans forfeited and transferred to merchandise held for disposition 34,632 28,740 Loans repaid or renewed 79,867 69,920 Loans made, including loans renewed (107,852) (92,733) - -------------------------------------------------------------------------------------------------------------- Net decrease in loans 6,647 5,927 - -------------------------------------------------------------------------------------------------------------- Acquisitions, net of cash acquired (1,509) (11,175) Effect on cash of de-consolidation of subsidiary (4,795) -- Advances to unconsolidated subsidiaries (500) (120) Purchases of property and equipment (6,572) (4,191) - -------------------------------------------------------------------------------------------------------------- Net cash used by investing activities (6,729) (9,559) - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net payments under bank lines of credit (8,596) (4,095) Payments on capital lease obligations (107) -- Net proceeds from reissuance of treasury shares 1,658 293 Treasury shares sold (purchased) 3 (177) Dividends paid (315) (305) - -------------------------------------------------------------------------------------------------------------- Net cash used by financing activities (7,357) (4,284) - -------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (33) (5) - -------------------------------------------------------------------------------------------------------------- CHANGE IN CASH AND CASH EQUIVALENTS 1,352 1,455 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,417 1,119 - -------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,769 $ 2,574 - -------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES NONCASH INVESTING AND FINANCING ACTIVITIES: Purchase transactions- Liabilities assumed $ -- $ 85 Loans to stockholders for exercise of stock options 247 22 - --------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. Page 4 7 CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Cash America International, Inc. and its majority-owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. In January 1999, the manned check cashing business of Mr. Payroll Corporation ("Mr. Payroll"), a wholly owned subsidiary of the Company, was transferred to a new wholly owned, consolidated subsidiary. Through March 9, 1999, Mr. Payroll's remaining assets and liabilities, consisting of its automated check cashing machine ("CCM") business, and the results of its operations were included in the consolidated financial statements. Effective as of the close of business on March 9, 1999, Mr. Payroll sold, in a private placement, newly issued shares of its senior convertible preferred stock and common stock. The Company retained 40.5% of the voting interest in Mr. Payroll, and is accounting for its investment and its share of the results of Mr. Payroll's operations after March 9, 1999, by the equity method (see Note 3). The financial statements as of March 31, 1999 and 1998, and for the three month periods 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 month periods are not necessarily indicative of the results that may be expected for the full fiscal year. Certain amounts in the consolidated financial statements for the three month period ended March 31, 1998, have been reclassified to conform to the presentation format adopted in 1999. These reclassifications have no effect on the net income previously reported. These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1998 Annual Report to Stockholders. 2. REVENUE RECOGNITION Lending Operations o Pawn loans ("loans") are made on the pledge of tangible personal property. The Company accrues finance and service charge revenue on 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 ("merchandise held for disposition") is stated at the lower of cost (cash amount loaned) or market. Page 5 8 Revenue is recognized at the time of disposition of merchandise. Interim customer payments for layaway sales are recorded as deferred revenue and subsequently recognized as revenue during the period in which final payment is received. Check Cashing Operations o The Company records fees derived from its owned check cashing locations in the period in which the service is provided. Royalties derived from franchised locations are recorded on the accrual basis. Prior to Mr. Payroll's de-consolidation of its CCM business, CCM sales revenue was recorded upon installation and activation of the CCM. Rental Operations o Tire and wheel rentals are paid on a weekly basis in advance and receipts are recorded on the cash basis. Customers may return the tires and wheels at any time and have no obligation to complete the rental agreement. Rent-A-Tire has also entered into agreements to operate and manage stores for unrelated investors. The investors own the stores and incur all costs to operate them. Management fees earned by Rent-A-Tire are recorded in revenue on a straight-line basis over the life of the agreement. In addition, Rent-A-Tire receives initial compensation for its efforts in constructing and opening each store. 3. ISSUANCE OF SUBSIDIARY'S STOCK On March 9, 1999, Wells Fargo Cash Centers, Inc. ("Cash Centers"), a wholly owned subsidiary of Wells Fargo Bank, N.A. ("Wells Fargo"), made a contribution to Mr. Payroll of $21.0 million of cash and assets valued at $6.0 million that primarily consisted of an existing network of approximately 200 automated teller machines operating in gaming establishments. In addition, Wells Fargo agreed to provide Mr. Payroll a $5.0 million revolving credit facility, up to $17.0 million in equipment lease financing, and cash for use in its CCMs and ATMs in specified markets at negotiated rates. In return, Cash Centers received newly issued shares of Mr. Payroll's senior convertible preferred stock representing 45% of its voting interest. Also, certain members of the newly constituted management of Mr. Payroll subscribed for newly issued shares of common stock of Mr. Payroll, representing 10% of its voting interest. In addition, the Company assigned 10% of its senior convertible preferred stock to the former owners of Mr. Payroll in consideration for the termination of an option issued in conjunction with the Company's original acquisition of Mr. Payroll. The Company retained 40.5% of the voting interest in Mr. Payroll, represented by newly issued shares of senior convertible preferred stock. The Company recognized a net gain of $1.1 million (after applicable income taxes of $3.7 million) as a result of the transactions described above. 4. ACQUISITIONS In March 1999, Rent-A-Tire acquired four tire rental stores that it previously managed, in purchase transactions for $1.5 million. Excess purchase price over net assets acquired of $.9 million is being amortized on a straight-line basis over the expected period of benefit of 15 years. Page 6 9 5. LONG-TERM DEBT The Company's long-term debt instruments and balances outstanding as of March 31 are as follows (in thousands):
