UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|||
For the quarterly period ended March 31, 2012 | ||||
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 | ||||
![]() |
||||
(Exact name of registrant as specified in its charter) |
Texas | 75-2018239 | |
(State or other jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification No.) | |
1600 West 7th Street Fort Worth, Texas (Address of principal executive offices) |
76102 (Zip Code) |
(817) 335-1100
(Registrants telephone number, including area code)
NONE
(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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act:
Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
APPLICABLE ONLY TO CORPORATE ISSUERS:
29,374,400 of the Registrants common shares, $.10 par value, were issued and outstanding as of April 16, 2012.
CASH AMERICA INTERNATIONAL, INC.
CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements give current expectations or forecasts of future events and reflect the views and assumptions of senior management of Cash America International, Inc. (the Company) with respect to the business, financial condition and prospects of the Company. When used in this report, terms such as believes, estimates, should, could, would, plans, expects, anticipates, may, forecast, project and similar expressions or variations as they relate to the Company or its management are intended to identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties that are beyond the ability of the Company to control and, in some cases, predict. Accordingly, there are or will be important factors that could cause the Companys actual results to differ materially from those indicated in these statements. Key factors that could cause the Companys actual financial results, performance or condition to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following:
| changes in domestic and foreign pawn, consumer credit, tax and other laws and government rules and regulations applicable to the Companys business, or changes in the interpretation or enforcement thereof, and the anticipated regulation of consumer financial products and services by the Consumer Financial Protection Bureau; |
| acceptance by consumers, legislators and regulators of the negative characterization by the media and consumer activists with respect to certain of the Companys loan products; |
| risks related to the Companys previously-announced proposed initial public offering of common stock of the Companys wholly-owned subsidiary, Enova International, Inc.; |
| the deterioration of the political, regulatory or economic environment in foreign countries where the Company operates or in the future may operate; |
| the actions of third parties who provide, acquire or offer products and services to, from or for the Company; |
| changes in demand for the Companys services and the continued acceptance of the online channel by the Companys online loan customers; |
| fluctuations in the price of gold or a deterioration in economic conditions; |
| changes in competition; |
| the ability of the Company to open new locations in accordance with plans or to successfully integrate newly acquired businesses into the Companys operations; |
| interest rate and foreign currency exchange rate fluctuations; |
| the effect of any current or future litigation proceedings and any judicial decisions or rule-making that could render the Companys arbitration agreements illegal or unenforceable; |
| changes in the capital markets, including the debt and equity markets; |
| changes in the Companys ability to satisfy its debt obligations or to refinance existing debt obligations or obtain new capital to finance growth; |
| a prolonged interruption in the Companys operations of its facilities, systems and business functions, including its information technology and other business systems; |
| security breaches, cyber attacks or fraudulent activity; |
| the implementation of new, or changes in the interpretation of existing, accounting principles or financial reporting requirements; |
| acts of God, war or terrorism, pandemics and other events; |
| the effect of any of such changes on the Companys business or the markets in which the Company operates; and |
| other risks and uncertainties described in this report or from time to time in the Companys filings with the Securities and Exchange Commission (the SEC). |
The foregoing list of factors is not exhaustive and new factors may emerge or changes to these factors may occur that would impact the Companys business. Additional information regarding these and other factors may be contained in the Companys filings with the SEC, especially on Forms 10-K, 10-Q and 8-K. If one or more events related to these or other risks or uncertainties materialize, or if managements underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. The Company disclaims any intention or obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of this report. All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements.
Item 1. Financial Statements
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(Unaudited)
March 31, | December 31, | |||||||||||
2012 | 2011 | 2011 | ||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 63,606 | $ | 42,414 | $ | 62,542 | ||||||
Pawn loans |
206,343 | 186,937 | 253,519 | |||||||||
Consumer loans, net |
200,365 | 126,135 | 222,778 | |||||||||
Merchandise held for disposition, net |
139,519 | 117,784 | 161,884 | |||||||||
Pawn loan fees and service charges receivable |
38,797 | 35,530 | 48,003 | |||||||||
Prepaid expenses and other assets |
34,213 | 31,566 | 31,301 | |||||||||
Deferred tax assets |
32,312 | 26,606 | 35,065 | |||||||||
Total current assets |
715,155 | 566,972 | 815,092 | |||||||||
Property and equipment, net |
250,722 | 220,817 | 246,429 | |||||||||
Goodwill |
567,830 | 545,665 | 562,721 | |||||||||
Intangible assets, net |
33,956 | 29,584 | 34,771 | |||||||||
Other assets |
15,074 | 14,738 | 15,236 | |||||||||
Total assets |
$ | 1,582,737 | $ | 1,377,776 | $ | 1,674,249 | ||||||
Liabilities and Equity |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable and accrued expenses |
$ | 88,472 | $ | 82,213 | $ | 113,113 | ||||||
Customer deposits |
11,464 | 10,434 | 9,935 | |||||||||
Income taxes currently payable |
19,894 | 12,823 | 12,880 | |||||||||
Current portion of long-term debt |
35,939 | 17,689 | 34,273 | |||||||||
Total current liabilities |
155,769 | 123,159 | 170,201 | |||||||||
Deferred tax liabilities |
92,277 | 64,435 | 89,712 | |||||||||
Noncurrent income tax payable |
2,602 | 2,568 | 2,315 | |||||||||
Other liabilities |
1,254 | 1,935 | 1,413 | |||||||||
Long-term debt |
371,969 | 352,883 | 503,018 | |||||||||
Total liabilities |
$ | 623,871 | $ | 544,980 | $ | 766,659 | ||||||
Equity: |
||||||||||||
Cash America International, Inc. equity: |
||||||||||||
Common stock, $0.10 par value per share, 80,000,000 shares authorized, 30,235,164 shares issued and outstanding |
3,024 | 3,024 | 3,024 | |||||||||
Additional paid-in capital |
164,722 | 164,516 | 167,683 | |||||||||
Retained earnings |
816,496 | 679,546 | 776,060 | |||||||||
Accumulated other comprehensive income (loss) |
3,460 | 9,677 | (6,896 | ) | ||||||||
Treasury shares, at cost (888,336 shares, 869,699 shares and 1,011,356 shares at March 31, 2012 and 2011, and at December 31, 2011, respectively) |
(33,051 | ) | (29,935 | ) | (37,419 | ) | ||||||
Total Cash America International, Inc. shareholders equity |
954,651 | 826,828 | 902,452 | |||||||||
Noncontrolling interest |
4,215 | 5,968 | 5,138 | |||||||||
Total equity |
958,866 | 832,796 | 907,590 | |||||||||
Total liabilities and equity |
$ | 1,582,737 | $ | 1,377,776 | $ | 1,674,249 |
See notes to consolidated financial statements.
1
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
Three Months Ended March 31, |
||||||||
2012 | 2011 | |||||||
Revenue |
||||||||
Pawn loan fees and service charges |
$ | 72,899 | $ | 65,282 | ||||
Proceeds from disposition of merchandise |
208,383 | 171,927 | ||||||
Consumer loan fees |
172,840 | 123,127 | ||||||
Other |
3,366 | 4,528 | ||||||
Total Revenue |
457,488 | 364,864 | ||||||
Cost of Revenue |
||||||||
Disposed merchandise |
138,321 | 109,236 | ||||||
Consumer loan loss provision |
62,383 | 39,500 | ||||||
Total Cost of Revenue |
200,704 | 148,736 | ||||||
Net Revenue |
256,784 | 216,128 | ||||||
Expenses |
||||||||
Operations and administration |
170,155 | 140,458 | ||||||
Depreciation and amortization |
14,621 | 12,442 | ||||||
Total Expenses |
184,776 | 152,900 | ||||||
Income from Operations |
72,008 | 63,228 | ||||||
Interest expense |
(7,176 | ) | (5,611 | ) | ||||
Interest income |
29 | 22 | ||||||
Foreign currency transaction gain (loss) |
87 | (96 | ) | |||||
Equity in loss of unconsolidated subsidiary |
(117 | ) | (4 | ) | ||||
Income before Income Taxes |
64,831 | 57,539 | ||||||
Provision for income taxes |
24,308 | 21,752 | ||||||
Net Income |
40,523 | 35,787 | ||||||
Net loss attributable to the noncontrolling interest |
944 | 591 | ||||||
Net Income Attributable to Cash America International, Inc. |
$ | 41,467 | $ | 36,378 | ||||
Earnings Per Share: |
||||||||
Net Income attributable to Cash America International, Inc. common shareholders: | ||||||||
Basic |
$ | 1.40 | $ | 1.22 | ||||
Diluted |
$ | 1.30 | $ | 1.13 | ||||
Weighted average common shares outstanding: |
||||||||
Basic |
29,616 | 29,755 | ||||||
Diluted |
31,912 | 32,060 | ||||||
Dividends declared per common share |
$ | 0.035 | $ | 0.035 |
See notes to consolidated financial statements.
2
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
(Unaudited)
Three Months Ended March 31, |
||||||||
2012 | 2011 | |||||||
Net income | $ | 40,523 | $ | 35,787 | ||||
Other comprehensive gain, net of tax: | ||||||||
Unrealized derivatives gain(a) |
12 | 15 | ||||||
Foreign currency translation gain(b) |
9,615 | 4,631 | ||||||
Marketable securities unrealized gain(c) |
750 | 466 | ||||||
Total other comprehensive gain, net of tax |
10,377 | 5,112 | ||||||
Comprehensive income |
$ | 50,900 | $ | 40,899 | ||||
Net loss attributable to the noncontrolling interest |
944 | 591 | ||||||
Foreign currency translation gain, net of tax, attributable to the noncontrolling interest |
(21 | ) | (232 | ) | ||||
Comprehensive loss attributable to the noncontrolling interest |
923 | 359 | ||||||
Comprehensive Income Attributable to Cash America International, Inc. |
$ | 51,823 | $ | 41,258 |
(a) | Net of tax (provision) of $(6) and $(8) for the three months ended March 31, 2012 and 2011, respectively. |
(b) | Net of tax (provision)/benefit of $(1,105) and $148 for the three months ended March 31, 2012 and 2011, respectively. |
(c) | Net of tax (provision) of $(403) and $(251) for the three months ended March 31, 2012 and 2011, respectively. |
See notes to consolidated financial statements.
3
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(dollars in thousands, except per share data)
(Unaudited)
Common Stock | Additional paid-in capital |
Retained earnings |
Accumulated other comprehensive income |
Treasury shares, at cost | Total share- holders equity |
Non-controlling interest |
Total Equity |
|||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance at January 1, 2011 |
30,235,164 | $ | 3,024 | $ | 165,658 | $ | 644,208 | $ | 4,797 | (685,315 | ) | $ | (21,283 | ) | $ | 796,404 | $ | 6,327 | $ | 802,731 | ||||||||||||||||||||
Shares issued under stock-based plans |
(2,852 | ) | 92,982 | 2,937 | 85 | 85 | ||||||||||||||||||||||||||||||||||
Stock-based compensation expense |
1,236 | 1,236 | 1,236 | |||||||||||||||||||||||||||||||||||||
Income tax benefit from stock-based compensation |
474 | 474 | 474 | |||||||||||||||||||||||||||||||||||||
Net income attributable to Cash America International, Inc. |
36,378 | 36,378 | 36,378 | |||||||||||||||||||||||||||||||||||||
Dividends paid |
(1,040 | ) | (1,040 | ) | (1,040 | ) | ||||||||||||||||||||||||||||||||||
Unrealized derivatives gain, net of tax |
15 | 15 | 15 | |||||||||||||||||||||||||||||||||||||
Foreign currency translation gain, net of tax |
4,399 | 4,399 | 232 | 4,631 | ||||||||||||||||||||||||||||||||||||
Marketable securities unrealized gain, net of tax |
466 | 466 | 466 | |||||||||||||||||||||||||||||||||||||
Purchases of treasury shares |
(277,366 | ) | (11,589 | ) | (11,589 | ) | (11,589 | ) | ||||||||||||||||||||||||||||||||
Loss attributable to the noncontrolling interest |
| (591 | ) | (591 | ) | |||||||||||||||||||||||||||||||||||
Balance at March 31, 2011 |
30,235,164 | $ | 3,024 | $ | 164,516 | $ | 679,546 | $ | 9,677 | (869,699 | ) | $ | (29,935 | ) | $ | 826,828 | $ | 5,968 | $ | 832,796 | ||||||||||||||||||||
Balance at January 1, 2012 |
30,235,164 | $ | 3,024 | $ | 167,683 | $ | 776,060 | $ | (6,896 | ) | (1,011,356 | ) | $ | (37,419 | ) | $ | 902,452 | $ | 5,138 | $ | 907,590 | |||||||||||||||||||
Shares issued under stock-based plans |
(5,805 | ) | 167,765 | 6,304 | 499 | 499 | ||||||||||||||||||||||||||||||||||
Stock-based compensation expense |
1,555 | 1,555 | 1,555 | |||||||||||||||||||||||||||||||||||||
Income tax benefit from stock-based compensation |
1,289 | 1,289 | 1,289 | |||||||||||||||||||||||||||||||||||||
Net income attributable to Cash America International, Inc. |
41,467 | 41,467 | 41,467 | |||||||||||||||||||||||||||||||||||||
Dividends paid |
(1,031 | ) | (1,031 | ) | (1,031 | ) | ||||||||||||||||||||||||||||||||||
Unrealized derivatives gain, net of tax |
12 | 12 | 12 | |||||||||||||||||||||||||||||||||||||
Foreign currency translation gain, net of tax |
9,594 | 9,594 | 21 | 9,615 | ||||||||||||||||||||||||||||||||||||
Marketable securities unrealized gain, net of tax |
750 | 750 | 750 | |||||||||||||||||||||||||||||||||||||
Purchases of treasury shares |
(44,745 | ) | (1,936 | ) | (1,936 | ) | (1,936 | ) | ||||||||||||||||||||||||||||||||
Loss attributable to the noncontrolling interest |
| (944 | ) | (944 | ) | |||||||||||||||||||||||||||||||||||
Balance at March 31, 2012 |
30,235,164 | $ | 3,024 | $ | 164,722 | $ | 816,496 | $ | 3,460 | (888,336 | ) | $ | (33,051 | ) | $ | 954,651 | $ | 4,215 | $ | 958,866 |
See notes to consolidated financial statements.
4
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
Three Months Ended March 31, |
||||||||
2012 | 2011 | |||||||
Cash Flows from Operating Activities |
||||||||
Net Income |
$ | 40,523 | $ | 35,787 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
14,621 | 12,442 | ||||||
Amortization of debt discount and issuance costs |
929 | 870 | ||||||
Consumer loan loss provision |
62,383 | 39,500 | ||||||
Stock-based compensation |
1,555 | 1,236 | ||||||
Deferred income taxes, net |
4,198 | 9,039 | ||||||
Excess income tax benefit from stock-based compensation |
(1,289 | ) | (474 | ) | ||||
Other |
458 | 2,357 | ||||||
Changes in operating assets and liabilities, net of assets acquired: |
||||||||
Merchandise held for disposition |
8,592 | (2,211 | ) | |||||
Pawn loan fees and service charges receivable |
9,470 | 5,809 | ||||||
Finance and service charges on consumer loans |
2,781 | (167 | ) | |||||
Prepaid expenses and other assets |
(1,778 | ) | (7,345 | ) | ||||
Accounts payable and accrued expenses |
(16,251 | ) | (10,654 | ) | ||||
Current income taxes |
8,734 | 12,538 | ||||||
Other operating assets and liabilities |
1,587 | 1,354 | ||||||
Net cash provided by operating activities |
136,513 | 100,081 | ||||||
Cash Flows from Investing Activities |
||||||||
Pawn loans made |
(172,027 | ) | (157,824 | ) | ||||
Pawn loans repaid |
132,570 | 114,889 | ||||||
Principal recovered through dispositions of forfeited pawn loans |
101,624 | 89,433 | ||||||
Consumer loans made or purchased |
(416,429 | ) | (332,442 | ) | ||||
Consumer loans repaid |
368,371 | 302,461 | ||||||
Acquisitions, net of cash acquired |
(4,184 | ) | | |||||
Purchases of property and equipment |
(16,665 | ) | (10,996 | ) | ||||
Other investing activities |
| (404 | ) | |||||
Net cash (used in) provided by investing activities |
(6,740 | ) | 5,117 | |||||
Cash Flows from Financing Activities |
||||||||
Net repayments under bank lines of credit |
(124,726 | ) | (110,991 | ) | ||||
Issuance of long-term debt |
| 50,000 | ||||||
Net proceeds from re-issuance of treasury shares |
499 | 85 | ||||||
Loan costs paid |
| (2,622 | ) | |||||
Payments on notes payable and other obligations |
(5,417 | ) | (25,840 | ) | ||||
Excess income tax benefit from stock-based compensation |
1,289 | 474 | ||||||
Treasury shares purchased |
(1,936 | ) | (11,589 | ) | ||||
Dividends paid |
(1,031 | ) | (1,040 | ) | ||||
Net cash used in financing activities |
(131,322 | ) | (101,523 | ) | ||||
Effect of exchange rates on cash |
2,613 | 415 | ||||||
Net increase in cash and cash equivalents |
1,064 | 4,090 | ||||||
Cash and cash equivalents at beginning of year |
62,542 | 38,324 | ||||||
Cash and cash equivalents at end of period |
$ | 63,606 | $ | 42,414 | ||||
Supplemental Disclosures |
||||||||
Non-cash investing and financing activities |
||||||||
Pawn loans forfeited and transferred to merchandise held for disposition |
$ | 88,066 | $ | 74,050 | ||||
Pawn loans renewed |
$ | 70,823 | $ | 42,601 | ||||
Consumer loans renewed |
$ | 159,738 | $ | 118,775 |
See notes to consolidated financial statements.
5
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. | Significant Accounting Policies |
Basis of Presentation
The consolidated financial statements include all of the accounts of Cash America International, Inc. and its subsidiaries (the Company). All significant intercompany accounts and transactions have been eliminated in consolidation.
The financial statements as of March 31, 2012 and 2011 and for the three-month periods then ended are unaudited but, in managements opinion, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for such interim periods. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by Generally Accepted Accounting Principles in the United States of America (GAAP). Operating results for the three-month period are not necessarily indicative of the results that may be expected for the full fiscal year.
In the first quarter of 2012, the Company changed its accounting policy with respect to its foreign pawn operations to reflect pledged collateral underlying nonperforming pawn loans as Merchandise held for disposition, net, the proceeds received from the disposition of this collateral as Proceeds from disposition of merchandise and the cost basis for this collateral as Cost of disposed merchandise in its consolidated financial statements. The Company believes this change, from one generally accepted accounting principle to another generally accepted accounting principle, is preferable because it enhances comparability of its financial statements by reporting financial results associated with its foreign pawn operations in the same manner as the financial results associated with its domestic pawn operations. The Company did not change its accounting policy with respect to its domestic pawn operations, and the change in the Companys accounting policy with respect to its foreign pawn operations had no impact on the Companys consolidated Net Revenue or Net Income previously reported. The change has been applied retrospectively. The following tables summarize the impact of the accounting change in the Companys consolidated financial statements as of and for the three months ended March 31, 2011 and as of December 31, 2011 (dollars in thousands):
6
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
As of and for the three months ended March 31, 2011 |
||||||||
As previously reported |
As adjusted | |||||||
Consolidated Balance Sheet |
||||||||
Merchandise held for disposition, net |
$ | 110,490 | $ | 117,784 | ||||
Prepaid expenses and other assets |
37,709 | 31,566 | ||||||
Pawn loans |
188,088 | 186,937 | ||||||
Consolidated Statements of Income |
||||||||
Pawn loan fees and service charges |
$ | 66,889 | $ | 65,282 | ||||
Proceeds from disposition of merchandise |
160,661 | 171,927 | ||||||
Total revenue |
355,205 | 364,864 | ||||||
Cost of disposed merchandise |
99,577 | 109,236 | ||||||
Total cost of revenue |
139,077 | 148,736 | ||||||
Consolidated Statement of Cash Flows |
||||||||
Merchandise held for disposition |
$ | (3,292 | ) | $ | (2,211 | ) | ||
Prepaid expenses and other assets |
(7,938 | ) | (7,345 | ) | ||||
Net cash provided by operating activities |
98,407 | 100,081 | ||||||
Pawn loans repaid |
126,076 | 114,889 | ||||||
Principal recovered through dispositions of forfeited pawn loans |
80,064 | 89,433 | ||||||
Net cash used in investing activities |
6,935 | 5,117 | ||||||
Consolidated Statement of Cash FlowsSupplemental Disclosures |
||||||||
Pawn loans forfeited and transferred to merchandise held for disposition |
$ | 62,863 | $ | 74,050 | ||||
As of December 31, 2011 | ||||||||
As previously reported |
As adjusted | |||||||
Consolidated Balance Sheet |
||||||||
Merchandise held for disposition, net |
$ | 151,274 | $ | 161,884 | ||||
Prepaid expenses and other assets |
41,911 | 31,301 |
Prior to 2012, the Company had a contractual relationship with a third party entity, Huminal, S.A. de C.V., a Mexican sociedad anónima de capital variable (Huminal), to compensate and maintain the labor force of its Mexico pawn operations, of which the Company is a majority owner due to the December 16, 2008 acquisition by the Company of 80% of the outstanding stock of Creazione Estilo, S.A. de C.V., a Mexican sociedad anónima de capital variable (Creazione), operating under the name Prenda Fácil (referred to as Prenda Fácil). On January 1, 2012, the labor force of the Mexico pawn operations was transferred from Huminal to a wholly-owned subsidiary of Creazione. However, Prenda Fácil qualifies as the primary beneficiary of Huminal in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, Consolidation (ASC 810). Therefore, the results and balances of Huminal are consolidated and allocated to net income attributable to noncontrolling interests.