1999 1998 - ---------------------------------------------------------------------------------------------------------------- U.S. Line of Credit up to $150 million due June 30, 2003 $ 85,500 $ 45,000 U.K. Line of Credit up to(pound)10 million due April 30, 2000 7,575 4,930 Swedish Lines of Credit up to SEK 215 million 17,779 20,609 8.33% senior unsecured notes due 2003 21,429 25,715 8.14% senior unsecured notes due 2007 20,000 20,000 7.10% senior unsecured notes due 2008 30,000 30,000 Capital lease obligations payable 1,958 -- 6.25% subordinated unsecured notes due 2004 500 -- - ---------------------------------------------------------------------------------------------------------------- 184,741 146,254 Less current portion 4,693 4,286 - ---------------------------------------------------------------------------------------------------------------- Long-term debt $ 180,048 $ 141,968 - ---------------------------------------------------------------------------------------------------------------- 6. NET INCOME PER SHARE The reconciliation of basic and diluted weighted average common shares outstanding for the three month periods ended March 31, follows (in thousands): 1999 1998 - ---------------------------------------------------------------------------------------------------------------- Weighted average shares - Basic 25,191 24,429 Effect of shares applicable to stock option plans 1,191 1,187 Effect of shares applicable to nonqualified savings plan 37 17 - ---------------------------------------------------------------------------------------------------------------- Weighted average shares - Diluted 26,419 25,633 - ----------------------------------------------------------------------------------------------------------------
Page 7 10 7. OPERATING SEGMENT INFORMATION The Company has two reportable operating segments in the lending industry and one each in the check cashing and rental industries. While the United States and foreign lending segments offer the same services, each is managed separately due to the different operational strategies required. The check cashing and rental operations are managed separately because they offer different services and products, each of which requires its own technical, marketing and operational strategy. Information concerning the segments is set forth below (in thousands):
Lending ------------------------------------- United Check States Foreign Total Cashing (A) Rental Consolidated -------------------------------------- ----------- ----------- ----------- ----------- ------------- ------------ Three Months Ended March 31, 1999: Total revenue $ 86,337 $ 7,445 $ 93,782 $ 454 $ 1,450 $ 95,686 Income (loss) from operations 9,759 2,984 12,743 (2,637) (22) 10,084 Total assets at end of period 295,659 80,170 375,829 18,832 9,429 404,090 -------------------------------------- ----------- ----------- ----------- ----------- ------------- ------------ Three Months Ended March 31, 1998: Total revenue $ 75,668 $ 6,444 $ 82,112 $ 1,529 $ 553 $ 84,194 Income (loss) from operations 8,962 2,849 11,811 (1,421) (60) 10,330 Total assets at end of period 250,388 75,909 326,297 15,901 4,329 346,527 -------------------------------------- ----------- ----------- ----------- ----------- ----------- ------------
(A) Only CCM operations are included in 1999. See Note 3. 8. 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, results of operations or liquidity. Page 8 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION SUMMARY CONSOLIDATED FINANCIAL DATA FIRST QUARTER ENDED MARCH 31, 1999 vs. FIRST QUARTER ENDED MARCH 31, 1998
- ----------------------------------------------------------------------------------------------------------------- (Dollars in thousands) The following table sets forth selected consolidated financial data with respect to the Company and its consolidated lending operations as of March 31, 1999 and 1998, and for the three months then ended. 1999 1998 Change - ----------------------------------------------------------------------------------------------------------------- REVENUE Finance and service charges $ 31,495 $ 27,863 13% Proceeds from disposition of merchandise 61,221 54,138 13% Check cashing machine sales 82 800 (90)% Check cashing royalties and fees 1,438 840 71% Rental operations 1,450 553 162% - ----------------------------------------------------------------------------------------------------------------- TOTAL REVENUE 95,686 84,194 14% - ----------------------------------------------------------------------------------------------------------------- COSTS OF REVENUE Disposed merchandise 40,416 34,614 17% Cost of check cashing machines sold 38 734 (95)% Rental operations 323 148 118% - ----------------------------------------------------------------------------------------------------------------- NET REVENUE $ 54,909 $ 48,698 13% - ----------------------------------------------------------------------------------------------------------------- OTHER DATA CONSOLIDATED OPERATIONS: Net revenue contribution by source-- Finance and service charges 57.4% 57.2% -- Margin on disposition of merchandise 37.9% 40.1% (5)% Check cashing operations 2.7% 1.9% 42% Rental operations 2.0% .8% 150% Expenses as a percentage of net revenue-- Operations and administration 72.3% 70.4% 3% Depreciation and amortization 9.3% 8.4% 11% Interest, net 6.1% 6.2% (2)% Income from operations before depreciation and amortization as a percentage of total revenue 15.9% 17.1% (7)% Income before income taxes as a percentage of total revenue 7.6% 8.6% (12)% - ----------------------------------------------------------------------------------------------------------------- CONSOLIDATED LENDING OPERATIONS: Annualized yield on loans 102% 102% -- Average loan balance per average location in operation $ 270 $ 270 -- Average loan amount at end of period (not in thousands) $ 104 $ 102 2% Margin on disposition of merchandise as a percentage of proceeds from disposition of merchandise 34.0% 36.1% (6)% Average annualized merchandise turnover 2.5X 2.7x (7)% Average merchandise held for disposition per average location $ 140 $ 129 9% Locations in operation-- Beginning of period 464 401 Acquired -- 13 Start-ups -- 1 Combined or closed (3) -- End of period 461 415 11% Average number of locations in operation (a) 463 409 13% - -----------------------------------------------------------------------------------------------------------------