These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2011.
7
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
On September 15, 2011, Enova International, Inc. (Enova), a wholly-owned subsidiary of the Company that comprises its e-commerce segment, filed a registration statement on Form S-1 with the Securities and Exchange Commission in connection with a proposed initial public offering of its common stock. See Note 12 for further discussion of this transaction.
Revenue Recognition
Pawn loan fees and service charges. Pawn loans are short-term loans made on the pledge of tangible personal property. Pawn loan fees and service charges revenue are accrued ratably over the term of the loan for the portion of those pawn loans deemed collectible. The typical loan term is generally 30 to 90 days plus, in many cases, an additional grace period (typically 10 to 60 days). A pawn loan is considered nonperforming if the customer does not repay or, where allowed by law, renew or extend the loan at its contractual maturity plus any applicable grace period. Pawn loan fees and service charges do not accrue on nonperforming loans. Pawn loans written during each calendar month are aggregated and tracked for performance. This empirical data allows the Company to analyze the characteristics of its outstanding pawn loan portfolio and assess the collectability of the principal balance in addition to pawn loan fees and service charges.
Proceeds from and cost of disposed merchandise. Upon the sale of merchandise, the Company realizes gross profit, which is the difference between the Companys cost basis in the loan, or the amount paid for purchased merchandise, both of which are recorded as cost of sales, and the amount of proceeds from the sale. The cost of disposed merchandise is computed on the specific identification basis. Interim customer payments for layaway sales are recorded as customer deposits and subsequently recognized as revenue during the period in which the final payment is received.
Merchandise Held for Disposition
Merchandise held for disposition consists primarily of forfeited collateral from pawn loans not repaid and merchandise that is purchased directly from third parties or from customers. The carrying value of the forfeited collateral and other merchandise held for disposition is stated at the lower of cost (which is the cost basis in the loan or the amount paid for purchased merchandise) or fair value. The Company provides an allowance for returns and valuation based on managements evaluation of the characteristics of the merchandise and historical shrinkage rates. Because pawn loans are made without recourse to the borrower, the Company does not investigate or rely upon the borrowers creditworthiness, but instead bases its lending decision on an evaluation of the pledged personal property. The amount the Company is willing to finance is typically based on a percentage of the pledged personal propertys estimated disposition value. The Company uses numerous sources in determining an items estimated disposition value, including the Companys automated product valuation system as well as catalogs, blue books, newspapers, internet research and previous experience with disposing of similar items. The Company performs a physical count of its merchandise in each location on multiple occasions on a cyclical basis and reviews the composition of inventory by category and age in order to assess the adequacy of the allowance.
Recently Adopted Accounting Pronouncements
In September 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-08, Testing Goodwill for Impairment (ASU 2011-08). This update is intended to simplify goodwill impairment testing by adding an optional qualitative review step to assess whether the required quantitative impairment analysis that exists under GAAP is necessary. Under the amended rule a company will not be required to calculate the fair value of a reporting unit that contains recorded goodwill unless it concludes, based on the qualitative assessment, that it is more likely than not (a likelihood of more than 50 percent) that the fair value of that reporting unit is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative goodwill impairment test that exists under current GAAP must be completed. If not, goodwill is deemed not impaired and no further testing is
8
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
required until the next annual test date, unless conditions or events before that date raise concerns of potential impairment. The amended goodwill impairment guidance does not affect the manner in which a company estimates fair value. The Company adopted ASU 2011-08 on January 1, 2012 and the adoption did not have a material effect on its financial position or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05), which enhances comparability between entities that report under GAAP and those that report under International Financial Reporting Standards (IFRS). ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of equity. ASU 2011-05 is effective for the Companys interim and annual periods beginning after December 15, 2011 and must be applied retrospectively. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 effectively defers only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The Company adopted ASU 2011-05 and ASU 2011-12 on January 1, 2012 and the adoption did not have a material effect on its financial position or results of operations.
In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (ASU 2011-04), which amends ASC 820, Fair Value Measurement (ASC 820). ASU 2011-04 provides a consistent definition and measurement of fair value, as well as similar disclosure requirements between GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the ASC 820 disclosure requirements, particularly for Level 3 fair value measurements. ASU 2011-04 is effective for the Company prospectively for interim and annual periods beginning after December 15, 2011. The Company adopted ASU 2011-04 on January 1, 2012 and the adoption did not have a material effect on its financial position or results of operations.
2. | Acquisitions |
Pawn Partners, Inc.
Pursuant to its business strategy of expanding storefront operations in the United States, the Companys wholly-owned subsidiary, Cash America, Inc. of Nevada, entered into an agreement to acquire substantially all of the assets of Pawn Partners, Inc., Pawn Partners -Tucson, Inc., Pawn Partners Tucson II, Inc., Pawn Partners Tucson 3, Inc., Pawn Partners Tucson 4, Inc. and Pawn Partners Yuma, Inc. (collectively, Pawn Partners) on November 22, 2011 (the Pawn Partners acquisition), the final closing for which was to occur following receipt of all applicable licensing and regulatory approvals. The Company assumed the economic benefits of these pawnshops by operating them under a management arrangement that commenced on November 30, 2011. As of March 31, 2012, all of the regulatory licenses had been obtained, and the management arrangement had been terminated. Pawn Partners operated a seven-store chain of pawn lending locations as franchised Cash America locations under the name SuperPawn. The seven locations are located in Tucson, Flagstaff and Yuma, Arizona. As of March 31, 2012, the Company has paid aggregate consideration of $52.8 million, of which $3.6 million was paid during the three months ended March 31, 2012. The Company incurred acquisition costs of $0.1 million related to the acquisition. The goodwill of $26.7 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Pawn Partners. As further described in Note 8, the activities and goodwill related to the Pawn Partners acquisition are included in the results of the Companys retail services segment.
9
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
3. | Credit Quality Information on Pawn Loans |
The Company manages the pawn loan portfolio by monitoring the type and adequacy of collateral compared to historical gross profit margins. If a pawn loan defaults, the Company must rely on the disposition of pawned property to recover the principal amount of an unpaid pawn loan, plus a yield on the investment, because pawn loans are non-recourse against the customer. As a result, the customers creditworthiness is not a significant factor in the loan decision, and a decision to redeem pawned property does not affect the customers personal credit status with other third-party creditors. In addition, the customers creditworthiness does not affect the Companys financial position or results of operations. Generally, forfeited merchandise has historically sold for an amount in excess of the cost of goods sold (which is the lower of the cash amount loaned or market value). Goods pledged to secure pawn loans are tangible personal property items such as jewelry, tools, televisions and other electronics, musical instruments and other miscellaneous items. A pawn loan is considered nonperforming if the customer does not make a payment in accordance with the contractual requirements. When a pawn loan is considered nonperforming, any accrued pawn loan fees and service charges are reversed and additional pawn loan fees and service charges are not accrued. As of March 31, 2012 and 2011 and December 31, 2011, the Company had performing pawn loans outstanding of $202.6 million, $182.1 million and $248.4 million, respectively, and nonperforming pawn loans outstanding of $3.7 million, $4.8 million and $5.1 million, respectively.
4. | Consumer Loans, Credit Quality Information and Allowances and Liabilities for Estimated Losses on Consumer Loans |
Each consumer loan provides customers with cash, typically in exchange for a fee and an agreement to repay the amount advanced. These transactions result in a receivable or a loan, owed to the Company or a third-party lender that the Company guarantees. The Companys consumer loan portfolio consists of consumer loans the Company originates, guarantees or purchases and includes: short-term loans, which include single payment loans and line of credit products, and longer-term multi-payment installment loans. Through the credit services organization programs (the CSO programs), the Company provides services related to a third-party lenders consumer loan product in some markets by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws. Services offered under the CSO programs include credit related services such as arranging loans with independent third-party lenders and assisting in the preparation of loan applications and loan documents. Under the CSO programs, the Company also guarantees consumer loan payment obligations to the third-party lender in the event that the consumer defaults on the loan. A customer who obtains a loan through the CSO programs pays the Company a fee for these credit services (CSO fees). Consumer loan fee revenue generated from the Companys consumer loans, CSO programs and related activities for the three months ended March 31, 2012 and 2011 was as follows (dollars in thousands):
Three Months Ended March 31, |
||||||||
2012 | 2011 | |||||||
Interest and fees on short-term loans |
$ | 148,293 | $ | 114,994 | ||||
Interest and fees on installment loans |
24,547 | 8,133 | ||||||
|
||||||||
Total consumer loan fees |
$ | 172,840 | $ | 123,127 | ||||
|
The Company monitors the performance of its portfolio of consumer loans and maintains either an allowance or liability for estimated losses on consumer loans (including fees and interest) at a level estimated to be adequate to absorb credit losses inherent in the portfolio. The allowance for losses on the Companys owned consumer loans reduces the outstanding loan balance in the consolidated balance sheets. In addition, the Company maintains a liability for estimated losses related to loans guaranteed under the CSO programs which approximates the fair value of the liability and is included in Accounts payable and accrued expenses on the consolidated balance sheets.
10
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
In determining the allowance or liability for estimated losses on consumer loans, the Company applies a documented systematic methodology. Outstanding loans are divided into discrete groups of short-term loans and installment loans and are analyzed as performing or nonperforming. Short-term consumer loans are considered nonperforming as of the payment due date when payment of an amount due has not been made as of that date (after allowing for normal payment processing time). An installment loan is considered nonperforming if the customer does not make two consecutive payments.
Where permitted by law, a customer may choose to renew a performing short-term consumer loan before it is considered nonperforming by agreeing to pay the current finance charge for the right to make payment of the outstanding principal balance at a later date plus an additional finance charge. If a performing loan is renewed, the renewal is considered a new loan. In some instances in the United Kingdom, customers agree to repay a new short-term loan in two payments (which the Company also considers short-term loans), and in these cases the Company considers the obligation to make the first payment as a new single-payment loan and the obligation to make the second payment as a renewal of that loan because the customer pays a finance charge when each payment is made, similar to a renewed loan. If a performing loan is renewed but the customer fails to pay that loans current finance charge as of its due date (after allowing for normal payment processing time), the loan that was renewed is reclassified as nonperforming to the extent of that loans unpaid finance charge.
The Company does not provide for any grace period when determining the performance status of a consumer loan (other than allowing for normal payment processing time). Nonperforming loans may not be renewed, and if during its attempt to collect on a nonperforming loan the Company extends the time for payment through a payment plan or a promise to pay, it is still considered nonperforming. Nonperforming loans are analyzed by stage of collection. Actual loss experience based on historical loss rates for each discrete group is calculated and adjusted for recent default trends. The required allowance is calculated by applying the resulting adjusted loss rates to each discrete loan group and aggregating the results. Increases in either the allowance or the liability, net of charge-offs and recoveries, are recorded as a Consumer loan loss provision in the consolidated statements of income. The Company fully reserves and generally charges off all consumer loans once they have been classified as nonperforming for 60 consecutive days. If a loan is deemed uncollectible before it is fully reserved, it is charged off at that point. All loans included in nonperforming loans have an age of one to 59 days from the date they became nonperforming loans, as defined above. Recoveries on loans previously charged to the allowance are credited to the allowance when collected.
The allowance deducted from the carrying value of consumer loans was $58.7 million, $35.0 million and $63.1 million at March 31, 2012 and 2011 and December 31, 2011, respectively. In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders and is required to purchase the loan should a consumer not make payments as required by the contract. The guarantee represents an obligation to purchase specific loans that go into default, which generally have terms of less than 90 days. At March 31, 2012 and 2011 and December 31, 2011, the amount of consumer loans guaranteed by the Company was $44.5 million, $38.8 million and $59.4 million, respectively, representing amounts due under consumer loans originated by third-party lenders under the CSO programs. The estimated fair value of the liability related to these guarantees of $2.0 million, $1.7 million and $3.1 million at March 31, 2012 and 2011 and December 31, 2011, respectively, is included in Accounts payable and accrued expenses in the accompanying consolidated balance sheets.
11
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The components of Company-owned consumer loan portfolio receivables at March 31, 2012 and 2011 and December 31, 2011 were as follows (dollars in thousands):
As of March 31, 2012 | ||||||||||||
Short-term Loans |
Installment Loans |
Total | ||||||||||
Performing loans |
$ | 136,158 | $ | 65,127 | $ | 201,285 | ||||||
Nonperforming loans |
47,775 | 10,018 | 57,793 | |||||||||
Total consumer loans, gross |
183,933 | 75,145 | 259,078 | |||||||||
Less: Allowance for losses |
(43,425 | ) | (15,288 | ) | (58,713 | ) | ||||||
Consumer loans, net |
$ | 140,508 | $ | 59,857 | $ | 200,365 | ||||||
As of March 31, 2011 | ||||||||||||
Short-term Loans |
Installment Loans |
Total | ||||||||||
Performing loans |
$ | 101,283 | $ | 20,122 | $ | 121,405 | ||||||
Nonperforming loans |
36,447 | 3,293 | 39,740 | |||||||||
Total consumer loans, gross |
137,730 | 23,415 | 161,145 | |||||||||
Less: Allowance for losses |
(30,512 | ) | (4,498 | ) | (35,010 | ) | ||||||
Consumer loans, net |
$ | 107,218 | $ | 18,917 | $ | 126,135 | ||||||
As of December 31, 2011 | ||||||||||||
Short-term Loans |
Installment Loans |
Total | ||||||||||
Performing loans |
$ | 157,156 | $ | 59,165 | $ | 216,321 | ||||||
Nonperforming loans |
59,049 | 10,480 | 69,529 | |||||||||
Total consumer loans, gross |
216,205 | 69,645 | 285,850 | |||||||||
Less: Allowance for losses |
(50,129 | ) | (12,943 | ) | (63,072 | ) | ||||||
Consumer loans, net |
$ | 166,076 | $ | 56,702 | $ | 222,778 |
Changes in the allowance for losses for the Company-owned loans and the liability for estimated losses on the Companys guarantees of third-party lender-owned loans during the three months ended March 31, 2012 and 2011 were as follows (dollars in thousands):
Three Months Ended March 31, 2012 | ||||||||||||||||
Short-term Loans |
Installment Loans |
MLOC(a) | Total | |||||||||||||
Allowance for losses for Company-owned consumer loans: |
||||||||||||||||
Balance at beginning of period |
$ | 50,129 | $ | 12,943 | $ | - | $ | 63,072 | ||||||||
Consumer loan loss provision |
48,954 | 14,498 | - | 63,452 | ||||||||||||
Charge-offs |
(65,276 | ) | (13,337 | ) | - | (78,613 | ) | |||||||||
Recoveries |
9,618 | 1,184 | - | 10,802 | ||||||||||||
Balance at end of period |
$ | 43,425 | $ | 15,288 | $ | - | $ | 58,713 | ||||||||
Liability for third-party lender-owned consumer loans: |
||||||||||||||||
Balance at beginning of period |
$ | 2,617 | $ | 445 | $ | - | $ | 3,062 | ||||||||
Decrease in liability |
(987 | ) | (82 | ) | - | (1,069 | ) | |||||||||
Balance at end of period |
$ | 1,630 | $ | 363 | $ | - | $ | 1,993 |
12
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Three Months Ended March 31, 2011 | ||||||||||||||||
Short-term Loans |
Installment Loans |
MLOC(a) | Total | |||||||||||||
Allowance for losses for Company-owned consumer loans: |
||||||||||||||||
Balance at beginning of period |
$ | 34,455 | $ | 2,988 | $ | 1,510 | $ | 38,953 | ||||||||
Consumer loan loss provision |
36,169 | 4,888 | (430 | ) | 40,627 | |||||||||||
Charge-offs |
(47,601 | ) | (3,561 | ) | (1,514 | ) | (52,676 | ) | ||||||||
Recoveries |
7,489 | 183 | 434 | 8,106 | ||||||||||||
Balance at end of period |
$ | 30,512 | $ | 4,498 | $ | - | $ | 35,010 | ||||||||
Liability for third-party lender-owned consumer loans: |
||||||||||||||||
Balance at beginning of period |
$ | 2,610 | $ | 228 | $ | - | $ | 2,838 | ||||||||
Decrease in liability |
(1,109 | ) | (18 | ) | - | (1,127 | ) | |||||||||
Balance at end of period |
$ | 1,501 | $ | 210 | $ | - | $ | 1,711 | ||||||||
(a) Represents micro line of credit (MLOC) receivables, which are participation interests in receivables acquired from a third-party lender. The Company stopped providing MLOC services on behalf of a third-party lender in October 2010 when the lender discontinued offering MLOC advances. |
|
5. | Merchandise Held For Disposition |
In the Companys domestic operations, merchandise held for disposition consists primarily of forfeited collateral from pawn loans not repaid and merchandise that is purchased directly from third parties or from customers. The carrying value of the forfeited collateral and other merchandise held for disposition is stated at the lower of cost (which is the cost basis in the loan or the amount paid for purchased merchandise) or fair value. With respect to the Companys foreign pawn operations, collateral underlying unredeemed pawn loans is not owned by the Company; however, the Company assumes the risk of loss on such collateral that allows for recognition of the assets. Accordingly, the Company classifies these assets as Merchandise held for disposition in the consolidated balance sheets.
As of March 31, 2012 and 2011 and December 31, 2011, the Company had merchandise held for disposition, net, of $128.2 million, $110.5 million and $151.3 million, respectively, associated with its domestic retail services operations, and $11.3 million, $7.3 million and $10.6 million, respectively, associated with its foreign retail services operations.
13
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
6. | Earnings Per Share Computation |
Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the period.
The following table sets forth the reconciliation of numerators and denominators for the basic and diluted earnings per share computation for the three months ended March 31, 2012 and 2011 (dollars in thousands, except per share amounts):
Three Months Ended March 31, |
||||||||||
2012 | 2011 | |||||||||
Numerator: | ||||||||||
Net income attributable to Cash America International, Inc. | $ | 41,467 | $ | 36,378 | ||||||
|
||||||||||
Denominator: | ||||||||||
Total weighted average basic shares (a) | 29,616 | 29,755 | ||||||||
Shares applicable to stock-based compensation(b) | 297 | 585 | ||||||||
Convertible debt(c) | 1,999 | 1,720 | ||||||||
|
||||||||||
Total weighted average diluted shares (d) | 31,912 | 32,060 | ||||||||
|
||||||||||
Net income basic | $ | 1.40 | $ | 1.22 | ||||||
|
||||||||||
Net income diluted | $ | 1.30 | $ | 1.13 | ||||||
|
||||||||||
(a) |
Includes vested restricted stock units of 279 and 220, as well as 32 and 32 shares in the Companys nonqualified deferred compensation plan for the three months ended March 31, 2012 and 2011, respectively. | |||||||||
(b) |
Includes shares related to outstanding option awards that are exercisable and shares related to unvested or deferred restricted stock unit awards. | |||||||||
(c) |
The shares issuable with respect to the Companys 2009 Convertible Notes due 2029 (the 2009 Convertible Notes) have been calculated using the treasury stock method. The Company intends to settle the principal portion of the convertible debt in cash; therefore, only the shares related to the conversion spread have been included in weighted average diluted shares. | |||||||||
(d) |
There are no anti-dilutive shares for the three months ended March 31, 2012 and 2011. |
14
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
7. | Long-Term Debt |
The Companys long-term debt instruments and balances outstanding at March 31, 2012 and 2011 and December 31, 2011 were as follows (dollars in thousands):
Balance at | ||||||||||||||
March 31, | December 31, | |||||||||||||
2012 | 2011 | 2011 | ||||||||||||
Domestic and multi-currency line of credit up to $380,000 ($100,000 due 2013, $280,000 due 2015)(a) | $ | 156,113 | $ | 104,034 | $ | 280,839 | ||||||||
6.21% senior unsecured notes due 2021 | 22,727 | 25,000 | 22,727 | |||||||||||
6.09% senior unsecured notes due 2016 | 35,000 | 35,000 | 35,000 | |||||||||||
6.12% senior unsecured notes due 2012 | 13,333 | 26,667 | 16,667 | |||||||||||
7.26% senior unsecured notes due 2017 | 25,000 | 25,000 | 25,000 | |||||||||||
Variable rate senior unsecured note due 2015 | 47,917 | 50,000 | 50,000 | |||||||||||
5.25% convertible senior unsecured notes due 2029 | 107,818 | 104,871 | 107,058 | |||||||||||
Total debt |
$ | 407,908 | $ | 370,572 | $ | 537,291 | ||||||||
Less current portion | 35,939 | 17,689 | 34,273 | |||||||||||
Total long-term debt | $ | 371,969 | $ | 352,883 | $ | 503,018 | ||||||||
(a) |
$100.0 million of the available balance matures on the earlier of May 29, 2013 or the second business day following the closing of the proposed initial public offering of common stock of Enova if it generates at least $350.0 million in net proceeds. |
Domestic and Multi-Currency Line
On March 30, 2011, the Company entered into a new credit agreement for up to $330.0 million of credit with a group of commercial banks (the Original Credit Agreement). On November 29, 2011, the Company amended the Credit Agreement, to increase the amount available by $100.0 million, to $430.0 million (the Credit Agreement). The Credit Agreement consists of a $380.0 million line of credit, which includes the ability to borrow up to $50.0 million in specified foreign currencies or U.S. dollars (the Domestic and Multi-currency Line) and a $50.0 million term loan facility (the 2015 Variable Rate Notes). The line of credit commitment amount will decrease by $100.0 million, to $280.0 million, on the earlier of May 29, 2013 or the second business day following the closing of the proposed initial public offering of common stock of Enova. if it generates at least $350.0 million in net proceeds. See Note 12 for further discussion of this transaction. Interest on the Domestic and Multi-currency Line is charged, at the Companys option, at either the London Interbank Offered Rate (LIBOR) plus a margin varying from 2.00% to 3.25%, or at the agents base rate plus a margin varying from 0.50% to 1.75%. Interest on the 2015 Variable Rate Notes is charged, at the Companys option, at either LIBOR plus a margin of 3.50% or at the agents base rate plus a margin of 2.00%. The margin for the Domestic and Multi-currency Line is dependent on the Companys cash flow leverage ratios as defined in the Credit Agreement. The Company also pays a fee on the unused portion of the Domestic and Multi-currency Line ranging from 0.25% to 0.50% (0.38% at March 31, 2012) based on the Companys cash flow leverage ratios. The weighted average interest rate (including margin) on the Domestic and Multi-currency Line and the 2015 Variable Rate Notes, respectively, was 3.03% and 3.75% at March 31, 2012. The Domestic and Multi-currency Line matures on March 31, 2015. The 2015 Variable Rate Notes require quarterly principal payments of $2.1 million with any outstanding principal remaining due at maturity on March 31, 2015.