(a) Averages based on accumulation of month-end balances and dividing aggregate total by total months in the period. Page 9 12 GENERAL The Company is a diversified provider of specialty financial services to individuals in the United States, United Kingdom and Sweden. The Company offers secured non-recourse loans, commonly referred to as pawn loans, to individuals through its lending operations. The pawn loan portfolio generates finance and service charge revenue. The disposition of merchandise, primarily collateral from unredeemed pawn loans, is a related but secondary source of net revenue from the Company's lending function. The Company also provides check cashing services through its franchised and company owned Mr. Payroll(R) manned check cashing centers and rental of tires and wheels through its subsidiary, Rent-A-Tire, Inc. ("Rent-A-Tire"). The Company expanded its lending operations during the fifteen month period ended March 31, 1999, by adding a net sixty locations. Seven locations were established, sixty-one operating units were acquired, and eight locations were combined or closed. As of March 31, 1999, the Company operated 461 lending units--411 in sixteen states in the United States, thirty-nine jewelry-only and primarily loan-only units in the United Kingdom, and eleven loan-only and primarily jewelry-only units in Sweden. During the first quarter of 1999, the Company restructured the business of its check cashing subsidiary, Mr. Payroll Corporation ("Mr. Payroll"), in a series of transactions designed to isolate and accelerate the development and deployment of the automated check cashing machine ("CCM"). In January 1999, the Company transferred its manned check cashing operations out of Mr. Payroll into a new, wholly owned subsidiary of the Company. As of March 31, 1999, the Company operated 125 franchised and 10 company owned manned check cashing centers, continuing to do business under the Mr. Payroll name, in twenty states compared to 148 franchised centers as of March 31, 1998. Operations related to the development of CCMs remained in Mr. Payroll. On March 9, 1999, Wells Fargo Cash Centers, Inc. ("Cash Centers"), a wholly owned subsidiary of Wells Fargo Bank, N.A. ("Wells Fargo"), made a contribution to Mr. Payroll of $21.0 million of cash and assets valued at $6.0 million that primarily consisted of an existing network of approximately 200 automated teller machines operated in gaming establishments. In return, Cash Centers received newly issued shares of Mr. Payroll's senior convertible preferred stock representing 45% of its voting interest. Also, certain members of the newly constituted management of Mr. Payroll subscribed for newly issued shares of common stock of Mr. Payroll, representing 10% of its voting interest. In addition, the Company assigned 10% of its senior convertible preferred stock to the former owners of Mr. Payroll in consideration for the termination of an option issued in conjunction with the Company's original acquisition of Mr. Payroll. Upon completion of the transactions that reduced the Company's ownership interest in Mr. Payroll to 40.5%, Mr. Payroll was de-consolidated and the Company began accounting for its investment and its share of the results of Mr. Payroll's operations after March 9, 1999, by the equity method. See Note 3 of Notes to Consolidated Financial Statements. Page 10 13 Through January 31, 1998, the Company had a 49% ownership interest in Express Rent A Tire, Ltd. ("Express") that was accounted for by the equity method of accounting. Effective February 1, 1998, the Company increased its ownership interest to 99.9% and reorganized the operations of Express into Rent-A-Tire. The acquisition of additional interests was accounted for as a purchase and, accordingly, the assets and liabilities of Rent-A-Tire and the results of its operations have been included in the consolidated financial statements since February 1, 1998. As of March 31, 1999, Rent-A-Tire owned and operated eight tire and wheel rental stores, including four that were previously managed and were purchased in March 1999, and it manages thirteen additional tire and wheel rental stores under the Rent-A-Tire name, including three that were added during the first quarter of 1999. RESULTS OF OPERATIONS First Quarter Ended March 31, 1999, Compared To The First Quarter Ended March 31, 1998 Net Revenue: Consolidated. Consolidated net revenue increased 13% to $54.9 million during the first quarter ended March 31, 1999 (the "current quarter"), from $48.7 million during the first quarter ended March 31, 1998 (the "prior year quarter"). Of the 13% increase, 8% was attributable to the net addition of forty-six lending locations since March 31, 1998, 2% was attributable to gains from same unit lending operations (those in operation for more than one year), and 3% was attributable to increases in the check cashing and rental operations of the Company. Net Revenue: Lending Activities. Net revenue from lending operations increased $5.9 million to $53.4 million during the current quarter from $47.5 million during the prior year quarter. The lending units added since March 31, 1998, contributed $3.9 million of the increase. The principal components of lending operations net revenue are finance and service charges, which accounted for $3.6 million of the total increase, and net revenue from the disposition of merchandise, which accounted for $1.3 million of the total increase. The remaining components, domestic manned check cashing operations