At March 31, 2012 and 2011, borrowings under the Companys Domestic and Multi-currency Line consisted of four pricing tranches with maturity dates ranging from three to 31 days. However, the Company routinely refinances borrowings pursuant to the terms of its Domestic and Multi-currency Line. Therefore, these borrowings are reported as part of the applicable line of credit and as long-term debt.
15
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Other
On March 30, 2011, in conjunction with the establishment of the Original Credit Agreement, the Company entered into a separate credit agreement for the issuance of $20.0 million in letters of credit (the Letter of Credit Facility). The Company had standby letters of credit of $18.1 million issued under the Letter of Credit Facility at March 31, 2012.
Each of the Companys credit agreements and senior unsecured notes require the Company to maintain certain financial ratios. As of March 31, 2012, the Company was in compliance with all covenants or other requirements set forth in its debt agreements.
8. | Operating Segment Information |
The Company has two operating segments: retail services and e-commerce. The retail services segment includes all of the operations of the Companys Retail Services Division, which is composed of both domestic and foreign storefront locations that offer some or all of the following services: pawn lending, consumer loans, the purchase and sale of merchandise, check cashing and other ancillary services such as money orders, wire transfers and prepaid debit cards. Most of these ancillary services offered in the retail services segment are provided through third party vendors. The e-commerce segment includes the operations of the Companys E-Commerce Division, which is composed of the Companys domestic and foreign online channels (and includes the Companys internet lending activities and other ancillary services). In the e-commerce segment, certain administrative expenses are allocated between the domestic and foreign components based on the amount of loans written. See Note 12 for further discussion of the proposed sale of a portion of the Companys ownership in its wholly-owned subsidiary that comprises its e-commerce segment through an initial public offering.
During the first quarter of 2012, the Company changed the presentation of its operating segment information to report corporate operations separately from its retail services and e-commerce segment information. Corporate administrative expense, which was previously allocated to each segment based on personnel expense, is included under the Corporate heading in the following tables. For comparison purposes, operations and administration expenses for prior years have been conformed to the current presentation. Corporate operations primarily include corporate expenses, such as personnel, legal, occupancy, and other costs related to corporate service functions, such as executive oversight, insurance and risk management, public and government relations, internal audit, treasury, payroll, compliance and licensing, finance, accounting, tax, certain information systems and collections support and other similar services. Corporate income includes miscellaneous income not directly attributable to the Companys segments. Corporate assets primarily include: corporate property and equipment, non-qualified savings plan assets, marketable securities, foreign exchange forward contracts and prepaid insurance.
16
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Retail Services | E-Commerce | |||||||||||||||||||||||||||||||
Domestic | Foreign | Total | Domestic | Foreign | Total | Corporate | Consolidated | |||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Three Months Ended March 31, 2012 |
||||||||||||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||||||
Pawn loan fees and service charges |
$ | 69,413 | $ | 3,486 | $ | 72,899 | $ | - | $ | - | $ | - | $ | - | $ | 72,899 | ||||||||||||||||
Proceeds from disposition of merchandise |
195,986 | 12,397 | 208,383 | - | - | - | - | 208,383 | ||||||||||||||||||||||||
Consumer loan fees |
29,372 | - | 29,372 | 69,124 | 74,344 | 143,468 | - | 172,840 | ||||||||||||||||||||||||
Other |
2,962 | 49 | 3,011 | 165 | (6 | ) | 159 | 196 | 3,366 | |||||||||||||||||||||||
Total revenue |
297,733 | 15,932 | 313,665 | 69,289 | 74,338 | 143,627 | 196 | 457,488 | ||||||||||||||||||||||||
Disposed merchandise |
127,128 | 11,193 | 138,321 | - | - | - | - | 138,321 | ||||||||||||||||||||||||
Consumer loan loss provision |
4,466 | - | 4,466 | 21,954 | 35,963 | 57,917 | - | 62,383 | ||||||||||||||||||||||||
Total cost of revenue |
131,594 | 11,193 | 142,787 | 21,954 | 35,963 | 57,917 | - | 200,704 | ||||||||||||||||||||||||
Net revenue |
166,139 | 4,739 | 170,878 | 47,335 | 38,375 | 85,710 | 196 | 256,784 | ||||||||||||||||||||||||
Expenses |
||||||||||||||||||||||||||||||||
Operations and administration |
91,259 | 8,194 | 99,453 | 23,816 | 26,723 | 50,539 | 20,163 | 170,155 | ||||||||||||||||||||||||
Depreciation and amortization |
7,132 | 1,128 | 8,260 | 2,612 | 263 | 2,875 | 3,486 | 14,621 | ||||||||||||||||||||||||
Total expenses |
98,391 | 9,322 | 107,713 | 26,428 | 26,986 | 53,414 | 23,649 | 184,776 | ||||||||||||||||||||||||
Income (loss) from operations |
$ | 67,748 | $ | (4,583 | ) | $ | 63,165 | $ | 20,907 | $ | 11,389 | $ | 32,296 | $ | (23,453 | ) | $ | 72,008 | ||||||||||||||
As of March 31, 2012 |
||||||||||||||||||||||||||||||||
Total assets |
$ | 844,689 | $ | 123,245 | $ | 967,934 | $ | 339,199 | $ | 143,757 | $ | 482,956 | $ | 131,847 | $ | 1,582,737 | ||||||||||||||||
Goodwill |
$ | 357,459 | $ | 210,371 | $ | 567,830 | ||||||||||||||||||||||||||
Retail Services | E-Commerce | |||||||||||||||||||||||||||||||
Domestic | Foreign | Total | Domestic | Foreign | Total | Corporate | Consolidated | |||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||
Three Months Ended March 31, 2011 |
||||||||||||||||||||||||||||||||
Revenue |
||||||||||||||||||||||||||||||||
Pawn loan fees and service charges |
$ | 60,226 | $ | 5,056 | $ | 65,282 | $ | - | $ | - | $ | - | $ | - | $ | 65,282 | ||||||||||||||||
Proceeds from disposition of merchandise |
160,661 | 11,266 | 171,927 | - | - | - | - | 171,927 | ||||||||||||||||||||||||
Consumer loan fees |
25,835 | - | 25,835 | 58,711 | 38,581 | 97,292 | - | 123,127 | ||||||||||||||||||||||||
Other |
3,725 | 102 | 3,827 | 233 | 308 | 541 | 160 | 4,528 | ||||||||||||||||||||||||
Total revenue |
250,447 | 16,424 | 266,871 | 58,944 | 38,889 | 97,833 | 160 | 364,864 | ||||||||||||||||||||||||
Disposed merchandise |
99,577 | 9,659 | 109,236 | - | - | - | - | 109,236 | ||||||||||||||||||||||||
Consumer loan loss provision |
3,183 | - | 3,183 | 17,158 | 19,159 | 36,317 | - | 39,500 | ||||||||||||||||||||||||
Total cost of revenue |
102,760 | 9,659 | 112,419 | 17,158 | 19,159 | 36,317 | - | 148,736 | ||||||||||||||||||||||||
Net revenue |
147,687 | 6,765 | 154,452 | 41,786 | 19,730 | 61,516 | 160 | 216,128 | ||||||||||||||||||||||||
Expenses |
||||||||||||||||||||||||||||||||
Operations and administration |
82,561 | 9,261 | 91,822 | 18,904 | 15,315 | 34,219 | 14,417 | 140,458 | ||||||||||||||||||||||||
Depreciation and amortization |
6,045 | 1,511 | 7,556 | 2,748 | 192 | 2,940 | 1,946 | 12,442 | ||||||||||||||||||||||||
Total expenses |
88,606 | 10,772 | 99,378 | 21,652 | 15,507 | 37,159 | 16,363 | 152,900 | ||||||||||||||||||||||||
Income (loss) from operations |
$ | 59,081 | $ | (4,007 | ) | $ | 55,074 | $ | 20,134 | $ | 4,223 | $ | 24,357 | $ | (16,203 | ) | $ | 63,228 | ||||||||||||||
As of March 31, 2011 |
||||||||||||||||||||||||||||||||
Total assets |
$ | 741,075 | $ | 126,750 | $ | 867,825 | $ | 304,071 | $ | 72,054 | $ | 376,125 | $ | 133,826 | $ | 1,377,776 | ||||||||||||||||
Goodwill |
$ | 335,383 | $ | 210,282 | $ | 545,665 |
17
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
9. | Litigation |
On August 6, 2004, James E. Strong filed a purported class action lawsuit in the State Court of Cobb County, Georgia against Georgia Cash America, Inc., Cash America International, Inc. (together with Georgia Cash America, Inc., Cash America), Daniel R. Feehan, and several unnamed officers, directors, owners and stakeholders of Cash America. The lawsuit alleges many different causes of action, among the most significant of which is that Cash America made illegal short-term loans in Georgia in violation of Georgias usury law, the Georgia Industrial Loan Act and Georgias Racketeer Influenced and Corrupt Organizations Act (RICO). First National Bank of Brookings, South Dakota (FNB) and Community State Bank of Milbank, South Dakota (CSB) for some time made loans to Georgia residents through Cash Americas Georgia operating locations. The complaint in this lawsuit claims that Cash America was the true lender with respect to the loans made to Georgia borrowers and that FNB and CSBs involvement in the process is a mere subterfuge. Based on this claim, the suit alleges that Cash America was the de facto lender and was illegally operating in Georgia. The complaint seeks unspecified compensatory damages, attorneys fees, punitive damages and the trebling of any compensatory damages. In November 2009 the case was certified as a class action lawsuit. In August 2011, Cash America filed a motion for summary judgment, and in October 2011, the plaintiffs filed a cross-motion for partial summary judgment. Hearings on the motions were held in October and November 2011, and the trial court entered an order granting summary judgment in favor of Cash America on one of plaintiffs claims, denying the remainder of Cash Americas motion and granting plaintiffs cross-motion for partial summary judgment. Cash America filed a notice of appeal in December 2011 on the grant of plaintiffs partial summary judgment, which is pending before the Georgia Court of Appeals. The Company is currently unable to estimate a range of reasonably possible losses, as defined by ASC 450-20-20, Contingencies Loss Contingencies Glossary (ASC 450-20-20), for this litigation. Cash America believes that the Plaintiffs claims in this suit are without merit and is vigorously defending this lawsuit.
On March 5, 2009, Peter Alfeche and Kim Saunders, on behalf of themselves and all others similarly situated, filed a purported class action lawsuit in the U.S. District Court for the Eastern District of Pennsylvania against Cash America International, Inc., Cash America Net of Nevada, LLC (CashNet Nevada), Cash America Net of Pennsylvania, LLC and Cash America of PA, LLC, d/b/a CashNetUSA.com (collectively, CashNetUSA). The lawsuit alleges, among other things, that CashNetUSAs online consumer loan activities in Pennsylvania were illegal and in violation of various Pennsylvania laws, including the Loan Interest Protection Law, the Pennsylvania Consumer Discount Company Act (the CDCA) and the Unfair Trade Practices and Consumer Protection Laws. The lawsuit also seeks declaratory judgment that several of CashNetUSAs contractual provisions, including the class action waiver and the choice of law and arbitration provisions, are not enforceable under Pennsylvania law and that CashNetUSAs loan contracts are void and unenforceable. The complaint seeks compensatory damages (including the trebling of certain damages), punitive damages and attorneys fees. CashNetUSA filed a motion to enforce the arbitration provision, including its class action waiver, located in the agreements governing the lending activities. In August 2011, the U.S. District Court ruled that the arbitration provision, which includes the class action waiver, was valid and enforceable and granted the motion to compel arbitration and stayed the litigation. In August 2011, the plaintiffs filed a motion to reconsider, which the court denied, and in September 2011, the plaintiffs filed a motion for certification for interlocutory appeal, which was denied in November 2011. On February 24, 2012, plaintiffs filed a motion for reconsideration of the courts decision, and the court has not yet ruled on this motion. Neither the likelihood of an unfavorable outcome nor the ultimate liability, if any, with respect to this matter can be determined at this time, and the Company is currently unable to estimate a range of reasonably possible losses, as defined by ASC 450-20-20, for this litigation. The Company believes that the plaintiffs claims in this suit are without merit and intends to vigorously defend this lawsuit.
On December 4, 2009, Krystle Wilson filed a lawsuit against Cash America Net of Illinois d/b/a CashNetUSA alleging violation of the Texas Debt Collection Practices Act, violation of the Texas Deceptive Trade Practices Act and invasion of privacy. In April 2011, the plaintiff amended her petition to include a purported class action claim and named Cash America International, Inc., Cash America Net Holdings, LLC, Cash America Net of Texas, LLC and Enova Financial Holdings, LLC as additional defendants (and corrected the name of the previously-named defendant to Cash America Net of Illinois, LLC) (collectively, CashNet). The amended petition alleges, among other things,
18
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
that CashNets consumer loan activities violated the Texas Credit Services Organization Act (CSOA) and that in its efforts to collect on loans issued through the CSOA loan program, CashNet violated the Texas and Federal Fair Debt Collection Practices Acts. The plaintiff was seeking unspecified compensatory damages, attorneys fees and punitive damages. In June 2011, CashNet removed this action to the U.S. District Court for the Northern District of Texas (Fort Worth Division) and filed a motion to enforce the arbitration provision, including the class action waiver, located in the agreements governing the lending activities. On February 1, 2012, the court ruled that the arbitration provision, which includes the class action waiver, was valid and enforceable and granted the Companys motion to compel arbitration and dismissed the litigation.
The Company is also a defendant in certain routine litigation matters encountered in the ordinary course of its business. Certain of these matters are covered to an extent by insurance. In the opinion of management, the resolution of these matters is not expected to have a material adverse effect on the Companys financial position, results of operations or liquidity.
10. | Fair Value Measurements |
Recurring Fair Value Measurements
In accordance with ASC 820-10, Fair Value Measurements and Disclosures (ASC 820-10), certain of the Companys assets and liabilities, which are carried at fair value, are classified in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The Companys financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2012 and 2011 and December 31, 2011 are as follows (dollars in thousands):
March 31, | Fair Value Measurements Using | |||||||||||||||
2012 | Level 1 | Level 2 | Level 3 | |||||||||||||
Financial assets (liabilities): |
||||||||||||||||
Forward currency exchange contracts |
$ | (396 | ) | $ | - | $ | (396 | ) | $ | - | ||||||
Nonqualified savings plan assets(a) |
10,336 | 10,336 | - | - | ||||||||||||
Marketable securities(b) |
5,565 | 5,565 | - | - | ||||||||||||
Total |
$ | 15,505 | $ | 15,901 | $ | (396 | ) | $ | - | |||||||
March 31, | Fair Value Measurements Using | |||||||||||||||
2011 | Level 1 | Level 2 | Level 3 | |||||||||||||
Financial assets (liabilities): |
||||||||||||||||
Interest rate contracts |
$ | 1 | $ | - | $ | 1 | $ | - | ||||||||
Forward currency exchange contracts |
(372 | ) | - | (372 | ) | - | ||||||||||
Nonqualified savings plan assets(a) |
8,352 | 8,352 | - | - | ||||||||||||
Marketable securities(b) |
4,370 | 4,370 | - | - | ||||||||||||
Total |
$ | 12,351 | $ | 12,722 | $ | (371 | ) | $ | - |
19
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
December 31, | Fair Value Measurements Using | |||||||||||||||||
2011 | Level 1 | Level 2 | Level 3 | |||||||||||||||
Financial assets (liabilities): | ||||||||||||||||||
Forward currency exchange contracts |
$ | 260 | $ | - | $ | 260 | $ | - | ||||||||||
Nonqualified savings plan assets(a) |
8,264 | 8,264 | - | - | ||||||||||||||
Marketable securities(b) |
4,412 | 4,412 | - | - | ||||||||||||||
Total | $ | 12,936 | $ | 12,676 | $ | 260 | $ | - | ||||||||||
(a) |
The non-qualified savings plan assets have an offsetting liability of equal amount, which is included in Accounts payable and accrued expenses in the Companys consolidated balance sheets. | |||||||||||||||||
(b) |
Unrealized total losses, net of tax, on these securities of $0.1 million, $0.8 million and $0.8 million as of March 31, 2012 and 2011, and December 31, 2011, respectively, are recorded in Accumulated other comprehensive income (loss) in the Companys consolidated statements of equity. |
The Company measures the value of its forward currency exchange contracts under Level 2 inputs as defined by ASC 820-10. For these forward currency exchange contracts, standard valuation models are used to determine fair value. The significant inputs used in these models are derived from observable market transactions. The fair value of the nonqualified savings plan assets and marketable securities, both of which are classified as available for sale, are measured under a Level 1 input. These assets are publicly traded equity securities for which market prices are readily observable. During the three months ended March 31, 2012 and 2011, there were no transfers of assets in or out of Level 1 or Level 2 fair value measurements.
Other Fair Value Disclosures
The Companys other financial liabilities as of March 31, 2012 and 2011 and December 31, 2011 that are not measured at fair value in the consolidated balance sheets but for which fair value is required to be disclosed are as follows (dollars in thousands):
Carrying Value | Estimated Fair Value | |||||||||||||||||||
March 31, | March 31, | Fair Value Measurement Using | ||||||||||||||||||
2012 | 2012 | Level 1 | Level 2 | Level 3 | ||||||||||||||||
Financial liabilities: |
||||||||||||||||||||
Bank lines of credit |
$ | 156,113 | $ | 162,053 | $ | - | $ | 162,053 | $ | - | ||||||||||
Senior unsecured notes |
143,977 | 142,501 | - | 142,501 | - | |||||||||||||||
2009 Convertible Notes |
107,818 | 225,544 | - | 225,544 | - | |||||||||||||||
Total |
$ | 407,908 | $ | 530,098 | $ | - | $ | 530,098 | $ | - | ||||||||||
Carrying Value | Estimated Fair Value | |||||||||||||||||||
March 31, | March 31, | Fair Value Measurement Using | ||||||||||||||||||
2011 | 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||||||
Financial liabilities: |
||||||||||||||||||||
Bank lines of credit |
$ | 104,034 | $ | 104,034 | $ | - | $ | 104,034 | $ | - | ||||||||||
Senior unsecured notes |
161,667 | 160,634 | - | 160,634 | - | |||||||||||||||
2009 Convertible Notes |
104,871 | 222,238 | - | 222,238 | - | |||||||||||||||
Total |
$ | 370,572 | $ | 486,906 | $ | - | $ | 486,906 | $ | - |
20
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Carrying Value | Estimated Fair Value | |||||||||||||||||||
December 31, | December 31, | Fair Value Measurement Using | ||||||||||||||||||
2011 | 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||||||
Financial liabilities: |
||||||||||||||||||||
Bank lines of credit |
$ | 280,839 | $ | 291,983 | $ | - | $ | 291,983 | $ | - | ||||||||||
Senior unsecured notes |
149,394 | 147,721 | - | 147,721 | - | |||||||||||||||
2009 Convertible Notes |
107,058 | 220,642 | - | 220,642 | - | |||||||||||||||
Total |
$ | 537,291 | $ | 660,346 | $ | - | $ | 660,346 | $ | - |
The Company measures the value of long-term debt instruments under Level 2 inputs. The fair values of the Companys long-term debt instruments are estimated based on market values for debt issues with similar characteristics or rates currently available for debt with similar terms. The Companys bank lines of credit have a higher fair market value than the carrying value due to the difference in yield when compared to recent issuances of similar types of credit. The Companys senior unsecured notes have a lower fair market value than the carrying value due to the difference in yield when compared to recent issuances of similar senior unsecured notes. The 2009 Convertible Notes have a higher fair value than carrying value due to the Companys stock price as of each period presented above exceeding the applicable conversion price for the 2009 Convertible Notes, thereby increasing the value of the instrument for bondholders.
The carrying amounts and estimated fair values of financial instruments at March 31, 2012 and 2011 and December 31, 2011 were as follows (dollars in thousands):
As of March 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||||
Carrying Value |
Estimated Fair Value |
Carrying Value |
Estimated Fair Value |
Carrying Value |
Estimated Fair Value |
|||||||||||||||||||||||||||||||||||
Financial assets: |
||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 63,606 | $ | 63,606 | $ | 42,414 | $ | 42,414 | $ | 62,542 | $ | 62,542 | ||||||||||||||||||||||||||||
Pawn loans |
206,343 | 206,343 | 186,937 | 186,937 | 253,519 | 253,519 | ||||||||||||||||||||||||||||||||||
Consumer loans, net |
200,365 | 200,365 | 126,135 | 126,135 | 222,778 | 222,778 |
Cash and cash equivalents bear interest at market rates and have maturities of less than 90 days. Pawn loans and consumer loans also have relatively short maturity periods. Since cash and cash equivalents, pawn loans and consumer loans generally have relatively short maturity periods, their fair value approximates their carrying value. Pawn loan fee and service charge rates are determined by regulations and bear no valuation relationship to the capital markets interest rate movements. Generally, pawn loans may only be resold to a licensed pawnbroker.
11. | Derivative Instruments |
The Company periodically uses derivative instruments to manage risk from changes in market conditions that may affect the Companys financial performance. The Company primarily uses derivative instruments to manage its primary market risks, which are interest rate risk and foreign currency exchange rate risk.
During 2011, the Company used interest rate cap agreements for the purpose of managing interest rate exposure on its floating rate debt. For derivatives designated as cash flow hedges, the effective portions of changes in the estimated fair value of the derivative are reported in Accumulated other comprehensive income (loss) (or OCI) and are subsequently reclassified into earnings when the hedged item affects earnings. The change in the estimated fair value of the ineffective portion of the hedge, if any, was recorded as income or expense.
21
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The Company uses forward currency exchange contracts to minimize the effects of foreign currency risk in the United Kingdom and Australia and, for the three months ended March 31, 2011, in Mexico. The Companys forward currency exchange contracts are non-designated derivatives. Any gain or loss resulting from these contracts is recorded as income or loss and is included in Foreign currency transaction gain (loss) in the Companys consolidated statements of income. The Company does not currently manage its exposure to risk from foreign currency exchange rate fluctuations through the use of forward currency exchange contracts in Canada. As the Companys foreign operations continue to grow, management will continue to evaluate and implement foreign exchange rate risk management strategies.
The fair values of the Companys derivative instruments at March 31, 2012 and 2011 and December 31, 2011 were as follows (dollars in thousands):
Balance at | ||||||||||||||||||||||||||
Assets | Balance Sheet Location | March 31, 2012 | March 31, 2011 | December 31, 2011 | ||||||||||||||||||||||
Derivatives designated as hedges: |
|
Notional Amount |
|
|
Fair Value |
|
|
Notional Amount |
|
|
Fair Value |
|
|
Notional Amount |
|
|
Fair Value |
| ||||||||
Interest rate contracts |
Prepaid expenses and other assets |
$ | | $ | | $ | 30,000 | $ | 1 | $ | 15,000 | $ | | |||||||||||||
Non-designated derivatives: |
||||||||||||||||||||||||||
Forward currency exchange contracts |
Prepaid expenses and other assets |
$ | 76,671 | $ | (396 | ) | $ | 51,246 | $ | (372 | ) | $ | 80,375 | $ | 260 |
The following table presents information on the effect of derivative instruments on the consolidated results of operations and OCI for the three months ended March 31, 2012 and 2011 (dollars in thousands):
Losses Recognized
in Income |
Gains Recognized in OCI |
Gains (Losses) Reclassified From OCI into Income |
||||||||||||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||||||||||
March 31, | March 31, | March 31, | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Derivatives designated as hedges: |
||||||||||||||||||||||||
Interest rate contracts |
$ | | $ | | $ | 12 | $ | 15 | $ | | $ | | ||||||||||||
Total |
$ | | $ | | $ | 12 | $ | 15 | $ | | $ | | ||||||||||||
Non-designated derivatives: |
||||||||||||||||||||||||
Forward currency exchange contracts(a) |
$ | (2,910 | ) | $ | (1,456 | ) | $ | | $ | | $ | | $ | | ||||||||||
Total |
$ | (2,910 | ) | $ | (1,456 | ) | $ | | $ | | $ | | $ | |
(a) | The losses on these derivatives substantially offset the gains on the hedged portion of foreign intercompany balances. |
12. | Proposed Initial Public Offering of Enova International, Inc. |
On September 15, 2011, Enova International, Inc. (Enova), a wholly-owned subsidiary of the Company that comprises its e-commerce segment, filed a registration statement on Form S-1 with the Securities and Exchange Commission in connection with a proposed initial public offering (IPO) of its common stock. The registration
22
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
statement filed in September 2011 provided that Enova would offer common stock to the public, and the Company would also offer a portion of its interest in Enova to the public. On April 9, 2012, Enova filed an amendment to its registration statement that provided that only Enova plans to sell shares of Enova common stock in the proposed IPO. The Company currently intends to retain approximately 80% or more of its ownership interest in Enova immediately following the proposed IPO. The number of shares of common stock to be offered and the price range for the offering have not yet been determined. If the offering is completed as currently contemplated, Enova will continue to be consolidated in the Companys financial statements.
At the date of this report, the registration statement is not effective. The completion of the proposed IPO is subject to numerous conditions, including market conditions, and the Company can provide no assurance that an offering will be made or completed. The securities offered under the registration statement may not be sold, nor may offers to buy be accepted prior to the time that the registration statement becomes effective. The information contained in this Form 10-Q with respect to this offering shall not constitute an offer to sell or a solicitation of an offer to buy these securities.
23
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of financial condition, results of operations, liquidity and capital resources and certain factors that may affect future results, including economic and industry-wide factors, of Cash America International, Inc. (the Company) should be read in conjunction with the Companys consolidated financial statements and accompanying notes included under Part I, Item I of this Quarterly Report on Form 10-Q, as well as with Managements Discussion and Analysis of Financial Condition and Results of Operations included in the Companys Annual Report on Form 10-K for the calendar year ended December 31, 2011.
General
The Company provides specialty financial services to individuals through retail services locations and through electronic distribution platforms known as e-commerce activities.
The Company offers secured non-recourse loans, commonly referred to as pawn loans. Pawn loans are short-term loans (generally 30 to 90 days) made on the pledge of tangible personal property. Pawn loan fees and service charges revenue is generated from the Companys pawn loan portfolio. A related activity of the pawn lending operations is the disposition of collateral from unredeemed pawn loans and the liquidation of a smaller volume of merchandise purchased directly from third parties or from customers.
The Company also offers unsecured consumer loans. The Companys consumer loan portfolio consists of consumer loans that the Company originates, guarantees or purchases and includes: short-term loans, which include single payment loans (commonly referred to as payday loans) and line of credit products, and longer-term multi-payment installment loans. Consumer loans provide customers with cash, typically in exchange for a promissory note or other repayment agreement supported, in most cases, by the customers personal check or authorization to debit the customers bank account via an electronic transaction for the aggregate amount of the payment due. Through the credit services organization programs (the CSO programs) the Company provides services related to a third-party lenders consumer loan product in some markets by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws. Services offered under the CSO programs include credit-related services such as arranging loans with independent third-party lenders and assisting in the preparation of loan applications and loan documents. Under the CSO programs, the Company also guarantees consumer loan payment obligations to the third-party lender in the event that the consumer defaults on the loan. A customer who obtains a loan through the CSO programs pays the Company a fee for these credit services (CSO fees). Although consumer loan transactions may take the form of loans or a line of credit, deferred check deposit transactions and transactions through the Companys CSO programs, the transactions are referred to throughout this discussion as consumer loans.
The Company has two reportable segments: retail services and e-commerce. The retail services segment includes all of the operations of the Companys Retail Services Division, which is composed of both domestic and foreign storefront locations that offer some or all of the following services: pawn lending, consumer loans, check cashing and other ancillary services such as money orders, wire transfers and prepaid debit cards. Most of these ancillary services are provided through third-party vendors. The e-commerce segment includes the operations of the Companys E-Commerce Division, which is composed of the Companys domestic and foreign online lending channels.
24
During the first quarter of 2012, the Company changed the presentation of its operating segment information to report corporate operations separately from its retail services and e-commerce segment information. Corporate administrative expense, which was previously allocated to each segment based on personnel expense, is included under the Corporate heading in the tables throughout the Managements Discussion and Analysis of Financial Condition and Results of Operations. For comparison purposes, operations and administration expenses for prior years have been conformed to the current presentation. Corporate operations primarily include corporate expenses, such as personnel, legal, occupancy, and other costs related to corporate service functions, such as executive oversight, insurance and risk management, public and government relations, internal audit, treasury, payroll, compliance and licensing, finance, accounting, tax, certain information systems and collections support and other similar services. Corporate income includes miscellaneous income not directly attributable to the Companys segments. Corporate assets primarily include: corporate property and equipment, non-qualified savings plan assets, marketable securities, foreign exchange forward contracts and prepaid insurance.
Retail Services Segment
The following table sets forth the number of domestic and foreign Company-owned and franchised locations in the Companys retail services segment offering pawn lending, consumer lending, and other services as of March 31, 2012 and 2011. The Companys domestic retail services locations operate under the names Cash America Pawn, SuperPawn, Cash America Payday Advance, Cashland, Pawn X-Change and Mr. Payroll. The Companys foreign retail services locations (of which the Company is a majority owner) operate under the name Prenda Fácil.
As of March 31, | ||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||
Domestic(a)(b) | Foreign(a) | Total | Domestic(a)(b) | Foreign(a) | Total | |||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Retail services locations offering: |
||||||||||||||||||||||||
Both pawn and consumer lending |
574 | - | 574 | 569 | - | 569 | ||||||||||||||||||
Pawn lending only |
127 | 193 | 320 | 124 | 182 | 306 | ||||||||||||||||||
Consumer lending only |
85 | - | 85 | 88 | - | 88 | ||||||||||||||||||
Other (c) |
101 | - | 101 | 124 | - | 124 | ||||||||||||||||||
Total retail services |
887 | 193 | 1,080 | 905 | 182 | 1,087 |
(a) | Except as described in (c) below, includes locations that operate in 23 states in the United States as of both March 31, 2012 and 2011, respectively, and 21 jurisdictions in Mexico, as of both March 31, 2012 and 2011, respectively. |
(b) | Includes unconsolidated franchised locations as follows: one location operating under the name Cash America Pawn as of March 31, 2012 and nine locations operating under the names Cash America Pawn and SuperPawn as of March 31, 2011. |
(c) | As of both March 31, 2012 and 2011, includes six and six consolidated Company-owned check cashing locations, respectively, and 95 and 118 unconsolidated franchised check cashing locations, respectively. As of March 31, 2012 and 2011, includes locations that operate in 16 and 18 states in the United States, respectively. |
E-Commerce Segment
As of March 31, 2012, the Companys e-commerce operating segment offers consumer loans to customers over the Internet:
| in the United States at http://www.cashnetusa.com, |
| in the United Kingdom at http://www.quickquid.co.uk and http://www.poundstopocket.co.uk, |
| in Australia at http://www.dollarsdirect.com.au, and |
| in Canada at http://www.dollarsdirect.ca. |
The following table includes, as of March 31, 2012 and 2011, the number of states in the United States and other foreign countries where the Companys e-commerce segment operates.
March 31, 2012 | March 31, 2011 | |||
United States |
32 | 30 | ||
United Kingdom |
ü | ü | ||
Australia |
ü | ü | ||
Canada |
ü | ü |
25
Recent Developments
Proposed Initial Public Offering of Enova International, Inc.
On September 15, 2011, Enova International, Inc. (Enova), a wholly-owned subsidiary of the Company that comprises its e-commerce segment, filed a registration statement on Form S-1 with the Securities and Exchange Commission in connection with a proposed initial public offering (IPO) of its common stock. The registration statement filed in September 2011 provided that Enova would offer common stock to the public, and the Company would also offer a portion of its interest in Enova to the public. On April 9, 2012, Enova filed an amendment to its registration statement that provided that only Enova plans to sell shares of Enova common stock in the proposed IPO. The Company currently intends to retain approximately 80% or more of its ownership interest in Enova immediately following the proposed IPO. The number of shares of common stock to be offered and the price range for the offering have not yet been determined. If the offering is completed as currently contemplated, Enova will continue to be consolidated in the Companys financial statements.
At the date of this report, the registration statement is not effective. The completion of the proposed IPO is subject to numerous conditions, including market conditions, and the Company can provide no assurance that an offering will be made or completed. The securities offered under the registration statement may not be sold, nor may offers to buy be accepted prior to the time that the registration statement becomes effective. The information contained in this Form 10-Q with respect to this offering shall not constitute an offer to sell or a solicitation of an offer to buy these securities.
CRITICAL ACCOUNTING POLICIES
Except as described below, since December 31, 2011, there have been no changes in critical accounting policies as described in the Companys Annual Report on Form 10-K for the year ended December 31, 2011.
In the first quarter of 2012, the Company changed its accounting policy with respect to its foreign pawn operations to reflect pledged collateral underlying nonperforming pawn loans as Merchandise held for disposition, net, the proceeds received from the disposition of this collateral as Proceeds from disposition of merchandise and the cost basis for this collateral as Cost of disposed merchandise in its consolidated financial statements. The Company believes this change, from one generally accepted accounting principle to another generally accepted accounting principle, is preferable because it enhances comparability of its financial statements by reporting financial results associated with its foreign pawn operations in the same manner as the financial results associated with its domestic pawn operations. The Company did not change its accounting policy with respect to its domestic pawn operations, and the change in the Companys accounting policy with respect to its foreign pawn operations had no impact on the Companys consolidated Net Revenue or Net Income previously reported. The change has been applied retrospectively. The following tables summarize the impact of the accounting change in the Companys consolidated financial statements as of and for the three months ended March 31, 2011 and as of December 31, 2011 (dollars in thousands):
26
As of and for the three months ended March 31, 2011 |
||||||||
As previously reported |
As adjusted | |||||||
Consolidated Balance Sheet |
||||||||
Merchandise held for disposition, net |
$ | 110,490 | $ | 117,784 | ||||
Prepaid expenses and other assets |
37,709 | 31,566 | ||||||
Pawn loans |
188,088 | 186,937 | ||||||
Consolidated Statements of Income |
||||||||
Pawn loan fees and service charges |
$ | 66,889 | $ | 65,282 | ||||
Proceeds from disposition of merchandise |
160,661 | 171,927 | ||||||
Total revenue |
355,205 | 364,864 | ||||||
Cost of disposed merchandise |
99,577 | 109,236 | ||||||
Total cost of revenue |
139,077 | 148,736 | ||||||
Consolidated Statement of Cash Flows |
||||||||
Merchandise held for disposition |
$ | (3,292 | ) | $ | (2,211 | ) | ||
Prepaid expenses and other assets |
(7,938 | ) | (7,345 | ) | ||||
Net cash provided by operating activities |
98,407 | 100,081 | ||||||
Pawn loans repaid |
126,076 | 114,889 | ||||||
Principal recovered through dispositions of forfeited pawn loans |
80,064 | 89,433 | ||||||
Net cash used in investing activities |
6,935 | 5,117 | ||||||
Consolidated Statement of Cash FlowsSupplemental Disclosures |
||||||||
Pawn loans forfeited and transferred to merchandise held for disposition |
$ | 62,863 | $ | 74,050 | ||||
As of December 31, 2011 | ||||||||
As previously reported |
As adjusted | |||||||
Consolidated Balance Sheet |
||||||||
Merchandise held for disposition, net |
$ | 151,274 | $ | 161,884 | ||||
Prepaid expenses and other assets |
41,911 | 31,301 |
Pawn loan fees and service charges revenue recognition. Pawn loans are short-term loans made on the pledge of tangible personal property. Pawn loan fees and service charges revenue are accrued ratably over the term of the loan for the portion of those pawn loans deemed collectible. The typical loan term is generally 30 to 90 days plus, in many cases, an additional grace period (typically 10 to 60 days). A pawn loan is considered nonperforming if the customer does not repay or, where allowed by law, renew or extend the loan at its contractual maturity plus any applicable grace period. Pawn loan fees and service charges do not accrue on nonperforming loans. Pawn loans written during each calendar month are aggregated and tracked for performance. This empirical data allows the Company to analyze the characteristics of its outstanding pawn loan portfolio and assess the collectability of the principal balance in addition to pawn loan fees and service charges.
Proceeds from and cost of disposed merchandise. Upon the sale of merchandise, the Company realizes gross profit, which is the difference between the Companys cost basis in the loan, or the amount paid for purchased merchandise, both of which are recorded as cost of sales, and the amount of proceeds from the sale. The cost of disposed merchandise is computed on the specific identification basis. Interim customer payments for layaway sales are recorded as customer deposits and subsequently recognized as revenue during the period in which the final payment is received.
27
Merchandise held for disposition. Merchandise held for disposition consists primarily of forfeited collateral from pawn loans not repaid and merchandise that is purchased directly from third parties or from customers. The carrying value of the forfeited collateral and other merchandise held for disposition is stated at the lower of cost (which is the cost basis in the loan or the amount paid for purchased merchandise) or fair value. The Company provides an allowance for returns and valuation based on managements evaluation of the characteristics of the merchandise and historical shrinkage rates. Because pawn loans are made without recourse to the borrower, the Company does not investigate or rely upon the borrowers creditworthiness, but instead bases its lending decision on an evaluation of the pledged personal property. The amount the Company is willing to finance is typically based on a percentage of the pledged personal propertys estimated disposition value. The Company uses numerous sources in determining an items estimated disposition value, including the Companys automated product valuation system as well as catalogs, blue books, newspapers, internet research and previous experience with disposing of similar items. The Company performs a physical count of its merchandise in each location on multiple occasions on a cyclical basis and reviews the composition of inventory by category and age in order to assess the adequacy of the allowance.
28
RESULTS OF CONTINUING OPERATIONS
Highlights
The Companys financial results for the three months ended March 31, 2012 (the current quarter) are summarized below.
| Consolidated total revenue increased 25.4% to $457.5 million for the current quarter compared to the three months ended March 31, 2011 (the prior year quarter), due to increased consumer loan fees, primarily from the foreign e-commerce business, increased levels of retail sales, and increased pawn loan fees and service charges as a result of the acquisition of a seven-store chain of pawn lending locations in Arizona during the fourth quarter of 2011. |
| Consolidated net revenue increased $40.7 million, or 18.8%, to $256.8 million for the current quarter from $216.1 million for the prior year quarter. Net revenue from pawn-related activities, which is the sum of pawn loan fees and service charges and the net proceeds from the disposition of merchandise, increased 11.7%, or $15.0 million, in the current quarter compared to the prior year quarter, primarily due to organic growth in domestic retail pawn operations. Consumer loan fees, net of consumer loan loss provision, increased 32.1%, or $26.8 million, in the current quarter compared to the prior year quarter, primarily due to higher average consumer loan balances in the e-commerce segment from growth in foreign markets. |
| Net income increased 14.0%, to $41.5 million, in the current quarter compared to the prior year quarter. Diluted net income per share increased $0.17 per share, or 15.0%, to $1.30 in the current quarter compared to $1.13 in the prior year quarter. |
OVERVIEW
Consolidated Net Revenue. Consolidated net revenue is composed of total revenue less cost of disposed merchandise and consumer loan loss provision. Net revenue is the income available to satisfy all remaining expenses and is the measure management uses to evaluate top-line performance.
The following tables show the components of net revenue for the three months ended March 31, 2012 and 2011 by segment and on a consolidated basis (dollars in thousands):
Three Months Ended March 31, 2012 | ||||||||||||||||||||||||||||||||
Retail Services | E-Commerce | Corporate | Consolidated | |||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
Amount | Total | Amount | Total | Amount | Total | Amount | Total | |||||||||||||||||||||||||
Pawn loan fees and service charges |
$ | 72,899 | 42.6 | % | $ | - | - | % | $ | - | - | % | $ | 72,899 | 28.4 | % | ||||||||||||||||
Proceeds from disposition of merchandise, net of cost of disposed merchandise |
70,062 | 41.0 | % | - | - | % | - | - | % | 70,062 | 27.3 | % | ||||||||||||||||||||
Pawn related |
$ | 142,961 | 83.6 | % | $ | - | - | % | $ | - | - | % | $ | 142,961 | 55.7 | % | ||||||||||||||||
Consumer loan fees, net of loss provision |
$ | 24,906 | 14.6 | % | $ | 85,551 | 99.8 | % | $ | - | - | % | $ | 110,457 | 43.0 | % | ||||||||||||||||
Other revenue |
3,011 | 1.8 | % | 159 | 0.2 | % | 196 | 100.0 | % | 3,366 | 1.3 | % | ||||||||||||||||||||
Net revenue |
$ | 170,878 | 100.0 | % | $ | 85,710 | 100.0 | % | $ | 196 | 100.0 | % | $ | 256,784 | 100.0 | % |
29
Three Months Ended March 31, 2011 | ||||||||||||||||||||||||||||||||
Retail Services | E-Commerce | Corporate | Consolidated | |||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
Amount | Total | Amount | Total | Amount | Total | Amount | Total | |||||||||||||||||||||||||
Pawn loan fees and service charges |
$ | 65,282 | 42.2 | % | $ | - | - | % | $ | - | - | % | $ | 65,282 | 30.2 | % | ||||||||||||||||
Proceeds from disposition of merchandise, net of cost of disposed merchandise |
62,691 | 40.7 | % | - | - | % | - | - | % | 62,691 | 29.0 | % | ||||||||||||||||||||
Pawn related |
$ | 127,973 | 82.9 | % | $ | - | - | % | $ | - | - | % | $ | 127,973 | 59.2 | % | ||||||||||||||||
Consumer loan fees, net of loss provision |
$ | 22,652 | 14.6 | % | $ | 60,975 | 99.1 | % | $ | - | - | % | $ | 83,627 | 38.7 | % | ||||||||||||||||
Other revenue |
3,827 | 2.5 | % | 541 | 0.9 | % | 160 | 100.0 | % | 4,528 | 2.1 | % | ||||||||||||||||||||
Net revenue |
$ | 154,452 | 100.0 | % | $ | 61,516 | 100.0 | % | $ | 160 | 100.0 | % | $ | 216,128 | 100.0 | % |
For the current quarter, consolidated net revenue increased $40.7 million, or 18.8%, to $256.8 million, from $216.1 million for the prior year quarter. Pawn lending activities accounted for 55.7% and 59.2% of total consolidated net revenue for the current quarter and prior year quarter, respectively. Net revenue from pawn lending activities increased $15.0 million, to $143.0 million, during the current quarter, from $128.0 million in the prior year quarter, which accounted for 36.9% of the overall increase in net revenue. The increase in pawn-related contribution was primarily due to an increase in pawn loan fees and service charges that resulted from higher average pawn loan balances as a result of organic growth in domestic retail operations, the acquisition of substantially all of the assets of Pawn Partners, Inc. and related entities, which, prior to its acquisition by the Company, operated a seven-store chain of pawn lending locations in Arizona as franchised Cash America locations under the name SuperPawn (the Pawn Partners acquisition) during the fourth quarter of 2011 and higher sales from the disposition of merchandise in domestic markets.