and foreign check cashing operations accounted for $1.0 million of the total increase. Finance and service charges are affected by changes in both the average outstanding balance of the pawn loan portfolio and the annualized yield on such loans. Finance and service charges increased a net amount of $3.6 million, or 13%, in the current quarter over the prior year quarter. A 13% increase in the average outstanding amount of pawn loans, occurring as a result of a 10% increase in the average number of loans outstanding along with a 3% increase in the average loan amount, produced the increase in finance and service charges. Same units contributed $1.7 million of the $3.6 million net increase. Pawn loans outstanding at March 31, 1999, increased $11.9 million, or 11.0%, to $120.8 million from $108.9 million at March 31, 1998. However, pawn loans outstanding at March 31, 1999, were 6% lower than at December 31, 1998, compared to a 3% decline for the comparable period of the preceding year. Domestic pawn loan balances decreased 11% during the 1999 period and 8% during the 1998 period. Historically, the Company's domestic pawn loans have declined during the first quarter Page 11 14 when the Internal Revenue Service processes federal income tax refunds. The Company believes that many customers use a portion of their refund to repay or extend their loans and purchase items of personal property. Foreign loan balances, denominated in local currencies, increased during both periods and lessened the impact of the domestic decreases. Both foreign currencies were slightly weaker against the dollar at March 31, 1999, as compared to December 31, 1998, resulting in only a 2% increase in the loan balances from foreign lending activities after translation to dollars. In the first quarter of 1998, the foreign currencies were stable against the dollar resulting in a 5% increase in loan balances after translation to dollars. The consolidated annualized loan yield, which represents a weighted average of the distinctive loan yields realized in the three countries in which the Company operates, was unchanged at 102% in the current quarter and the prior year quarter. The domestic annualized loan yield was 131% for the current quarter compared to 134% for the prior year quarter. The decrease can be partially attributed to a 16% increase in average domestic pawn loans outstanding during the first quarter over the prior year quarter, which can have the effect of reducing the loan yield until revenues from the loans are fully realized. The net addition of forty-six domestic lending locations accounted for 10% of the average loan balance increase, while same units contributed the remainder. In addition, the lower domestic annualized loan yield was partially due to expansion into lower-yielding markets during 1998. The blended yield on average foreign pawn loans outstanding was 55% for the current quarter compared to 53% in the prior year quarter. The increase in foreign loan yields resulted from slightly higher loan yields on redeemed loans that offset slightly lower returns on the disposition of unredeemed collateral at auction. Net revenue from the disposition of merchandise represents the proceeds received from the disposition of merchandise in excess of the cost of merchandise disposed. Proceeds from the disposition of merchandise in the current quarter were $7.1 million, or 13%, higher than the prior year quarter primarily due to the addition of the new lending units. The margin on disposition of merchandise declined to 34.0% in the current quarter from 36.1% during the prior year quarter. Excluding the effect of the disposition of scrap jewelry, the margin on disposition of merchandise fell to 35.4% for the current quarter from 37.6% in the prior year quarter primarily due to a higher average cost of items disposed. The net result was a $1.3 million, or 7%, increase in net revenue from the disposition of merchandise. The merchandise turnover rate declined to 2.5 times in the current quarter compared to 2.7 times in the prior year quarter due to higher average merchandise levels. Net Revenue: Other Activities. The restructuring of the Company's check cashing operations and resulting de-consolidation of Mr. Payroll caused a decline in other net revenue in the current year quarter to $.4 million from $.8 million in the prior year quarter. Following de-consolidation, the Company began accounting for its investment in Mr. Payroll by the equity method and, accordingly, the Company's 40.5% share of the results of operations of Mr. Payroll are recorded in "Equity in loss of unconsolidated subsidiary." Net revenue of Rent-A-Tire increased to $1.1 million in the current quarter from $.4 million for two months of the prior year quarter. Prior to February 1, 1998, the Company's Page 12 15 49% share of earnings or losses of Rent-A-Tire's predecessor was recorded in "Equity in loss of unconsolidated subsidiary." Operations and Administration Expenses. Consolidated operations and administration expenses as a percentage of net revenue were 72.3% in the current quarter compared to 70.4% for the prior year quarter. Total operations and administration expenses increased $5.4 million, or 15.9%, in the current quarter as compared to the prior year quarter. Domestic lending operations contributed $3.6 million of the increase primarily as a result of higher personnel, occupancy, and utilities expenses attributable to new units that accounted for $3.2 million of the domestic increase. Foreign lending operations contributed $.4 million of the increase, Mr. Payroll accounted for $.8 million of the increase, and Rent-A-Tire accounted for the remaining $.6 million of the increase. Depreciation and Amortization. Depreciation and amortization expenses as a percentage of net revenue increased to 9.3% in the current quarter from 8.4% in the prior year quarter. Depreciation and amortization expenses increased 25.1% principally due to the effect of the increase in additional lending units. Interest Expense. Net interest expense as a percentage of net revenue declined slightly to 6.1% in the current quarter from 6.2% in the prior year quarter. The amount increased a net $.3 million, or 10.8%, due to the effect of a higher average level of debt related to the Company's growth that was