Consumer loan activities accounted for 43.0% and 38.7% of total consolidated net revenue for the current quarter and prior year quarter, respectively. Net revenue from consumer loan activities increased $26.8 million, to $110.5 million during the current quarter, which accounted for 66.0% of the overall increase in net revenue, mainly due to an increase in consumer loan fees that resulted from higher average consumer loan balances in the e-commerce segment from growth in foreign markets.
Non-GAAP Disclosure
In addition to the financial information prepared in conformity with generally accepted accounting principles in the United States of America (GAAP), the Company provides historical non-GAAP financial information. Management believes that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Companys operations. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of the Companys business that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.
Management provides non-GAAP financial information for informational purposes and to enhance understanding of the Companys GAAP consolidated financial statements. Readers should consider the information in addition to, but not instead of, its financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.
30
Adjusted Earnings Per Share
In addition to reporting financial results in accordance with GAAP, the Company has provided adjusted earnings and adjusted earnings per share, which are non-GAAP measures. Management believes that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments and amortization methods, which provides a more complete understanding of the Companys financial performance, competitive position and prospects for the future. Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted earnings and adjusted earnings per share, to assess operating performance and that such measures may highlight trends in the Companys business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The following table provides a reconciliation between net income attributable to the Company and diluted earnings per share calculated in accordance with GAAP to adjusted earnings and adjusted earnings per share, respectively (dollars in thousands, except per share data):
Three Months Ended March 31, | ||||||||||||||||
2012 | 2011 | |||||||||||||||
$ | |
Per Diluted Share |
|
$ | |
Per Diluted Share |
| |||||||||
Net income attributable to Cash America International, Inc. |
$ | 41,467 | $ | 1.30 | $ | 36,378 | $ | 1.13 | ||||||||
Adjustments: |
||||||||||||||||
Intangible asset amortization, net of tax |
738 | 0.02 | 1,104 | 0.04 | ||||||||||||
Non-cash equity-based compensation, net of tax |
972 | 0.03 | 769 | 0.02 | ||||||||||||
Convertible debt non-cash interest and issuance cost amortization, net of tax |
581 | 0.02 | 541 | 0.02 | ||||||||||||
Foreign exchange (gain) loss, net of tax |
(54 | ) | - | 60 | - | |||||||||||
Adjusted earnings |
$ | 43,704 | $ | 1.37 | $ | 38,852 | $ | 1.21 |
31
Adjusted EBITDA
The table below shows adjusted EBITDA, a non-GAAP measure that the Company defines as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, equity in earnings or loss of unconsolidated subsidiary, taxes and including the net income or loss attributable to noncontrolling interests. Management believes adjusted EBITDA is used by investors to analyze operating performance and evaluate the Companys ability to incur and service debt and its capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess the Companys liquidity and estimated enterprise value. The computation of adjusted EBITDA as presented below may differ from the computation of similarly-titled measures provided by other companies (dollars in thousands):
Trailing 12 Months Ended March 31, |
||||||||
2012 | 2011 | |||||||
Net Income attributable to Cash America |
$ | 141,052 | $ | 119,880 | ||||
Adjustments: |
||||||||
Depreciation and amortization expenses |
56,328 | 45,651 | ||||||
Interest expense, net |
27,005 | 22,157 | ||||||
Foreign currency transaction loss |
1,082 | 422 | ||||||
Equity in loss of unconsolidated subsidiary |
217 | 140 | ||||||
Provision for income taxes |
84,916 | 72,219 | ||||||
Net loss attributable to the noncontrolling interest |
(1,150 | ) | (903 | ) | ||||
Adjusted EBITDA |
$ | 309,450 | $ | 259,566 | ||||
Adjusted EBITDA margin calculated as follows: |
||||||||
Total revenue |
$ | 1,675,688 | $ | 1,378,625 | ||||
Adjusted EBITDA |
309,450 | 259,566 | ||||||
Adjusted EBITDA as a percentage of total revenue |
18.5 | % | 18.8 | % |
32
Quarter Ended March 31, 2012 Compared To Quarter Ended March 31, 2011
Pawn Lending Activities:
Pawn lending activities consist of pawn loan fees and service charges from the retail services segment during the period and the profit on disposition of collateral from unredeemed pawn loans, as well as the sale of merchandise acquired from customers directly or from third parties.
The following table sets forth selected data related to the Companys pawn lending activities as of and for the three months ended March 31, 2012 and 2011 (dollars in thousands):
2012 | 2011 | |||||||||||||||||||||||
Three Months Ended March 31, |
Domestic | Foreign | Total | Domestic | Foreign | Total | ||||||||||||||||||
Pawn loan fees and service charges |
$ | 69,413 | $ | 3,486 | $ | 72,899 | $ | 60,226 | $ | 5,056 | $ | 65,282 | ||||||||||||
Average pawn loan balance outstanding |
$ | 214,836 | $ | 16,067 | $ | 230,903 | $ | 180,885 | $ | 20,377 | $ | 201,262 | ||||||||||||
Amount of pawn loans written and renewed |
$ | 205,454 | $ | 18,635 | $ | 224,089 | $ | 179,539 | $ | 20,886 | $ | 200,425 | ||||||||||||
Annualized yield on pawn loans |
129.9% | 87.3% | 127.0% | 135.0% | 100.6% | 131.5% | ||||||||||||||||||
Gross profit margin on disposition of merchandise |
35.1% | 9.7% | 33.6% | 38.0% | 14.3% | 36.5% | ||||||||||||||||||
Merchandise turnover |
3.5 | 4.0 | 3.6 | 3.4 | 5.5 | 3.5 | ||||||||||||||||||
As of March 31, |
||||||||||||||||||||||||
Ending pawn loan balances |
$ | 189,721 | $ | 16,622 | $ | 206,343 | $ | 166,074 | $ | 20,863 | $ | 186,937 | ||||||||||||
Ending merchandise balance, net |
$ | 128,206 | $ | 11,313 | $ | 139,519 | $ | 110,490 | $ | 7,294 | $ | 117,784 |
Pawn loan fees and service charges. Pawn loan balances in domestic and foreign locations at March 31, 2012 were $206.3 million, which was $19.4 million, or 10.4%, higher than at March 31, 2011. The average balance of pawn loans outstanding during the current quarter increased by $29.6 million, or 14.7%, compared to the prior year quarter, primarily due to loan growth in existing domestic retail locations and additional pawn loan balances resulting from the Pawn Partners acquisition. In addition, higher average gold prices have contributed to the growth in pawn loan balances, as increased collateral values have supported customer demand resulting in a higher average loan amount.
Domestic pawn loan fees and service charges from pawn loans increased $9.2 million, or 15.3%, to $69.4 million in the current quarter from $60.2 million in the prior year quarter. The increase is mainly due to higher average pawn loan balances during the current quarter, which contributed $11.3 million of the increase, partially offset by lower annualized yield on pawn loans, which decreased pawn loan fees and service charges by $2.1 million during the current quarter. The lower pawn loan yield in the domestic portfolio is mainly due to a higher concentration of pawn loans in states with lower statutory loan yields.
Foreign pawn loan fees and service charges decreased $1.6 million, or 31.1%, to $3.5 million in the current quarter from $5.1 million in the prior year quarter, primarily due to lower average loan balances.
33
Proceeds from disposition of merchandise. Profit from the disposition of merchandise represents the proceeds received from the disposition of merchandise in excess of the cost of disposed merchandise, which is the Companys cost basis in the loan or the amount paid for purchased merchandise. Retail sales include the sale of jewelry and general merchandise direct to consumers through the Companys domestic and foreign retail services locations or over the Internet. Commercial sales include the sale of refined gold, platinum, silver and diamonds to brokers or manufacturers. The following table summarizes the proceeds from the disposition of merchandise and the related profit for the current quarter and the prior year quarter (dollars in thousands):
Three Months Ended March 31, | ||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||
Retail | Commercial | Total | Retail | Commercial | Total | |||||||||||||||||||
Proceeds from disposition |
$ | 112,032 | $ | 96,351 | $ | 208,383 | $ | 97,440 | $ | 74,487 | $ | 171,927 | ||||||||||||
Gross profit on disposition |
$ | 41,746 | $ | 28,316 | $ | 70,062 | $ | 38,485 | $ | 24,206 | $ | 62,691 | ||||||||||||
Gross profit margin |
37.3 | % | 29.4 | % | 33.6 | % | 39.5 | % | 32.5 | % | 36.5 | % | ||||||||||||
Percentage of total gross profit |
59.6 | % | 40.4 | % | 100.0 | % | 61.4 | % | 38.6 | % | 100.0 | % |
The total proceeds from disposition of merchandise increased $36.5 million, or 21.2%, in the current quarter compared to the prior year quarter, and the total profit from the disposition of merchandise increased $7.4 million, or 11.8%, during the current quarter compared to the prior year quarter, primarily due to strong customer demand, greater commercial sales related to higher average pawn loan balances and the Pawn Partners acquisition. Consistent with recent trends, the overall profit margin percentage decreased to 33.6% in the current quarter from 36.5% in the prior year quarter, partially due to a higher mix of commercial sales during the quarter, which typically have a lower profit margin than retail sales. The consolidated merchandise turnover rate increased to 3.6 times during the current quarter from 3.5 times during the prior year quarter.
Proceeds from retail dispositions of merchandise increased $14.6 million, or 15.0%, during the current quarter compared to the prior year quarter, primarily due to organic growth in the Companys domestic retail operations and the Pawn Partners acquisition. However, the profit margin on the retail disposition of merchandise decreased to 37.3% in the current quarter from 39.5% in the prior year quarter, primarily due to the continued discounting of merchandise prices to encourage retail sales activity.
Proceeds from commercial dispositions increased $21.9 million, or 29.4%, during the current quarter compared to the prior year quarter. Gross profit from commercial dispositions increased $4.1 million, mainly due to an increase in gross profit from refined gold and diamonds resulting from increased volume of gold available for sale due to higher average pawn loan balances, which produced more unredeemed merchandise. The profit margin on commercial sales decreased to 29.4% in the current quarter from 32.5% in the prior year quarter, primarily due to an increase in the cost per ounce of gold sold.
Management expects that total gross profit margin in future periods will continue to be heavily influenced by the gross profit margin on commercial dispositions. Management expects the profit margin on retail dispositions, excluding commercial activities, to be similar to or slightly lower than current levels.
34
Total merchandise held for disposition increased during the current quarter compared to the prior year quarter, primarily due to organic growth in the retail services segment and the addition of 24 retail services locations, net of closures, since March 31, 2011. The table below summarizes the age of merchandise held for disposition related to the Companys pawn operations before valuation allowance of $0.7 million as of both March 31, 2012 and 2011 (dollars in thousands):
As of March 31, | ||||||||||||||||
2012 | 2011 | |||||||||||||||
Amount | % | Amount | % | |||||||||||||
Jewelry - held for one year or less |
$ 87,597 | 62.5 | $ 79,048 | 66.7 | ||||||||||||
Other merchandise - held for one year or less |
46,250 | 33.0 | 34,474 | 29.1 | ||||||||||||
Total merchandise held for one year or less |
133,847 | 95.5 | 113,522 | 95.8 | ||||||||||||
Jewelry - held for more than one year |
2,708 | 1.9 | 2,232 | 1.9 | ||||||||||||
Other merchandise - held for more than one year |
3,664 | 2.6 | 2,730 | 2.3 | ||||||||||||
Total merchandise held for more than one year |
6,372 | 4.5 | 4,962 | 4.2 | ||||||||||||
Total merchandise held for disposition |
$ | 140,219 | 100.0 | $ 118,484 | 100.0 |
Consumer Loan Activities:
Consumer loan fees. Consumer loan fees increased $49.7 million, or 40.4%, to $172.8 million in the current quarter compared to $123.1 million in the prior year quarter. The increase in consumer loan fees is due to growth in both of the Companys segments, with the majority of the growth generated by the e-commerce segment from lending in the foreign markets in which the Company operates.
Consumer loan loss provision. The consumer loan loss provision increased by $22.9 million, to $62.4 million in the current quarter from $39.5 million in the prior year quarter. The loss provision as a percentage of consumer loan fees increased to 36.1% in the current quarter from 32.1% in the prior year quarter, primarily due to growth in short-term and installment loans written in foreign e-commerce markets and the expansion of the Companys line of credit and installment loan products in the United States, all of which have a higher percentage of new customers. New customers tend to have a higher risk of default than customers with a history of successfully repaying loans. In addition, the Company experienced a continued change in the mix of consumer loans written between the retail services segment and the e-commerce segment, with a higher percentage of consumer loans written at the e-commerce segment, which has a higher percentage of new customers. The Company expects that new customers as a percentage of total customers will remain similar to current levels since the number of existing and new customer loans written are expected to increase at a similar pace. However, if the Company experiences a disproportionate increase in new customers, loss rates will be higher until it develops a repayment history with these customers.
35
The following table sets forth consumer loan fees by segment, adjusted for the deduction of the loan loss provision for the current quarter and the prior year quarter (dollars in thousands):
Three Months Ended March 31, | ||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||
Retail Services |
E-Commerce | Total | Retail Services |
E-Commerce | Total | |||||||||||||||||||||
Short-term loans |
$ | 26,911 | $ | 121,382 | $ | 148,293 | $ | 24,730 | $ | 90,264 | $ | 114,994 | ||||||||||||||
Installment loans |
2,461 | 22,086 | 24,547 | 1,105 | 7,028 | 8,133 | ||||||||||||||||||||
Consumer loan fees |
$ | 29,372 | $ | 143,468 | $ | 172,840 | $ | 25,835 | $ | 97,292 | $ | 123,127 | ||||||||||||||
Consumer loan loss provision |
4,466 | 57,917 | 62,383 | 3,183 | 36,317 | 39,500 | ||||||||||||||||||||
Consumer loan fees, net of loss provision |
$ | 24,906 | $ | 85,551 | $ | 110,457 | $ | 22,652 | $ | 60,975 | $ | 83,627 | ||||||||||||||
Year-over-year change - $ |
$ | 2,254 | $ | 24,576 | $ | 26,830 | $ | (1,906) | $ | 10,984 | $ | 9,078 | ||||||||||||||
Year-over-year change - % |
10.0% | 40.3% | 32.1% | 7.8% | 22.0% | 12.2% | ||||||||||||||||||||
Consumer loan loss provision as a % of consumer loan fees |
15.2% | 40.4% | 36.1% | 12.3% | 37.3% | 32.1% |
Combined consumer loans. In addition to reporting consumer loans owned by the Company and consumer loans guaranteed by the Company, which are either GAAP items or disclosures required by GAAP, the Company has provided combined consumer loans, which is a non-GAAP measure. In addition, the Company has reported consumer loans written, which is statistical data that is not included in the Companys financial statements. The Company also reports allowances and liabilities for estimated losses on consumer loans and on a combined basis, which are GAAP measures.
Management believes these measures provide investors with important information needed to evaluate the magnitude of potential loan losses and the opportunity for revenue performance of the consumer loan portfolio on an aggregate basis. Management believes that the comparison of the aggregate amounts from period to period is more meaningful than comparing only the residual amount on the Companys balance sheet since both revenue and the loss provision for loans are impacted by the aggregate amount of loans owned by the Company and those guaranteed by the Company as reflected in its financial statements.
Consumer loan balances. The outstanding combined portfolio balance of consumer loans, net of allowances and liability for estimated losses, increased $79.7 million, or 48.8%, to $242.9 million at March 31, 2012 from $163.2 million at March 31, 2011, primarily due to increased demand for short-term and installment loan products from the e-commerce segment in foreign markets and the expansion of the Companys installment loan product and the Companys line of credit products in the United States. The Company has experienced growth in consumer loan balances from the foreign e-commerce business in recent years and expects that foreign consumer loan balances will continue to comprise a greater percentage of the e-commerce segments total consumer loan balances in the future.
The combined consumer loan balance includes $259.1 million and $161.1 million at March 31, 2012 and 2011, respectively, of Company-owned consumer loan balances before the allowance for losses of $58.7 million and $35.0 million, respectively, which have both been provided in the consolidated financial statements for March 31, 2012 and 2011, respectively. The combined loan balance also includes $44.5 million and $38.8 million at March 31, 2012 and 2011, respectively, of consumer loan balances that are guaranteed by the Company, which are not included in the Companys financial statements, before the liability for estimated losses of $2.0 million and $1.7 million, respectively, which has been provided in the consolidated financial statements for March 31, 2012 and 2011, respectively.
36
The following table summarizes consumer loan balances outstanding as of March 31, 2012 and 2011 (dollars in thousands):
As of March 31, | ||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||
Company Owned(a) |
Guaranteed by the Company(a) |
Combined(b) | Company Owned(a) |
Guaranteed by the Company(a) |
Combined(b) | |||||||||||||||||||||
Ending consumer loan balances: |
||||||||||||||||||||||||||
Retail Services |
||||||||||||||||||||||||||
Short-term loans |
$ | 38,852 | $ | 6,239 | $ | 45,091 | $ | 37,422 | $ | 6,974 | $ | 44,396 | ||||||||||||||
Installment loans |
7,859 | 6,043 | 13,902 | 5,058 | 3,504 | 8,562 | ||||||||||||||||||||
Total Retail Services, gross |
46,711 | 12,282 | 58,993 | 42,480 | 10,478 | 52,958 | ||||||||||||||||||||
E-Commerce |
||||||||||||||||||||||||||
Domestic |
||||||||||||||||||||||||||
Short-term loans |
48,367 | 28,771 | 77,138 | 37,334 | 25,869 | 63,203 | ||||||||||||||||||||
Installment loans |
22,283 | - | 22,283 | 8,783 | - | 8,783 | ||||||||||||||||||||
Total Domestic, gross |
70,650 | 28,771 | 99,421 | 46,117 | 25,869 | 71,986 | ||||||||||||||||||||
Foreign |
||||||||||||||||||||||||||
Short-term loans |
96,714 | 3,450 | 100,164 | 62,974 | 2,403 | 65,377 | ||||||||||||||||||||
Installment loans |
45,003 | - | 45,003 | 9,574 | - | 9,574 | ||||||||||||||||||||
Total Foreign, gross |
141,717 | 3,450 | 145,167 | 72,548 | 2,403 | 74,951 | ||||||||||||||||||||
Total E-Commerce, gross |
212,367 | 32,221 | 244,588 | 118,665 | 28,272 | 146,937 | ||||||||||||||||||||
Total ending loan balance, gross |
259,078 | 44,503 | 303,581 | 161,145 | 38,750 | 199,895 | ||||||||||||||||||||
Less: Allowance and liabilities for losses(a) |
(58,713 | ) | (1,993 | ) | (60,706 | ) | (35,010 | ) | (1,711 | ) | (36,721 | ) | ||||||||||||||
Total ending loan balance, net |
$ | 200,365 | $ | 42,510 | $ | 242,875 | $ | 126,135 | $ | 37,039 | $ | 163,174 |
(a) | GAAP measure. The consumer loan balances guaranteed by the Company represent loans originated by third-party lenders through the CSO programs, which are not recorded in the Companys financial statements. |
(b) | Except for allowance and liability for estimated losses, amounts represent non-GAAP measures. |
Consumer loans written. The amount of combined consumer loans written was $773.0 million in the current quarter, which is an increase of $134.2 million, or 21.0%, from $638.8 million in the prior year quarter, mainly due to significant growth in short-term and installment loans written from the e-commerce segment in foreign markets and the expansion of installment loans and the Companys line of credit product in the United States.
The average amount per consumer loan increased to $522 from $502 during the current quarter compared to the prior year quarter, due largely to an increase in longer-term multi-payment installment loans, which typically have a larger average loan amount than short-term single-payment loans. Management expects the average amount per consumer loan to increase for the remainder of 2012 due to the increase in installment lending.