partially offset by a 15.0% reduction in the Company's blended borrowing costs. Average debt outstanding increased 29.0% to $197.4 million during the current quarter from $153.0 million during the prior year quarter. The effective blended borrowing cost decreased to 6.8% in the current quarter from 8.0% in the prior year quarter. Other Items. Equity in the loss of unconsolidated subsidiary includes $587 thousand of losses in the current quarter from the Company's 40.5% equity interest in the losses incurred by Mr. Payroll's CCM business after its de-consolidation. The prior year quarter includes $80 thousand of losses attributable to the Company's 49% equity interest in the losses of Express prior to its consolidation on February 1, 1998. The Company recorded a gain of $1.1 million, net of applicable income taxes, as a result of the transactions described above involving Mr. Payroll. Income Taxes. The Company's consolidated effective income tax rate, excluding the effect of the income taxes recorded on the reduction of its equity interest in Mr. Payroll's CCM business, increased to 40% for the current quarter from 37% for the prior year quarter primarily as a result of the effect of a reduction of the tax rate applied to the losses of Mr. Payroll realized prior to de-consolidation. The effective tax rate of the domestic lending operations increased to 39% for the current quarter compared to 38% for the prior year quarter primarily as a result of higher non-deductible intangible asset amortization and other miscellaneous items in the current quarter. The effective tax rate of the foreign lending operations decreased to 31% for the current quarter from 33% for the prior year quarter primarily as a result of a greater proportion of the foreign income in the Page 13 16 current quarter being earned in Sweden, which has a lower tax rate than the United Kingdom. LIQUIDITY AND CAPITAL RESOURCES In management's opinion, the Company's cash flow and liquidity remain strong. Cash and cash equivalents increased $1.4 million to $5.8 million at March 31, 1999, from $4.4 million at December 31, 1998. During the current quarter, $15.5 million of cash was provided by net operating activities, $6.6 million was provided by a reduction of pawn loan balances, and $1.7 million was provided by the issuance of common shares pursuant to the Company's stock option plans. The cash increases were partially offset by the Company's investments of $1.5 million to acquire four tire rental stores and $6.6 million for capital expenditures, including $3.3 million related to Mr. Payroll's CCM operations. As a result of the de-consolidation of Mr. Payroll's CCM operations following the transactions described above, cash was reduced by $4.8 million. The Company also advanced $.5 million on a short-term basis to Mr. Payroll's CCM operations following the de-consolidation. In addition, the Company repaid $8.6 million of bank lines of credit, paid $.1 million of capital lease obligations, and paid $.3 million in dividends. As a result of the transactions described above involving Mr. Payroll, the Company has eliminated its obligation to continue to fund the development and deployment of the CCM while remaining in a position to share in its growth potential. The new management of Mr. Payroll intends to continue to develop and market the CCM as a financial services machine. The Company anticipates that Mr. Payroll will incur future losses until sufficient revenues are generated from its sales and operations. The Company may add up to 28 new lending units during the remainder of 1999, for a net addition of approximately 25 units for the full year. These additions may occur through a combination of new openings and acquisitions of existing locations. Rent-A-Tire may purchase up to five more tire rental stores during the remainder of 1999, for a net addition of nine stores for the full year. On January 22, 1997, the Company announced that its Board of Directors had authorized management to purchase up to one million shares of its common stock in the open market. During the current quarter, the Company made no purchases under the program. Purchases may be made from time to time in the open market and it is expected that funding of the program will come from operating cash flow and existing bank facilities. Management believes that borrowings available under its revolving credit facilities, cash generated from operations and current working capital of $199.7 million should be sufficient to meet the Company's anticipated future capital requirements. IMPACT OF FOREIGN CURRENCY EXCHANGE RATES The Company is subject to the risk of unexpected changes in foreign currency rates by virtue of its operations in the United Kingdom and Sweden. The Company's foreign assets, liabilities, and earnings are converted into U.S. dollars for consolidation into the Page 14 17 Company's financial statements. At March 31, 1999, the Company had recorded a cumulative other comprehensive loss of $3.8 million as a result of fluctuations in foreign currency exchange rates. Future earnings and comparisons with prior periods reported by the Company may fluctuate depending on applicable currency exchange rates in effect during the periods. COMPUTER SYSTEMS - THE YEAR 2000 ISSUE Background. Many computer systems and equipment with embedded computer chips in use today were designed and developed using two digits, rather than four, to specify the year. As a result, such systems and equipment may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations. The Company's Year 2000 Efforts. In 1997, the Company began formulating a comprehensive plan to assess the actions and resources needed to address its Year 2000 issues. The plan provides for the identification and assessment of the Year 2000 issues for the Company's various internal systems and equipment; necessary remediation, including modification, upgrading and replacement of hardware and software; and adequate testing to ensure Year 2000 compliance. The plan involves the utilization of both internal and external resources, including the engagement of an independent expert to assist in the evaluation of the various Year 2000 issues and efforts. The Company is applying all aspects of this plan to both its information technology ("IT") systems and non-IT systems. Computer equipment and software commonly thought of as IT systems include point-of-sale, accounting, data processing, telephone, and other miscellaneous systems. Non-IT systems include alarm systems, security observation equipment, HVAC units, fax machines, and other miscellaneous systems. The Company believes that it has identified the internal business systems that are susceptible to system failures or processing errors as a result of the Year 2000 issue. Those systems considered most critical to continuing operations have received the highest priority. Currently, the Company anticipates that its Year 2000 identification, assessment, and remediation efforts will be completed by June 30, 1999. While the majority of the testing efforts should be completed by then, the Company anticipates that additional testing will occur after June 30, 1999. The Company believes that its pawnshop operating systems constitute its only critical internal business systems. The Company's proprietary pawnshop operating system used in its domestic lending business has been upgraded for Year 2000 compliance and is currently being tested. The Company is in the process of upgrading its Sweden pawnshop operating system for Year 2000 compliance. The Company expects to complete the upgrade and testing of this system by June 30, 1999. A proprietary pawnshop operating system for the Company's United Kingdom lending operations has been developed and is being implemented. The Company expects to complete the implementation and testing of this system by June 30, 1999. The Company also believes that its accounting applications, human resources, and payroll software systems are Year 2000 compliant, and testing to ensure compliance is scheduled to be completed by May 31, 1999. Page 15 18 The Company is still in the assessment phase with respect to its non-IT systems issues, and it currently estimates that all necessary non-IT system remediation and testing efforts should be completed by October 31, 1999. Third Parties. The Company is reviewing, and has initiated formal communications with, critical third parties that provide services or goods which are essential to its operations in order to: (1) determine the extent to which the Company is vulnerable to any failure by such third parties to remediate their respective Year 2000 problems; and (2) resolve such problems to the extent practicable. These third parties include financial institutions, utility suppliers, and providers of communication services and equipment. However, the responses of third parties are beyond the control of the Company. In the event that the Company is unable to obtain satisfactory assurance that a critical third party provider has successfully and timely achieved Year 2000 compliance, and the Company is unable to replace such a provider with an alternative provider, the Company's operations could be adversely impacted. Estimated Year 2000 Costs. The Company currently estimates that its total Year 2000 project cost will be approximately $2.2 million to $2.7 million. Through March 31, 1999, the Company has expended approximately $1.5 million. Costs to replace computerized systems, hardware or equipment (currently estimated to be approximately $1.4 million to $1.7 million) are included in the above estimate. The remaining costs include estimated internal and external costs to repair software problems, test all systems, and acquire license upgrades that have been accelerated due to Year 2000 issues. No major non-Year 2000 projects have been deferred because of Year 2000 activities. The Company has funded, and expects to continue to fund, the expenditures related to its Year 2000 initiatives either through cash generated from operations and current working capital, or its existing revolving credit facilities. Risks of Year 2000 Problems. Based on the progress it has made in addressing its Year 2000 issues and its plan and timetable to complete its compliance program, the Company does not currently foresee significant risks associated with its Year 2000 issues. However, management believes that it is not possible to determine with complete certainty that all Year 2000 problems affecting the Company have been identified or will be corrected. Likewise, because of its constant progress in addressing its various Year 2000 issues, the Company has not yet determined the most reasonably likely worst case scenario relating to Year 2000 problems. Nevertheless, management expects that the Company could likely suffer the following consequences: (1) a significant number of operational inconveniences and inefficiencies for the Company and its customers that could divert management's time and attention and financial and human resources from its ordinary business activities; and (2) a lesser number of serious system failures that may require significant efforts by the Company to prevent or alleviate material business disruptions. Contingency Planning. The Company is in the process of completing a comprehensive contingency plan with respect to the Year 2000 issue. The Company's lending operations can operate, if necessary, on a manual, non-computerized basis. Due to the widespread nature of potential Year 2000 issues, the contingency planning process is an ongoing one which will require further modifications as the Company obtains additional Page 16 19 information regarding (1) the Company's progress on critical internal business systems during the remediation and testing phases; and (2) the status of third party Year 2000 readiness. Depending on the systems affected, these plans could include accelerated replacement of affected software or equipment, increased work hours for Company personnel or contract personnel to accelerate remediation efforts, or development of manual workarounds for information systems. If the Company is required to implement any of these contingency plans, the implementation could have an adverse effect on the Company's financial condition and results of operations. Page 17 20 DOMESTIC LENDING OPERATIONS - ------------------------------------------------------------------------------- (Dollars in thousands) The following table sets forth selected financial data for the Company's domestic lending operations as of March 31, 1999 and 1998, and for the three months then ended.