37
The following table summarizes the consumer loans written for the current year quarter and the prior year quarter (dollars in thousands):
Three Months Ended March 31, | ||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||
Company Owned(a) |
Guaranteed by the Company(a)(b) |
Combined(a) | Company Owned(a) |
Guaranteed by the Company(a)(b) |
Combined(a) | |||||||||||||||||||||
Amount of consumer loans written: |
||||||||||||||||||||||||||
Retail Services |
||||||||||||||||||||||||||
Short-term loans |
$ | 175,674 | $ | 37,367 | $ | 213,041 | $ | 158,218 | $ | 41,233 | $ | 199,451 | ||||||||||||||
Installment loans |
1,511 | 1,860 | 3,371 | 2,837 | 1,489 | 4,326 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total Retail Services |
177,185 | 39,227 | 216,412 | 161,055 | 42,722 | 203,777 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
E-Commerce |
||||||||||||||||||||||||||
Domestic |
||||||||||||||||||||||||||
Short-term loans |
100,058 | 162,282 | 262,340 | 102,789 | 155,345 | 258,134 | ||||||||||||||||||||
Installment loans |
11,266 | - | 11,266 | 5,629 | - | 5,629 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total Domestic |
111,324 | 162,282 | 273,606 | 108,418 | 155,345 | 263,763 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Foreign |
||||||||||||||||||||||||||
Short-term loans |
240,521 | 17,797 | 258,318 | 151,383 | 10,896 | 162,279 | ||||||||||||||||||||
Installment loans |
24,683 | - | 24,683 | 8,954 | - | 8,954 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total Foreign |
265,204 | 17,797 | 283,001 | 160,337 | 10,896 | 171,233 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total E-Commerce |
376,528 | 180,079 | 556,607 | 268,755 | 166,241 | 434,996 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total amount of consumer loans written |
$ | 553,713 | $ | 219,306 | $ | 773,019 | $ | 429,810 | $ | 208,963 | $ | 638,773 | ||||||||||||||
|
||||||||||||||||||||||||||
Number of consumer loans written: |
||||||||||||||||||||||||||
Retail Services |
||||||||||||||||||||||||||
Short-term loans |
369,384 | 66,731 | 436,115 | 351,271 | 71,176 | 422,447 | ||||||||||||||||||||
Installment loans |
1,537 | 277 | 1,814 | 1,915 | 308 | 2,223 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total Retail Services |
370,921 | 67,008 | 437,929 | 353,186 | 71,484 | 424,670 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
E-Commerce |
||||||||||||||||||||||||||
Domestic |
||||||||||||||||||||||||||
Short-term loans |
316,385 | 219,126 | 535,511 | 303,752 | 215,019 | 518,771 | ||||||||||||||||||||
Installment loans |
10,015 | - | 10,015 | 6,550 | - | 6,550 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total Domestic |
326,400 | 219,126 | 545,526 | 310,302 | 215,019 | 525,321 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Foreign |
||||||||||||||||||||||||||
Short-term loans |
452,203 | 23,355 | 475,558 | 296,528 | 18,121 | 314,649 | ||||||||||||||||||||
Installment loans |
21,782 | - | 21,782 | 8,144 | - | 8,144 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total Foreign |
473,985 | 23,355 | 497,340 | 304,672 | 18,121 | 322,793 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total E-Commerce |
800,385 | 242,481 | 1,042,866 | 614,974 | 233,140 | 848,114 | ||||||||||||||||||||
|
||||||||||||||||||||||||||
Total number of consumer loans written |
1,171,306 | 309,489 | 1,480,795 | 968,160 | 304,624 | 1,272,784 | ||||||||||||||||||||
|
(a) | The disclosure regarding the amount and number of consumer loans written is statistical data that is not included in the Companys financial statements. |
(b) | Loans guaranteed by the Company represent loans originated by third-party lenders through the CSO programs. |
Consumer loan loss experience. The Company monitors the performance of its portfolio of consumer loans and maintains either an allowance or liability for estimated losses on consumer loans (including fees and interest) at a level estimated to be adequate to absorb credit losses inherent in the portfolio. The allowance for losses on the Companys owned consumer loans reduces the outstanding loan balance in the consolidated balance sheets. In addition, the Company maintains a liability for estimated losses related to loans guaranteed under the CSO programs which approximates the fair value of the liability and is included in Accounts payable and accrued expenses on the consolidated balance sheets.
38
The combined allowance and liability for estimated losses as a percentage of combined consumer loans and fees receivable balance increased for the current quarter to 20.0% from 18.4% in the prior year quarter, primarily due to the change in the mix of loans in the e-commerce segment, as discussed in the Consumer loan loss provision section above.
The following table shows consumer loan information for each of the last five quarters (dollars in thousands):
2011 | 2012 | |||||||||||||||||||||
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
First Quarter |
||||||||||||||||||
Consumer loan balances and fees receivable: | ||||||||||||||||||||||
Gross - Company owned | $ | 161,145 | $ | 197,582 | $ | 238,977 | $ | 285,850 | $ | 259,078 | ||||||||||||
Gross - Guaranteed by the Company(a) | 38,750 | 47,259 | 51,218 | 59,423 | 44,503 | |||||||||||||||||
|
||||||||||||||||||||||
Combined consumer loans and fees receivable, gross(b) |
$ | 199,895 | $ | 244,841 | $ | 290,195 | $ | 345,273 | $ | 303,581 | ||||||||||||
Allowance and liability for losses on consumer loans |
36,721 | 39,348 | 49,822 | 66,134 | 60,706 | |||||||||||||||||
|
||||||||||||||||||||||
Combined consumer loans and fees receivable, net(b) |
$ | 163,174 | $ | 205,493 | $ | 240,373 | $ | 279,139 | $ | 242,875 | ||||||||||||
|
||||||||||||||||||||||
Allowance and liability for losses and accrued third-party lender losses as a % of combined consumer loans and fees receivable, gross(b) |
18.4 | % | 16.1 | % | 17.2 | % | 19.2 | % | 20.0 | % | ||||||||||||
|
(a) | Represents loans originated by third-party lenders through the CSO programs, which are not included in the Companys financial statements. |
(b) | Non-GAAP measure. |
The following table summarizes the consumer loan loss provision for the current quarter and the prior year quarter (dollars in thousands):
Three Months Ended March 31, |
||||||||||
2012 | 2011 | |||||||||
Consumer loan loss provision: |
||||||||||
Loss provision on Company owned consumer loans |
$ | 63,452 | $ | 40,627 | ||||||
Loss provision on consumer loans guaranteed by the Company(a)(b) |
(1,069 | ) | (1,127 | ) | ||||||
Combined consumer loan loss provision |
$ | 62,383 | $ | 39,500 | ||||||
Charge-offs, net of recoveries |
$ | 67,811 | $ | 44,570 |
(a) | Represents loss provision on loans originated by third-party lenders through the CSO programs. |
(b) | The loss provisions on consumer loans guaranteed by the Company for the three months ended March 31, 2012 and 2011, respectively, are credit balances due to improved collection rates. |
Due to the nature of the Companys consumer loan products and the high velocity of loans written, seasonal trends are evidenced in quarter-to-quarter performance. In the typical business cycle, the combined consumer loan loss provision as a percent of combined consumer loans written is lowest in the first quarter and increases throughout the year, with the final two quarters generally combining for the peak levels of loss provision expense. The loss provision as a percentage of combined loans written increased to 8.1% in the current quarter compared to 6.2% in the prior year quarter, primarily due to growth in short-term and installment loans written in foreign e-commerce markets and the growth of the installment loan and line of credit products in the United States, all of which have a higher percentage of new customers. New customers tend to have a higher risk of default than customers with a history of successfully repaying loans. In addition, installment loans have a lower velocity of loans written compared to short-term loans, which are often renewed.
39
The following table shows the Companys loss experience for each of the last five quarters (dollars in thousands):
2011 | 2012 | |||||||||||||||||||||
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
First Quarter |
||||||||||||||||||
Consumer loans written:(a) | ||||||||||||||||||||||
Company owned | $ | 429,810 | $ | 489,332 | $ | 570,658 | $ | 613,153 | $ | 553,713 | ||||||||||||
Guaranteed by the Company(b) | 208,963 | 214,220 | 247,341 | 257,693 | 219,306 | |||||||||||||||||
|
||||||||||||||||||||||
Combined consumer loans written | $ | 638,773 | $ | 703,552 | $ | 817,999 | $ | 870,846 | $ | 773,019 | ||||||||||||
|
||||||||||||||||||||||
Combined consumer loan loss provision as a % of combined consumer loans written (a) |
6.2 | % | 6.4 | % | 7.4 | % | 9.2 | % | 8.1 | % | ||||||||||||
Charge-offs (net of recoveries) as a % of combined consumer loans written (a) |
7.0 | % | 6.0 | % | 6.1 | % | 7.4 | % | 8.8 | % | ||||||||||||
Combined consumer loan loss provision as a % of consumer loan fees |
32.1 | % | 34.1 | % | 37.2 | % | 44.7 | % | 36.1 | % |
(a) | The disclosure regarding the amount of consumer loans written is statistical data that is not included in the Companys financial statements. |
(b) | Represents loans originated by third-party lenders through the CSO programs, which are not included in the Companys financial statements. |
Total Expenses. The table below shows total expenses by segment and significant category for the current quarter and the prior year quarter (dollars in thousands):
Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||||
Retail Services |
E-Commerce | Corporate | Total | Retail Services |
E-Commerce | Corporate | Total | |||||||||||||||||||||||||||
Operations and administration: |
||||||||||||||||||||||||||||||||||
Personnel |
$ | 58,010 | $ | 20,288 | $ | 13,118 | $ | 91,416 | $ | 51,832 | $ | 14,707 | $ | 9,739 | $ | 76,278 | ||||||||||||||||||
Occupancy |
26,071 | 1,856 | 1,058 | 28,985 | 23,573 | 1,482 | 804 | 25,859 | ||||||||||||||||||||||||||
Marketing |
3,123 | 20,202 | 36 | 23,361 | 3,760 | 13,606 | 31 | 17,397 | ||||||||||||||||||||||||||
Other |
12,249 | 8,193 | 5,951 | 26,393 | 12,657 | 4,424 | 3,843 | 20,924 | ||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Total operations and administration |
99,453 | 50,539 | 20,163 | 170,155 | 91,822 | 34,219 | 14,417 | 140,458 | ||||||||||||||||||||||||||
Depreciation and amortization |
8,260 | 2,875 | 3,486 | 14,621 | 7,556 | 2,940 | 1,946 | 12,442 | ||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Total expenses |
$ | 107,713 | $ | 53,414 | $ | 23,649 | $ | 184,776 | $ | 99,378 | $ | 37,159 | $ | 16,363 | $ | 152,900 | ||||||||||||||||||
Year-over-year change - $ |
||||||||||||||||||||||||||||||||||
Operations and administration |
$ | 7,631 | $ | 16,320 | $ | 5,746 | $ | 29,697 | $ | 12,273 | $ | 6,464 | $ | (346) | $ | 18,391 | ||||||||||||||||||
Depreciation and amortization |
704 | (65) | 1,540 | 2,179 | 782 | 909 | 33 | 1,724 | ||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Total |
$ | 8,335 | $ | 16,255 | $ | 7,286 | $ | 31,876 | $ | 13,055 | $ | 7,373 | $ | (313) | $ | 20,115 | ||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
Year-over-year change - % |
8.4% | 43.7% | 44.5% | 20.8% | 15.1% | 24.8% | -1.9% | 15.1% |
Total expenses increased $31.9 million, or 20.8%, to $184.8 million in the current quarter compared to $152.9 million in the prior year quarter. Total expenses for the retail services segment increased $8.3 million, or 8.4%, to $107.7 million during the current quarter compared to the prior year quarter. Total expenses for the e-commerce segment increased $16.3 million, or 43.7%, to $53.4 million in the current quarter compared to the prior year quarter.
Operations and administration expense. Operations and administration expense for the retail services segment increased $7.6 million, or 8.3%, to $99.5 million during the current quarter compared to the prior year quarter. Personnel expense for the retail services segment increased $6.2 million during the current quarter, which was mainly related to normal personnel additions, merit increases and incentive program accruals due to additional personnel resulting from organic growth. Occupancy expense increased $2.5 million during the current quarter, which related to normal rent increases, organic growth and newly acquired locations due to the Pawn Partners acquisition. The decrease in marketing and other operating expenses was primarily due to decreases in radio and television advertising, office and other miscellaneous expenses.
40
Operations and administration expense for the e-commerce segment increased $16.3 million, or 47.7%, to $50.5 million during the current quarter compared to the prior year quarter. Personnel expense increased $5.6 million, primarily due to the addition of new personnel to support the e-commerce segments growth in foreign markets. The increase of $6.6 million in marketing expense was mainly due to the online lending channels efforts to expand the Companys customer base in both domestic and foreign markets. The increase in other expenses was primarily due to costs related to the filing of Enovas Form S-1 registration statement.
Corporate administration expense increased $5.7 million, or 39.9%, to $20.2 million in the current quarter compared to the prior year quarter, primarily due to increased personnel expense, including salaries, short-term management bonuses, employee benefit costs and ongoing acquisition assessment activities.
Depreciation and Amortization. Depreciation and amortization expense at the retail services segment increased $0.7 million, or 9.3%, to $8.3 million mainly due to additional depreciation expense associated with the Companys new proprietary domestic point-of-sale system, newly acquired locations due to the Pawn Partners acquisition during the fourth quarter of 2011, and normal facility upgrades and remodels.
Depreciation and amortization expenses at the e-commerce segment decreased $0.1 million, or 2.2%, to $2.9 million.
Depreciation and amortization expenses for corporate operations increased $1.5 million or 79.1%, to $3.5 million, primarily related to additional depreciation expense associated with the Companys new proprietary domestic point-of-sale system.
Interest Expense. Interest expense increased $1.6 million, or 27.9%, to $7.2 million in the current quarter as compared to $5.6 million in the prior year quarter. The Companys effective blended borrowing cost increased to 4.9% in the current quarter from 4.7% in the prior year quarter, mainly due to the Companys increased concentration of borrowings under its variable rate line of credit, which the Company entered into during March 2011. The new credit agreement had a higher average interest rate than the Companys previous line of credit. In addition, the Company had a higher average debt balance outstanding in the current quarter compared to prior year quarter under its line of credit. During the current quarter, the average amount of debt outstanding increased $68.0 million to $500.4 million from $432.4 million during the prior year quarter, primarily due to the Pawn Partners acquisition during the fourth quarter of 2011. The Company incurred non-cash interest expense of $0.9 million in the current quarter from its Convertible Notes due 2029 (the 2009 Convertible Notes).
Income Taxes. The Companys effective tax rate decreased to 37.5% for the current quarter from 37.8% for the prior year quarter. The Companys effective tax rate is affected by various items including tax rates in various jurisdictions and the relative amount of income earned in those jurisdictions, as well as other permanent items.
41
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows Highlights
The Companys cash flows and other key indicators of liquidity are summarized as follows (dollars in thousands):
Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
Cash flows provided by operating activities |
$ | 136,513 | $ | 100,081 | ||||
|
||||||||
Cash flows provided by investing activities |
||||||||
|
||||||||
Pawn loans |
$ | 62,167 | $ | 46,498 | ||||
Consumer loans |
(48,058) | (29,981) | ||||||
Acquisitions |
(4,184) | - | ||||||
Property and equipment additions |
(16,665) | (10,996) | ||||||
Other investing |
- | (404) | ||||||
|
||||||||
Total cash flows used in investing activities |
$ | (6,740) | $ | 5,117 | ||||
|
||||||||
Cash flows provided by (used in) financing activities |
$ | (131,322) | $ | (101,523) | ||||
|
||||||||
Working capital |
$ | 559,386 | $ | 443,813 | ||||
Current ratio |
4.6 | x | 4.6 | x | ||||
Merchandise turnover |
3.6 | x | 3.5 | x | ||||
Debt to Adjusted EBITDA ratio(a) |
1.3 | x | 1.4 | x |
(a) | Non-GAAP measure. See the Adjusted EBITDA section above for a reconciliation of Adjusted EBITDA to Net Income attributable to the Company. |
Cash flows from operating activities. Net cash provided by operating activities increased $36.4 million, or 36.4%, from $100.1 million for the prior year quarter to $136.5 million for the current quarter. The significant components of the increase in net cash provided by operating activities during the current quarter compared to the prior year quarter included a $4.7 million increase in net income, a $22.9 million increase in the consumer loan loss provision, a non-cash expense, primarily as a result of growth in foreign consumer loans, and a $2.2 million increase in depreciation and amortization, a non-cash expense. In addition, changes in current and deferred income taxes related to the timing of domestic federal income tax payments that are based upon annualized activity used cash of $8.6 million. Changes in merchandise held for disposition also provided cash of $10.8 million due to lower purchases from customers and third parties. These increases were partially offset by a decrease in accounts payable and accrued expenses related to the timing of payroll cycles in the current quarter.
Management believes that its expected cash flows from operations and available cash balances and borrowings will be sufficient to fund the Companys operating liquidity needs.
Cash flows from investing activities. Net cash used in investing activities increased $11.8 million, or 231.7%, from a source of $5.1 million in the prior quarter to a use of $6.7 million in the current quarter. The primary component of this increase was an $18.1 million increase in cash used in consumer loan lending activities as a result of growth in loans written from the Companys foreign e-commerce business. In addition, during the current quarter, the Company increased cash used for the purchase of property and equipment by $5.7 million, primarily for the establishment and remodeling of retail services lending locations and system developments to support the growth and introduction of new products in the e-commerce segment, and increased cash used for acquisitions by $4.2 million during the current quarter. These uses were offset by a $15.7 million increase in cash provided by pawn lending activities, primarily due to growth in the Companys domestic pawn loan portfolio.
During the current quarter, the Company made payments related to the Pawn Partners acquisition of approximately $3.6 million, all of which were accounted for as goodwill. In addition, the Company acquired one domestic retail services location, which primarily operates as a pawn lending business, for approximately $0.4 million.
42
Management anticipates that expenditures for property and equipment related to its domestic and foreign operations for the remainder of 2012 will be between $70.0 million and $90.0 million primarily for the remodeling of selected operating units, for the rollout of product delivery and information systems and for the establishment of approximately 30 to 40 new retail services locations.
Cash flows from financing activities. Net cash used in financing activities increased $29.8 million, or 29.4%, from $101.5 million in the prior quarter to $131.3 million in the current quarter. This was primarily due to the year-over-year change associated with $50.0 million of proceeds from a debt issuance that occurred in the prior year quarter, with no similar event in the current quarter. This decrease in cash provided was partially offset by a $9.7 million decrease in net cash used for the repurchase of shares of Company common stock through open market transactions, pursuant to an authorization by the Board of Directors of the Company on January 26, 2011, and through the repurchase of shares of common stock for tax payments related to stock-based compensation.
On March 30, 2011, the Company entered into a new credit agreement for up to $330.0 million of credit with a group of commercial banks (the Original Credit Agreement). On November 29, 2011, the Company amended the Original Credit Agreement, to increase the amount available by $100.0 million, to $430.0 million (the Credit Agreement). The Credit Agreement consists of a $380.0 million line of credit, which includes the ability to borrow up to $50.0 million in specified foreign currencies or U.S. dollars (the Domestic and Multi-currency Line) and a $50.0 million term loan facility (the 2015 Variable Rate Notes). The line of credit commitment amount will decrease by $100.0 million, to $280.0 million, on the earlier of May 29, 2013 or the second business day following the closing of the proposed initial public offering of common stock of Enova if it generates at least $350.0 million in net proceeds. The Domestic and Multi-currency Line matures on March 31, 2015. The 2015 Variable Rate Notes require quarterly principal payments of $2.1 million with any outstanding principal remaining due at maturity on March 31, 2015.
In conjunction with the entry into the Credit Agreement, the Company repaid all outstanding revolving credit loans under its $300.0 million domestic line of credit due 2012 (the USD Line of Credit) and its variable rate senior unsecured note due 2012 (the 2012 Variable Rate Notes) with proceeds of the Credit Agreement. The outstanding amounts under the USD Line of Credit and 2012 Variable Rate Notes, respectively, as of March 30, 2011, were $154.0 million and $25.8 million, respectively.
On March 30, 2011, in conjunction with the establishment of the Credit Agreement, the Company entered into a separate credit agreement for the issuance of up to $20.0 million in letters of credit (the Letter of Credit Facility). The Company had standby letters of credit of $18.1 million issued under the Letter of Credit Facility at March 31, 2012. Previously, these letters of credit were provided under the USD Line of Credit by reducing the amount available to the Company.
Each of the Companys credit agreements and senior unsecured notes require the Company to maintain certain financial ratios. As of March 31, 2012, the Company was in compliance with all covenants and other requirements set forth in its debt agreements. Management believes that the borrowings available ($223.9 million at March 31, 2012) under the Credit Agreement, anticipated cash generated from operations and current working capital of $559.4 million is sufficient to meet the Companys anticipated capital requirements for its businesses. Should the Company experience a significant decline in demand for the Companys products and services or other unexpected changes in financial condition, management would evaluate several alternatives to ensure that it is in a position to meet liquidity requirements. The Companys strategies to generate additional liquidity may include the sale of assets, reductions in capital spending, changes to the issuance of debt or equity securities and/or its management of its current assets. The characteristics of the Companys current assets, specifically the ability to rapidly liquidate gold jewelry inventory and adjust outflows of cash in its lending practices, gives the Company flexibility to quickly modify its business strategy to increase cash flow from its business, if necessary.
43
Share Repurchases
On January 26, 2011, the Board of Directors of the Company authorized the repurchase of up to 2.5 million shares of its common stock and cancelled the Companys previous share repurchase authorization. During the current quarter, no shares were purchased in open market transactions under this authorization. Management anticipates that it will periodically purchase shares under this authorization based on its assessment of market characteristics, the liquidity position of the Company and alternative prospects for the investment of capital to expand the business and pursue strategic objectives.
Off-Balance Sheet Arrangements
In certain markets, the Company arranges for consumers to obtain consumer loan products from one of several independent third-party lenders through the CSO programs. For consumer loan products originated by third-party lenders under the CSO programs, each lender is responsible for providing the criteria by which the consumers application is underwritten and, if approved, determining the amount of the consumer loan. The Company in turn is responsible for assessing whether or not the Company will guarantee such loans. When a consumer executes an agreement with the Company under the CSO programs, the Company agrees, for a fee payable to the Company by the consumer, to provide certain services to the consumer, one of which is to guarantee the consumers obligation to repay the loan received by the consumer from the third-party lender if the consumer fails to do so. The guarantee represents an obligation to purchase specific loans if they go into default, which generally have terms of less than 90 days. As of March 31, 2012 and 2011, the amount of active consumer loans originated by third-party lenders under the CSO program was $44.5 million and $38.8 million, respectively, which were guaranteed by the Company.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Market risks relating to the Companys operations result primarily from changes in interest rates, foreign exchange rates, and gold prices. The Company does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes. There have been no material changes to the Companys exposure to market risks since December 31, 2011.