1999 1998 Change - ------------------------------------------------------------------------------------------------------------------- REVENUE Finance and service charges $ 25,119 $ 22,129 14% Proceeds from disposition of merchandise 60,329 53,539 13% Check cashing royalties and fees 889 -- -- - ------------------------------------------------------------------------------------------------------------------- TOTAL REVENUE 86,337 75,668 14% - ------------------------------------------------------------------------------------------------------------------- COSTS OF REVENUE Disposed merchandise 39,628 34,154 16% - ------------------------------------------------------------------------------------------------------------------- NET REVENUE $ 46,709 $ 41,514 13% - ------------------------------------------------------------------------------------------------------------------- OTHER DATA Net revenue contribution by source-- Finance and service charges 53.8% 53.3% 1% Margin on disposition of merchandise 44.3% 46.7% (5)% Check cashing royalties and fees 1.9% -- -- Expenses as a percentage of net revenue-- Operations and administration 69.9% 69.9% -- Depreciation and amortization 9.2% 8.5% 8% Interest, net 5.4% 5.2% 4% Income from operations before depreciation and amortization as a percentage of total revenue 16.3% 16.5% (1)% Income before income taxes as a percentage of total revenue 8.4% 8.9% (6)% Annualized yield on loans 131% 134% (2)% Average loan balance per average location in operation $ 188 $ 186 1% Average loan amount at end of period (not in thousands) $ 82 $ 79 4% Margin on disposition of merchandise as a percentage of proceeds from disposition of merchandise 34.3% 36.2% (5)% Average annualized merchandise turnover 2.5X 2.7x (7)% Average merchandise held for disposition per average location $ 154 $ 144 7% Locations in operation-- Beginning of period 414 352 Acquired -- 12 Start-ups -- 1 Combined or closed (3) -- End of period 411 365 13% Average number of locations in operation (a) 413 359 15% - -------------------------------------------------------------------------------------------------------------------
(a) Averages based on accumulation of month-end balances and dividing aggregate total by total months in the period. Page 18 21 FOREIGN LENDING OPERATIONS - ------------------------------------------------------------------------------- (Dollars in thousands) The following table sets forth selected consolidated financial data in U.S. dollars for Harvey & Thompson and Svensk Pantbelaning as of March 31, 1999 and 1998, and for the three months then ended, using the following currency exchange rates:
- --------------------------------------------------------------------------------------------------------------------------- 1999 1998 - --------------------------------------------------------------------------------------------------------------------------- Harvey & Thompson (from pounds sterling into U.S. dollars)-- Balance sheet data - end of period rate .6204 .5983 Income statement data - three months average rate .6124 .6074 Svensk Pantbelaning (from Swedish Kronor into U.S. dollars)-- Balance sheet data - end of period rate 8.2608 8.0085 Income statement data - three months average rate 8.0012 8.0222 - --------------------------------------------------------------------------------------------------------------------------- 1999 1998 Change - --------------------------------------------------------------------------------------------------------------------------- REVENUE Finance and service charges $ 6,376 $ 5,734 11% Proceeds from disposition of merchandise 892 599 49% Check cashing fees 177 111 59% - --------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUE 7,445 6,444 16% - --------------------------------------------------------------------------------------------------------------------------- COSTS OF REVENUE Disposed merchandise 788 460 71% - --------------------------------------------------------------------------------------------------------------------------- NET REVENUE $ 6,657 $ 5,984 11% - --------------------------------------------------------------------------------------------------------------------------- OTHER DATA Net revenue contribution by source-- Finance and service charges 95.8% 95.8% -- Margin on disposition of merchandise 1.6% 2.3% (30)% Check cashing fees 2.6% 1.9% 37% Expenses as a percentage of net revenue-- Operations and administration 47.8% 46.7% 2% Depreciation and amortization 7.4% 5.7% 30% Interest, net 5.1% 9.8% (48)% Income from operations before depreciation and amortization as a percentage of total revenue 46.7% 49.5% (6)% Income before income taxes as a percentage of total revenue 35.5% 35.1% 1% Annualized yield on loans 55% 53% 4% Average loan balance per average location in operation $ 945 $ 870 9% Average loan amount at end of period (not in thousands) $ 178 $ 173 3% Margin on disposition of merchandise as a percentage of proceeds from disposition of merchandise 11.7% 23.2% (50)% Average annualized merchandise turnover 2.1X 1.8x 17% Average merchandise held for disposition per average location $ 30 $ 21 43% Locations in operation-- Beginning of period 50 49 Acquired -- 1 Start-ups -- -- Combined or closed -- -- End of period 50 50 -- Average number of locations in operation (a) 50 50 -- - ---------------------------------------------------------------------------------------------------------------------------
(a) Averages based on accumulation of month-end balances and dividing aggregate total by total months in the period. Page 19 22 OTHER OPERATIONS - ------------------------------------------------------------------------------- (Dollars in thousands) The following table sets forth selected financial data with respect to the Company's other domestic operations as of March 31, 1999 and 1998, and for the three months then ended.