Item 4. | Controls and Procedures |
Under the supervision and with the participation of the Companys Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act) as of March 31, 2012 (the Evaluation Date). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Companys disclosure controls and procedures are effective and provide reasonable assurance (i) to ensure that information required to be disclosed in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Companys Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
There was no change in the Companys internal control over financial reporting during the quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
The Companys management, including its Chief Executive Officer and Chief Financial Officer, does not expect that the Companys disclosure controls and procedures or internal controls will prevent all possible misstatements due to error or fraud. The Companys disclosure controls and procedures and internal controls are, however, designed to provide reasonable assurance of achieving their objectives, and the Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures are effective at that reasonable assurance level.
44
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
See Note 9 of Item 1 Financial Statements.
Item 1A. | Risk Factors |
There have been no material changes from the Risk Factors described in Part 1 Item 1A. Risk Factors of the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2011.
45
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
The following table provides the information with respect to purchases made by the Company of shares of its common stock, par value $0.10 per share, during each of the months in the first three months of 2012:
Period | Total Number of Shares Purchased(a) |
Average Price Paid |
Total Number of Shares Purchased as Part of Publicly Announced Plan (b) |
Maximum Number of Shares that May Yet Be Purchased Under the Plan (b) |
||||||||||||||
|
||||||||||||||||||
January 1 to January 31 |
17,580 | $41.70 | - | 2,065,000 | ||||||||||||||
February 1 to February 29 |
27,165 | $44.30 | - | 2,065,000 | ||||||||||||||
March 1 to March 31 |
- | $0.00 | - | 2,065,000 | ||||||||||||||
|
||||||||||||||||||
Total | 44,745 | $43.28 | - | |||||||||||||||
|
(a) | Includes a repurchase of 1,211 shares in January by the Company from its Nonqualified Savings Plan, which no longer permits investments in the Companys common stock, shares withheld from employees as partial tax payments for shares issued under the Companys stock-based compensation plans of 16,369 and 27,141 shares for the months of January and February, respectively, and the reinvestment of dividends, which resulted in the purchase of 24 shares of the Companys common stock, in the Companys non-qualified deferred compensation plan for its directors in the month of February, |
(b) | On January 26, 2011, the Board of Directors authorized the Companys repurchase of up to a total of 2,500,000 shares of the Companys common stock. This repurchase authorization cancelled and replaced the Companys previous authorization for the repurchase of up to a total of 1,500,000 shares of the Companys common stock that was approved by the Board of Directors on October 24, 2007. |
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information |
None.
46
Incorporated by Reference | ||||||||||||||||||||
Exhibit No. |
Exhibit Description |
Form | File No. | Exhibit | Filing Date |
Filed | ||||||||||||||
10.1 | Form of 2012 Long-Term Incentive Plan Award Agreement for Executive Officers under the First Amended and Restated Cash America International, Inc. 2004 Long-Term Incentive Plan, as amended(1) | X | ||||||||||||||||||
10.2 | Summary of 2012 Terms and Conditions of the Cash America International, Inc. Short-Term Incentive Plan under the Cash America International, Inc. Senior Executive Bonus Plan | X | ||||||||||||||||||
10.3 | Form of Cash America International, Inc. First Amended and Restated Executive Change-in-Control Severance Agreement between the Company, its Division Presidents and each of its Executive Vice Presidents | 8-K | 001-09733 | 10.1 | 1/31/12 | |||||||||||||||
31.1 | Certification of Chief Executive Officer | X | ||||||||||||||||||
31.2 | Certification of Chief Financial Officer | X | ||||||||||||||||||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||
101.INS (2) | XBRL Instance Document | X(3) | ||||||||||||||||||
101.SCH (2) | XBRL Taxonomy Extension Schema Document | X(3) | ||||||||||||||||||
101.CAL (2) | XBRL Taxonomy Extension Calculation Linkbase Document | X(3) | ||||||||||||||||||
101.DEF (2) | XBRL Taxonomy Extension Definition Linkbase Document | X(3) | ||||||||||||||||||
101.LAB (2) | XBRL Taxonomy Label Linkbase Document | X(3) | ||||||||||||||||||
101.PRE (2) | XBRL Taxonomy Extension Presentation Linkbase Document | X(3) |
(1) | Pursuant to 17 CFR 240.24b-2, portions of this exhibit have been omitted and have been filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. |
(2) | Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2012, March 31, 2011 and December 31, 2011; (ii) Consolidated Statements of Income for the three months ended March 31, 2012 and March 31, 2011; (iii) Consolidated Statements of Equity at March 31, 2012 and March 31, 2011; (iv) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2012 and March 31, 2011; (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and March 31, 2011; and (vi) Notes to Consolidated Financial Statements. |
(3) | Submitted electronically herewith. |
47
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.
Date: April 30, 2012 | CASH AMERICA INTERNATIONAL, INC. |
|||||
By: | /s/ Thomas A. Bessant, Jr. |
|||||
Thomas A. Bessant, Jr. | ||||||
Executive Vice President and | ||||||
Chief Financial Officer | ||||||
(On behalf of the Registrant and as Principal Financial Officer) |
48
EXHIBIT INDEX
Incorporated by Reference | ||||||||||||
Exhibit No. |
Exhibit Description |
Form | File No. | Exhibit | Filing Date |
Filed | ||||||
10.1 | Form of 2012 Long-Term Incentive Plan Award Agreement for Executive Officers under the First Amended and Restated Cash America International, Inc. 2004 Long-Term Incentive Plan, as amended(1) | X | ||||||||||
10.2 | Summary of 2012 Terms and Conditions of the Cash America International, Inc. Short-Term Incentive Plan under the Cash America International, Inc. Senior Executive Bonus Plan | X | ||||||||||
10.3 | Form of Cash America International, Inc. First Amended and Restated Executive Change-in-Control Severance Agreement between the Company, its Division Presidents and each of its Executive Vice Presidents | 8-K | 001-09733 | 10.1 | 1/31/12 | |||||||
31.1 | Certification of Chief Executive Officer | X | ||||||||||
31.2 | Certification of Chief Financial Officer | X | ||||||||||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
101.INS (2) | XBRL Instance Document | X(3) | ||||||||||
101.SCH (2) | XBRL Taxonomy Extension Schema Document | X(3) | ||||||||||
101.CAL (2) | XBRL Taxonomy Extension Calculation Linkbase Document | X(3) | ||||||||||
101.DEF (2) | XBRL Taxonomy Extension Definition Linkbase Document | X(3) | ||||||||||
101.LAB (2) | XBRL Taxonomy Label Linkbase Document | X(3) | ||||||||||
101.PRE (2) | XBRL Taxonomy Extension Presentation Linkbase Document | X(3) |
(1) | Pursuant to 17 CFR 240.24b-2, portions of this exhibit have been omitted and have been filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. |
(2) | Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2012, March 31, 2011 and December 31, 2011; (ii) Consolidated Statements of Income for the three months ended March 31, 2012 and March 31, 2011; (iii) Consolidated Statements of Equity at March 31, 2012 and March 31, 2011; (iv) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2012 and March 31, 2011; (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and March 31, 2011; and (vi) Notes to Consolidated Financial Statements. |
(3) | Submitted electronically herewith. |
49
Exhibit 10.1
Confidential Treatment Requested by Cash America International, Inc.
Confidential portions of this document have been omitted and filed separately with the
Securities and Exchange Commission.
CASH AMERICA INTERNATIONAL, INC.
2012 LONG TERM INCENTIVE PLAN AWARD AGREEMENT
This Long Term Incentive Plan Award Agreement (the Agreement) is entered into as of the 25th day of January, 2012, by and between CASH AMERICA INTERNATIONAL, INC. (the Company) and (Employee).
W I T N E S S E T H:
WHEREAS, the Company has adopted the Cash America International, Inc. 2004 First Amended and Restated Long-Term Incentive Plan, as amended (the Plan), which is administered by the Management Development and Compensation Committee of the Companys Board of Directors (the Committee); and
WHEREAS, pursuant to Section 4 and Section 9 of the Plan, the Committee has granted to Employee an award (the Award) of Restricted Stock Units to encourage Employees continued loyalty and diligence that consists of (a) an Award that shall vest under the terms of the Plan over a four-year period (the Base Award), and (b) an additional Award that shall vest, subject to the satisfaction of certain conditions specified in this Agreement and Exhibit A to this Agreement, on January 1, 2015 (the Performance Award);
WHEREAS, the Restricted Stock Units (RSUs) represent the unfunded and unsecured promise of the Company to issue to Employee an equivalent number of shares of the common stock of the Company or its successors (Common Stock) at a future date, subject to the terms of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Award.
(a) General. Subject to the restrictions and other conditions set forth herein and in Exhibit A to this Agreement, the Company hereby grants to Employee the following Award:
(i) a Base Award of RSUs; and
(ii) a maximum Performance Award of RSUs (of such amount RSUs shall be considered the target Performance Award (the Target Performance Award) as further described on Exhibit A). The Performance Award is designated as a Qualified Performance-Based Award as defined in Section 2 of the Plan.
(b) Grant Date. The Award was awarded to Employee on January 25, 2012 (the Grant Date).
2. Vesting.
(a) Base Award Vesting. The Base Award shall vest as follows: Substantially equal 25% increments of the RSUs shall vest on each of the following dates as long as Employee remains continuously (i) employed by the Company or its subsidiaries or other affiliates, and/or (ii) a member of the Companys Board of Directors (the Board), through the applicable vesting date: February 24, 2013; January 31, 2014; January 31, 2015, and January 31, 2016. Any RSUs that are part of the Base Award and have not vested shall remain subject to forfeiture under Section 3 of this Agreement.
(b) Performance Award Vesting. Subject to the terms and conditions specified on Exhibit A, the portion of the Performance Award payable hereunder, if any, shall vest on January 1, 2015 (Performance Award Vesting Date), as long as Employee remains continuously (i) employed by the Company or its subsidiaries or other affiliates, and/or (ii) a member of the Board, through said date, subject to receiving Committee Certification (as defined on Exhibit A). In addition, if Employees employment with the Company and all of its subsidiaries and affiliates and his service as a member of the Board terminates for any reason (including death) before the Performance Award Vesting Date and Employees age plus continuous tenure with the Company (as described in Section 3(e)) equals at least 65 years (as further described in Section 3(b) of this Agreement), then, subject to the terms and conditions specified on Exhibit A, the portion of the Performance Award payable hereunder, if any, shall vest subject (i) to receiving Committee Certification, and (ii) to the proration rules set forth in Section 3(b) of this Agreement.
3. Treatment of Award Upon Termination or Failure to Vest.
(a) Base Award Forfeiture. Upon Employees termination of employment with the Company and all of its subsidiaries and affiliates and his service as a member of the Board for any reason (including death), any portion of the Base Award that has not yet vested as provided in Section 2(a) of this Agreement shall be immediately forfeited, and Employee shall forfeit any and all rights in or to such unvested portion of the Base Award.
(b) Performance Award Proration and Forfeiture with Rule of 65. If Employees employment with the Company and all of its subsidiaries and affiliates and his service as a member of the Board terminates for any reason (including death) before the Performance Award Vesting Date and Employees age plus continuous tenure with the Company (as described in Section 3(e)) as of the later of Employees employment termination date or Employees termination of service from the Board equals 65 years or more:
i. | Subject to the terms and conditions of Exhibit A, Employee shall be entitled to a prorated portion of any Performance Award (A) that receives the Committee Certification, and (B) that would have otherwise vested and been payable pursuant to this Agreement if Employee had remained employed by the Company and/or engaged as a Board member through the Performance Award Vesting Date. Such prorated portion shall be determined by multiplying the amount of the Performance Award that would have been payable to Employee, had Employee remained employed by the Company and/or engaged as a Board member through the Performance Award Vesting Date, by a fraction the numerator of which is equal to the number of whole calendar months following the Grant Date that Employee was actively employed by the Company and/or engaged as a Board member, and the denominator of which is equal to 35; |
ii. | The prorated portion of the vested Performance Award payable under this Section 3(b) shall be calculated as of the Performance Award Vesting Date, and shall be paid at the time specified under Section 4 of this Agreement; and |
2
iii. | Except for any prorated portion of the Performance Award that is determined in accordance with Section 3(b)(i) above and is certified by the Committee in accordance with the terms of Exhibit A, Employee shall forfeit any and all rights in or to the remaining unvested portion of the Performance Award. |
(c) Performance Award Forfeiture without Rule of 65. If Employees employment with the Company and all of its subsidiaries and affiliates and his service as a member of the Board terminates for any reason (including death) before the Performance Award Vesting Date, and Employees age plus his continuous tenure with the Company (as described in Section 3(e)) as of the later of Employees employment termination date or Employees termination of service from the Board equals less than 65 years, then Employee shall forfeit all rights in or to any portion of the Performance Award.
(d) Performance Award ForfeitureGeneral. Any portion of the Performance Award that does not vest on or before the Performance Award Vesting Date as described hereinabove shall be forfeited, and Employee shall forfeit any and all rights in or to such unvested portion of the Performance Award.
(e) Tenure with the Company. For purposes of Sections 3(b) and 3(c) of this Agreement, Employees tenure with the Company shall be the number of whole years that Employee had been continuously (i) employed by the Company and all of its subsidiaries and/or (ii) a member of the Board on the most recent anniversary of the earlier to occur of Employees commencement of Employees employment or Employees commencement of service as a member of the Board.
4. Payment of Awards.
(a) General.
i. | Except as provided in Section 4(b)(i) below, (A) as each 25%-portion of the Base Award vests, the Company shall instruct its transfer agent to issue a stock certificate evidencing the conversion of such vested RSUs into whole vested shares of Common Stock in the name of Employee (or if Employee has died, in the name of Employees designated beneficiary or, if no beneficiary has been designated, Employees estate (Beneficiary)) within a reasonable time after the vesting date of such 25%-portion of the Base Award, but (B) in no event will the Common Stock relating to the then-vesting portion of the Base Award be transferred to Employee later than December 31 of the calendar year in which the vesting date for the then-vesting portion of the Base Award occurs. The Company shall not be required to deliver any fractional shares of Common Stock under the Award. Any fractional shares shall be rounded up to the next whole share. |
ii. | If any portion of the Performance Award vests and is certified by the Committee in accordance with the terms of Exhibit A, then, except as provided in Section 4(b)(ii) below, (A) the Company shall instruct its transfer agent to issue a stock certificate evidencing the conversion of all vested Performance Award RSUs certified by the Committee that have not been forfeited under Section 3 of this Agreement into whole vested shares of Common Stock in the name of Employee (or if Employee has died, in the name of Employees Beneficiary) within a reasonable time after the Committee Certification Date (as defined in Exhibit A), but (B) in no event will the Common Stock relating to the vested portion of the Performance Award, as certified by the Committee, be transferred to Employee later than March 15, 2016. |
3
iii. | The Company shall not be required to deliver any fractional shares of Common Stock under the Base Award or the Performance Award. Any fractional shares shall be rounded up to the next whole share. |
(b) | Deferred Delivery. |
i. | Employee may elect to defer the timing of the payment of the vested portions of the Base Award granted under this Agreement until the later of (A) the date Employee has a separation from service as an employee (within the meaning of Treasury Regulations Section 1.409A-1(h)(1); Employment Separation from Service) or (B) a specified date which may be either the applicable vesting date or a later date not later than January 31, 2016. For all portions of the Base Award granted under this Agreement, such deferral election must be made no later than February 24, 2012. For clarification purposes, the payment for any portions of the Base Award that vest following an Employment Separation from Service in accordance with this Agreement and are deferred in accordance with this Section 4(b)(i) will be paid in accordance with Section 4(b)(i)(B); provided, however, if Employee has not specified a date pursuant to Section 4(b)(i)(B), such date shall be deemed to be January 31, 2016. |
ii. | Employee may elect to defer but not accelerate the timing of the payment of the portion of the Performance Award granted under this Agreement that vests and is certified by the Committee in accordance with this Agreement, if any, until the later of (A) the date of Employees Employment Separation from Service, or (B) January 1, 2017. Such election must be made no later than February 24, 2012. For clarification purposes, if the Performance Award vests following an Employment Separation from Service in accordance with this Agreement and is deferred in accordance with this Section 4(b)(ii) the payment of the portion of the Performance Award granted under this Agreement that vests and is certified by the Committee in accordance with this Agreement, if any, will be paid in accordance with Section 4(b)(ii)(B). |
iii. | To the extent required under Code §409A and applicable guidance issued thereunder (Code §409A), if Employee is a specified employee (within the meaning of Code §409A) at the time Employee has an Employment Separation from Service and has elected to defer receipt of his Base Award and/or Performance Award, the shares of Common Stock transferable on a deferred basis as a result of Employees Employment Separation from Service for any reason other than Employees death shall not be issued before the date that is six months after Employees Employment Separation from Service or such earlier time (if any) as may be permitted under Code §409A. In the event of Employees death after he has elected to defer receipt of his Base Award and/or Performance Award, the shares of Common Stock relating to any and all outstanding RSUs that have not been forfeited under Section 3 of this Agreement will be issued in the name of Employees Beneficiary, as follows: (A) for the Base Award, upon the 60th day after Employees death, and (B) for any vested Performance Award certified by the Committee, by the latest to occur of (a) March 15, 2016, (b) December 31 of the year in which his death occurs, or (c) within 2 1/2 months after his date of death. |
4
5. Change in Control.
(a) Vesting and Payment. In the event of a Change in Control (as defined below) while Employee is still employed by the Company or its subsidiaries or other affiliates and/or serving as a member of the Board, vesting of the entire Award (both the Base Award and the maximum Performance Award) shall automatically accelerate and become 100% vested as of the date the Change in Control occurs as long as Employee has remained continuously employed by the Company or by an entity that is a subsidiary or other affiliate of the Company on the day immediately preceding the date of the Change in Control and/or served as a member of the Board through such date. In such event, the shares of Common Stock evidencing vested RSUs shall be delivered to Employee in a lump sum within 60 days following the date of the Change in Control, notwithstanding any election made under Section 4(b) of this Agreement. A Change in Control shall mean an event that is a change in the ownership of the Company, a change in the effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, all as defined in Code §409A and guidance issued thereunder, except that 35% shall be substituted for 30% in applying Treasury Regulations Section 1.409A-3(i)(5)(vi) and 50% shall be substituted for 40% in applying Treasury Regulations Section 1.409A-3(i)(5)(vii). Notwithstanding the above, a Change in Control shall not include any event that is not treated under Code §409A as a change in control event with respect to Employee.
(b) Substitution. Notwithstanding anything set forth herein to the contrary, upon a Change in Control, the Committee, in its sole discretion, may, in lieu of issuing Common Stock, provide Employee with an equivalent amount payable in the form of cash.
6. Agreement of Employee. Employee acknowledges that certain restrictions under state or federal securities laws may apply with respect to the shares of Common Stock to be issued pursuant to the Award. Specifically, Employee acknowledges that, to the extent Employee is an affiliate of the Company (as that term is defined by the Securities Act of 1933), the shares of Common Stock to be issued as a result of the Award are subject to certain trading restrictions under applicable securities laws (including particularly the Securities and Exchange Commissions Rule 144). Employee hereby agrees to execute such documents and take such actions as the Company may reasonably require with respect to state and federal securities laws and any restrictions on the resale of such shares which may pertain under such laws. Notwithstanding anything herein to the contrary and only to the extent permitted under Code §409A, a payment may be delayed to the extent the Company reasonably anticipates that making the payment will violate federal securities laws or other applicable laws.
7. Withholding. Upon the issuance of shares to Employee pursuant to this Agreement, Employee shall pay an amount equal to the amount of all applicable federal, state and local employment taxes which the Company is required to withhold at any time. Such payment may be made in cash or, with respect to the issuance of shares to Employee pursuant to this Agreement, by delivery of whole shares of Common Stock (including shares issuable under this Agreement) in accordance with Section 14(a) of the Plan and the terms of Code §409A.
5
8. Adjustment of Awards.
(a) If there is an increase or decrease in the number of issued and outstanding shares of Common Stock through the payment of a stock dividend or resulting from a stock split-up, a recapitalization, or a combination or exchange of shares of Common Stock, then the number of outstanding RSUs hereunder shall be adjusted so that the proportion of such Award to the Companys total issued and outstanding shares of Common stock remains the same as existed immediately prior to such event.
(b) Except as provided in Section 8(a) of this Agreement, no adjustment in the number of shares of Common Stock subject to any outstanding portion of the RSUs shall be made upon the issuance by the Company of shares of any class of its capital stock or securities convertible into shares of any class of capital stock, either in connection with a direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of any other obligation of the Company that may be convertible into such shares or other securities.
(c) Upon the occurrence of events affecting Common Stock other than those specified in Sections 8(a) and 8(b) of this Agreement, the Committee may make such other adjustments to awards as are permitted under Section 5(c) of the Plan. This section shall not be construed as limiting any other rights the Committee may have under the terms of the Plan.
9. Clawback Provision. Notwithstanding anything in the Plan to the contrary, in the event that the Company is required to materially restate its financial results, excluding a material restatement of such financial results due solely to a change in generally accepted accounting principles in the United States or such other accounting principles that may be adopted by the Securities and Exchange Commission and are or become applicable to the Company, at any time before or within two years following the Performance Award Vesting Date as a result of fraud or intentional misconduct on the part of the Employee, the Committee may, in its discretion, (a) cancel the Performance Award, in whole or in part, whether or not vested (so long as shares of Common Stock have not yet been issued in accordance with Section 4(a)(ii) or Section 4(b)(ii) of this Agreement) and/or (b) require the Employee to repay to the Company an amount equal to all or any portion of the value of any or all of the shares that have been issued in accordance with Section 4(a)(ii) of this Agreement valued as of the Performance Award Vesting Date. Such cancellation or repayment obligation shall be effective as of the date specified by the Committee. Any repayment obligation may be satisfied in shares of Common Stock or cash or a combination thereof (based on the Fair Market Value of the shares of Common Stock on the date of repayment) and the Committee may provide for an offset to any future payments owed by the Company or any of its subsidiaries or affiliates to the Employee if necessary to satisfy the repayment obligation; provided, however, that if any such offset is prohibited under applicable law, the Committee shall not permit any offsets and may require immediate repayment by the Employee.