1999 1998 Change - ------------------------------------------------------------------------------------------------------------- CHECK CASHING OPERATIONS (a): REVENUE Check cashing machine sales $ 82 $ 800 (90)% Check cashing royalties and fees 372 729 (49)% - ------------------------------------------------------------------------------------------------------------- TOTAL REVENUE 454 1,529 (70)% - ------------------------------------------------------------------------------------------------------------- COSTS OF REVENUE Cost of check cashing machines sold 38 734 (95)% - ------------------------------------------------------------------------------------------------------------- NET REVENUE $ 416 $ 795 (48)% - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- RENTAL OPERATIONS: REVENUE Tire and wheel rentals $ 691 $ 360 92% Management fees 482 132 265% Tire and wheel sales 101 15 573% Lease income and other 176 46 283% - ------------------------------------------------------------------------------------------------------------- TOTAL REVENUE 1,450 553 162% - ------------------------------------------------------------------------------------------------------------- COSTS OF REVENUE Tire and wheel rentals 248 136 82% Tire and wheel sales 75 12 525% - ------------------------------------------------------------------------------------------------------------- NET REVENUE $ 1,127 $ 405 178% - ------------------------------------------------------------------------------------------------------------- OTHER DATA (OWNED LOCATIONS) Rental agreements outstanding at end of period $ 2,977 $ 1,581 88% Average balance per rental agreement at end of period (not in thousands) $ 970 $ 956 1% Locations in operation at end of period 8 4 100% Average locations in operation for the period (b) 5 4 25% - -------------------------------------------------------------------------------------------------------------
(a) Only CCM operations are included in 1999. See Note 3 of Notes to Consolidated Financial Statements. (b) Averages based on accumulation of month-end balances and dividing aggregate total by total months in the period. Page 20 23 CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS Certain portions of this report contain forward-looking statements about the business, financial condition and prospects of the Company. The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, without limitation, changes in demand for the Company's services, changes in competition, the ability of the Company to open new operating units in accordance with its plans, economic conditions, real estate market fluctuations, interest rate fluctuations, changes in the capital markets, changes in tax and other laws and governmental rules and regulations applicable to the Company's business, and other risks indicated in the Company's filings with the Securities and Exchange Commission. Certain risks and uncertainties relating specifically to the Company's Year 2000 efforts include, but are not limited to, the availability of qualified personnel and other information technology resources; the ability to identify and remediate all date sensitive lines of computer code or to replace embedded computer chips in affected systems or equipment; and the actions of various third parties with respect to Year 2000 problems. These risks and uncertainties are beyond the ability of the Company to control, and, in many cases, the Company cannot predict all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this report, the words "believes," "estimates," "plans," "expects," "anticipates" and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. Page 21 24 PART II Item 1. LEGAL PROCEEDINGS See Note 8 of Notes to Consolidated Financial Statements Item 2. CHANGES IN SECURITIES Not Applicable Item 3. DEFAULTS UPON SENIOR SECURITIES 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 22 25 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/ Thomas A. Bessant, Jr. --------------------------------------------------- Thomas A. Bessant, Jr. Executive Vice President and Chief Financial Officer Date: May 14, 1999 Page 23 26 INDEX TO EXHIBITS
Exhibit Number Description - ------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 5,769 0 139,149 0 64,338 229,563 131,114 68,982 404,090 29,823 180,048 0 0 3,024 189,814 404,090 61,303 95,686 40,777 73,141 12,461 0 3,331 7,294 2,494 4,800 0 0 0 4,800 0.19 0.18
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