Notwithstanding the foregoing, to the extent required to comply with applicable law and/or any Clawback Policy adopted by the Company after the date of this Agreement, the Company may unilaterally amend this Section 9, and any such amendment shall be made by providing notice of such amendment to Employee, and such amendment shall be binding on Employee; provided, regardless of whether the Company makes such a unilateral amendment to this Section 9 or provides such notice to Employee, this section shall be deemed consistent with any Clawback Policy adopted by the Company after the date of this Agreement and Employee shall be bound thereby.
6
10. Plan Provisions.
In addition to the terms and conditions set forth herein, the Award is subject to and governed by the terms and conditions set forth in the Plan, as may be amended from time to time, which are hereby incorporated by reference. Any terms used herein with an initial capital letter shall have the same meaning as provided in the Plan, unless otherwise specified herein. In the event of any conflict between the provisions of the Agreement and the Plan, the Plan shall control.
11. Miscellaneous.
(a) Limitation of Rights. The granting of the Award and the execution of the Agreement shall not give Employee any rights to (1) similar grants in future years, (2) any right to be retained in the employ or service of the Company or any of its affiliates or subsidiaries, or (3) interfere in any way with the right of the Company or its affiliates or subsidiaries to terminate Employees employment or services at any time.
(b) Claims Procedure. Any dispute or claim for benefits by any person under this Agreement shall be determined by the Committee in accordance with the claims procedures under the Cash America International, Inc. Nonqualified Savings Plan.
(c) Shareholder Rights. Neither Employee nor Employees Beneficiary shall have any of the rights of a shareholder with respect to any shares of Common Stock issuable upon vesting of any Award, including without limitation a right to cash dividends or a right to vote, until (i) such Award is vested and, if applicable with respect to the Performance Award, certified by the Committee, and (ii) such shares have been delivered and issued to Employee or Employees Beneficiary pursuant to Section 4 of this Agreement.
(d) Severability. If any term, provision, covenant or restriction contained in the Agreement is held by a court or a federal regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in the Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated.
(e) Controlling Law. The Agreement is being made in Texas and shall be construed and enforced in accordance with the laws of that state.
(f) Construction. The Agreement and the Plan contain the entire understanding between the parties, and supersedes any prior understanding and agreements between them, representing the subject matter hereof. There are no representations, agreements, arrangements or understandings, oral or written, between and among the parties hereto relating to the subject matter hereof which are not fully expressed herein.
(g) Amendments to Comply With Code §409A. Notwithstanding the foregoing, if any provision of this Agreement would cause compensation to be includible in Employees income pursuant to Code §409A(a)(1), then the Company may amend the Agreement in such a way as to cause substantially similar economic results without causing such inclusion; any such amendment shall be made by providing notice of such amendment to Employee, and shall be binding on Employee.
(h) Headings. Section and other headings contained in the Agreement are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of the Agreement or any provision hereof.
7
(i) Heirs, Successors and Assigns. Each and all of the covenants, terms, provisions and agreements contained herein shall be binding upon and inure to the benefit of Employees heirs, legal representatives, successors and assigns.
(j) Originals. This Agreement may be executed electronically and/or in duplicate counterparts, the production of either of which shall be sufficient for all purposes for the proof of the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the day and year first set forth above.
CASH AMERICA INTERNATIONAL, INC. | ||
By: | ||
EMPLOYEE | ||
8
EXHIBIT A
TERMS AND CONDITIONS OF PERFORMANCE AWARD
1. | General. The amount of the Performance Award that will vest and be payable upon vesting shall be based on the Company achieving growth in its [**Confidential Treatment Requested] EPS over the three-year period ending December 31, 2014. |
2. | Target Performance Award and Maximum Performance Award. 100% of the Target Performance Award shall vest and be payable if the Companys EPS achieves a compounded annual growth rate (CAGR) of [**Confidential Treatment Requested] when comparing the base [**Confidential Treatment Requested] EPS for the year ended December 31, 2011, determined as described in section 3(a) below ( the Base EPS), with the [**Confidential Treatment Requested] EPS for the year ending December 31, 2014, [**Confidential Treatment Requested] (the 2014 EPS); 200% of the Target Performance Award (or the maximum Performance Award) shall vest and be payable if the Companys EPS achieves a CAGR of [**Confidential Treatment Requested] when comparing the Base EPS with the 2014 EPS. |
3. | Calculation of CAGR. The CAGR shall reflect the cumulative growth [**Confidential Treatment Requested] EPS over the three-year period ending December 31, 2014. For purposes of computing CAGR, the Base EPS and the 2014 EPS shall be determined as described in this section 3. |
(a) | Base EPS. In the event that an initial public offering of common stock of Enova International, Inc. (Enova) occurs on or before December 31, 2014, and as a result of the Companys reduction in ownership of Enova, the financial results of Enova and its subsidiaries for periods following the closing of such initial public offering are not required to be consolidated with the financial results of the Company under generally accepted accounting principles in the United States or such other accounting principles that may be applicable to the Company (Deconsolidating Enova IPO), the Base EPS shall be determined in accordance with the following schedule, based on the date of the closing of the Deconsolidating Enova IPO: |
[**Confidential Treatment Requested] indicates that portions of this document have been omitted and have been separately filed with the Securities and Exchange Commission.
If Closing of the Deconsolidating IPO Occurs |
Base EPS Shall Be | |
Before January 31, 2014 |
[**Confidential Treatment Requested] | |
During February, 2014 |
[**Confidential Treatment Requested] | |
During March, 2014 |
[**Confidential Treatment Requested] | |
During April, 2014 |
[**Confidential Treatment Requested] | |
During May, 2014 |
[**Confidential Treatment Requested] | |
During June, 2014 |
[**Confidential Treatment Requested] | |
During July, 2014 |
[**Confidential Treatment Requested] | |
During August, 2014 |
[**Confidential Treatment Requested] | |
During September, 2014 |
[**Confidential Treatment Requested] | |
During October, 2014 |
[**Confidential Treatment Requested] | |
During November, 2014 |
[**Confidential Treatment Requested] | |
During December, 2014 |
[**Confidential Treatment Requested] |
In the event that an Enova Deconsolidating IPO does not occur on or before December 31, 2014, the Base EPS shall be [**Confidential Treatment Requested] per share.
(b) | 2014 EPS. The 2014 EPS [**Confidential Treatment Requested]. In the event that a Deconsolidating Enova IPO occurs on or before December 31, 2014, the 2014 EPS [**Confidential Treatment Requested]. [**Confidential Treatment Requested]. |
4. | Adjustments. If there is an increase or decrease in the number of issued and outstanding shares of Common Stock through the payment of a stock dividend or resulting from a stock split-up, a recapitalization or a combination or exchange of shares of Common Stock, then the Base EPS used to calculate the amount of the Performance Award shall be adjusted to reflect such increase or decrease. |
5. | Vesting and Payment Amounts. The amount of the Performance Award that will vest and be payable (subject to Committee Certification, as described below) shall be determined as follows: |
a. | The Companys 2014 [**Confidential Treatment Requested] EPS must achieve a CAGR of at least [**Confidential Treatment Requested] in order for any amount of the Performance Award to vest and be payable; and with a CAGR of [**Confidential Treatment Requested], 100% of the Target Performance Award will vest and be payable (see the Performance Schedule in Paragraph 7 below). |
b. | 200% of the Target Performance Award amount shall vest and be payable if the Companys 2014 [**Confidential Treatment Requested] EPS achieves a CAGR of [**Confidential Treatment Requested]. |
c. | If the Companys 2014 [**Confidential Treatment Requested] EPS achieves a CAGR of at least [**Confidential Treatment Requested] but less than [**Confidential Treatment Requested], the amount of the Target Performance Award that will vest and be payable shall be determined in accordance with the Performance Schedule in Paragraph 7 below. (See also the examples in Paragraph 8 below.) |
[**Confidential Treatment Requested] indicates that portions of this document have been omitted and have been separately filed with the Securities and Exchange Commission.
d. | No portion of the Performance Award will vest or be payable if the Companys 2014 [**Confidential Treatment Requested] EPS achieves a CAGR of less than [**Confidential Treatment Requested]. |
e. | For purposes of determining the amount of the Performance Award that will vest and be payable, CAGR shall be rounded to the nearest 0.1%; the calculated percentage of the amount of the Performance Award payable at vesting will be rounded to the nearest 1.0%; and any fractional share resulting from the calculation shall be rounded up to the next whole share. |
6. | Committee Certification. At its first regularly scheduled meeting (or, if later, at the first meeting held once the necessary EPS data has become available) following the Performance Award Vesting Date (which meeting is anticipated to occur during the last 14 days of January 2015), the Committee (or any successor thereto) shall determine the extent to which the conditions for the vesting of the Performance Award described in this Appendix (the Performance Goals) have been met and shall certify the portion of the Target Performance Award, if any, that has vested and is payable (Committee Certification). Such Performance Goals will be considered to have been met only to the extent that the Committee certifies in writing (within the meaning of Treasury Regulations Section 1.162-27(e)(5)) that they have been met. The Committee Certification shall certify as to the satisfaction of the performance goals set forth in this Exhibit and as to the satisfaction of all other material terms of the Performance Award (including, without limitation, the requirements of (a) remaining continuously employed and/or a member of the Board and/or (b) attaining Rule of 65). The date the Committee makes such a written certification shall be deemed the Committee Certification Date). |
[**Confidential Treatment Requested] indicates that portions of this document have been omitted and have been separately filed with the Securities and Exchange Commission.
7. | Performance Schedule: |
3 Year EPS CAGR* |
Percentage of Target Performance Award To be Issued¹ ** |
3 Year EPS CAGR* |
Percentage of Target Performance Award To be Issued¹ ** | |||
[**Confidential Treatment Requested] | 200% | [**Confidential Treatment Requested] | 174% | |||
[**Confidential Treatment Requested] | 199% | [**Confidential Treatment Requested] | 173% | |||
[**Confidential Treatment Requested] | 198% | [**Confidential Treatment Requested] | 172% | |||
[**Confidential Treatment Requested] | 197% | [**Confidential Treatment Requested] | 171% | |||
[**Confidential Treatment Requested] | 196% | [**Confidential Treatment Requested] | 170% | |||
[**Confidential Treatment Requested] | 195% | [**Confidential Treatment Requested] | 169% | |||
[**Confidential Treatment Requested] | 194% | [**Confidential Treatment Requested] | 168% | |||
[**Confidential Treatment Requested] | 193% | [**Confidential Treatment Requested] | 167% | |||
[**Confidential Treatment Requested] | 192% | [**Confidential Treatment Requested] | 166% | |||
[**Confidential Treatment Requested] | 191% | [**Confidential Treatment Requested] | 165% | |||
[**Confidential Treatment Requested] | 190% | [**Confidential Treatment Requested] | 164% | |||
[**Confidential Treatment Requested] | 189% | [**Confidential Treatment Requested] | 163% | |||
[**Confidential Treatment Requested] | 188% | [**Confidential Treatment Requested] | 162% | |||
[**Confidential Treatment Requested] | 187% | [**Confidential Treatment Requested] | 161% | |||
[**Confidential Treatment Requested] | 186% | [**Confidential Treatment Requested] | 160% | |||
[**Confidential Treatment Requested] | 185% | [**Confidential Treatment Requested] | 159% | |||
[**Confidential Treatment Requested] | 184% | [**Confidential Treatment Requested] | 158% | |||
[**Confidential Treatment Requested] | 183% | [**Confidential Treatment Requested] | 157% | |||
[**Confidential Treatment Requested] | 182% | [**Confidential Treatment Requested] | 156% | |||
[**Confidential Treatment Requested] | 181% | [**Confidential Treatment Requested] | 155% | |||
[**Confidential Treatment Requested] | 180% | [**Confidential Treatment Requested] | 154% | |||
[**Confidential Treatment Requested] | 179% | [**Confidential Treatment Requested] | 153% | |||
[**Confidential Treatment Requested] | 178% | [**Confidential Treatment Requested] | 152% | |||
[**Confidential Treatment Requested] | 177% | [**Confidential Treatment Requested] | 151% | |||
[**Confidential Treatment Requested] | 176% | [**Confidential Treatment Requested] | 150% | |||
[**Confidential Treatment Requested] | 175% | [**Confidential Treatment Requested] | 149% |
Continued on next page
[**Confidential Treatment Requested] indicates that portions of this document have been omitted and have been separately filed with the Securities and Exchange Commission.
3 Year EPS CAGR* |
Percentage of Target Performance Award To be Issued¹ ** |
3 Year EPS CAGR* |
Percentage of Target Performance Award To be Issued¹ ** | |||
[**Confidential Treatment Requested] | 148% | [**Confidential Treatment Requested] | 111% | |||
[**Confidential Treatment Requested] | 147% | [**Confidential Treatment Requested] | 110% | |||
[**Confidential Treatment Requested] | 146% | [**Confidential Treatment Requested] | 109% | |||
[**Confidential Treatment Requested] | 145% | [**Confidential Treatment Requested] | 108% | |||
[**Confidential Treatment Requested] | 144% | [**Confidential Treatment Requested] | 107% | |||
[**Confidential Treatment Requested] | 143% | [**Confidential Treatment Requested] | 106% | |||
[**Confidential Treatment Requested] | 142% | [**Confidential Treatment Requested] | 105% | |||
[**Confidential Treatment Requested] | 141% | [**Confidential Treatment Requested] | 104% | |||
[**Confidential Treatment Requested] | 140% | [**Confidential Treatment Requested] | 103% | |||
[**Confidential Treatment Requested] | 139% | [**Confidential Treatment Requested] | 102% | |||
[**Confidential Treatment Requested] | 138% | [**Confidential Treatment Requested] | 101% | |||
[**Confidential Treatment Requested] | 137% | [**Confidential Treatment Requested] | 100% | |||
[**Confidential Treatment Requested] | 136% | [**Confidential Treatment Requested] | 96% | |||
[**Confidential Treatment Requested] | 135% | [**Confidential Treatment Requested] | 92% | |||
[**Confidential Treatment Requested] | 134% | [**Confidential Treatment Requested] | 88% | |||
[**Confidential Treatment Requested] | 133% | [**Confidential Treatment Requested] | 85% | |||
[**Confidential Treatment Requested] | 132% | [**Confidential Treatment Requested] | 81% | |||
[**Confidential Treatment Requested] | 131% | [**Confidential Treatment Requested] | 77% | |||
[**Confidential Treatment Requested] | 130% | [**Confidential Treatment Requested] | 73% | |||
[**Confidential Treatment Requested] | 129% | [**Confidential Treatment Requested] | 69% | |||
[**Confidential Treatment Requested] | 128% | [**Confidential Treatment Requested] | 65% | |||
[**Confidential Treatment Requested] | 127% | [**Confidential Treatment Requested] | 62% | |||
[**Confidential Treatment Requested] | 126% | [**Confidential Treatment Requested] | 58% | |||
[**Confidential Treatment Requested] | 125% | [**Confidential Treatment Requested] | 54% | |||
[**Confidential Treatment Requested] | 124% | [**Confidential Treatment Requested] | 50% | |||
[**Confidential Treatment Requested] | 123% | [**Confidential Treatment Requested] | 46% | |||
[**Confidential Treatment Requested] | 122% | [**Confidential Treatment Requested] | 42% | |||
[**Confidential Treatment Requested] | 121% | [**Confidential Treatment Requested] | 38% | |||
[**Confidential Treatment Requested] | 120% | [**Confidential Treatment Requested] | 35% | |||
[**Confidential Treatment Requested] | 119% | [**Confidential Treatment Requested] | 31% | |||
[**Confidential Treatment Requested] | 118% | [**Confidential Treatment Requested] | 27% | |||
[**Confidential Treatment Requested] | 117% | [**Confidential Treatment Requested] | 23% | |||
[**Confidential Treatment Requested] | 116% | [**Confidential Treatment Requested] | 19% | |||
[**Confidential Treatment Requested] | 115% | [**Confidential Treatment Requested] | 15% | |||
[**Confidential Treatment Requested] | 114% | [**Confidential Treatment Requested] | 12% | |||
[**Confidential Treatment Requested] | 113% | [**Confidential Treatment Requested] | 8% | |||
[**Confidential Treatment Requested] | 112% | [**Confidential Treatment Requested] | 4% | |||
[**Confidential Treatment Requested] | 0% |
(1) | Reflects the % of Target Performance Award that may vest and be payable. |
* | CAGR Percentage to be rounded to nearest 0.1% |
** | Percentage of Performance Award to be issued rounded to the nearest 1% |
[**Confidential Treatment Requested] indicates that portions of this document have been omitted and have been separately filed with the Securities and Exchange Commission.
8. | Examples: For purposes of these examples, assume Employee is granted a Target Performance Award of 325 RSUs: |
a. | If the CAGR is [**Confidential Treatment Requested], Employee shall receive the number of shares equal to 143% of the number of RSUs granted as the Target Performance Award, rounded up to the next whole share or 465 shares (325 * 143% = 464.75). |
b. | If the CAGR is [**Confidential Treatment Requested], Employee shall receive the number of shares equal to 111% of the number of RSUs granted as the Target Performance Award rounded up to the next whole share or 361 shares (325 * 111% = 360.75). |
c. | If CAGR is [**Confidential Treatment Requested], Employee shall receive the number of shares equal to 62% of the number of RSUs granted as the Target Performance Award rounded up to the next whole share or 202 shares (325 * 62% = 201.5). |
d. | If CAGR is [**Confidential Treatment Requested], Employee shall not receive any portion of the Performance Award. |
e. | If the CAGR is [**Confidential Treatment Requested], Employee shall receive the number of shares equal to 200% of the number of RSUs granted as the Target Performance Award rounded up to the next whole share or 750 shares (325 * 200% = 750). |
[**Confidential Treatment Requested] indicates that portions of this document have been omitted and have been separately filed with the Securities and Exchange Commission.
Exhibit 10.2
CASH AMERICA INTERNATIONAL, INC.
Summary of 2012 Short Term Incentive Plan
On January 25, 2012, the independent members of the Board of Directors (the Board) of Cash America International, Inc. (the Company), on the recommendation of its Management Development and Compensation Committee (the Committee), approved the terms and conditions of the short term incentive compensation plan for executive officers of the Company for 2012 (the 2012 STI plan), which is a cash-based incentive plan that will be administered by the Committee under the Companys Senior Executive Bonus Plan. Under the 2012 STI plan, a cash bonus pool may be funded based on the Companys achievement of certain financial objectives for 2012. No executive officer has any contractual right to receive an award under the 2012 STI Plan.
The 2012 STI plan consists of the following three components (each an STI Component):
| the EBT component (the EBT Component), which is based on the Companys consolidated 2012 earnings before taxes, excluding certain unusual items; |
| the Retail Services Division component (the Retail Services Division Component), which is based on the 2012 earnings before taxes for the Retail Services Division, excluding certain unusual items; and |
| the E-Commerce Division component (the E-Commerce Division Component), which is based on the 2012 earnings before interest, taxes, depreciation and amortization of the E-Commerce Division, excluding certain unusual items. |
The target 2012 short term incentive (STI) award for the Companys Chief Executive Officer is 100% of his base salary, and the target 2012 STI award for all other executive officers is 70% of their respective base salaries. STI payments, if any, will be determined by the Committee in January 2013 and will be based on the following: (a) 50% on the EBT Component and 50% on the Retail Services Division Component for the Companys President-Retail Services Division, (b) 100% on the E-Commerce Division Component for the Companys President-E-Commerce Division and (c) 100% on the EBT Component for all other executive officers, including the Chief Executive Officer, Chief Financial Officer and General Counsel.
Under the terms of the 2012 STI plan, potential STI awards will begin to accrue under each STI Component once the Company exceeds a certain earnings threshold (the Earnings Threshold) established for that STI Component, and the potential STI awards can increase ratably up to 100% of the portion of a target award related to the applicable STI Component if earnings in the particular STI Component reach a specified earnings target (the Earnings Target) established for such STI Component. If earnings in a particular STI Component do not reach the Earnings Threshold applicable to such STI Component, no portion of the STI award related to that STI Component will be available for payment. If earnings in any STI Component exceed the applicable Earnings Target for such component, the potential STI award applicable to such STI Component will increase above the portion of the target award corresponding to such STI Component based on a formula set forth in the 2012 STI plan not to exceed a cap of 200% . The Committee also has discretion under the 2012 STI plan to reduce or eliminate amounts that may be paid under the plan but cannot award amounts greater than the amounts earned under the terms of the plan. The 2012 STI plan contains a clawback provision that allows the Committee to recoup all or some of the amount paid to an executive officer under certain circumstances when there is a material restatement of the Companys financial results.
EXHIBIT 31.1
CERTIFICATION
I, Daniel R. Feehan, certify that:
1. | I have reviewed this report on Form 10-Q of Cash America International, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 30, 2012 |
/s/ Daniel R. Feehan |
Daniel R. Feehan |
Chief Executive Officer and President
EXHIBIT 31.2
CERTIFICATION
I, Thomas A. Bessant, Jr., certify that:
1. | I have reviewed this report on Form 10-Q of Cash America International, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 30, 2012 |
/s/ Thomas A. Bessant, Jr. |
Thomas A. Bessant, Jr. |
Executive Vice President and Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cash America International, Inc. (the Company) on Form 10-Q for the quarterly period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Daniel R. Feehan, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Daniel R. Feehan |
Daniel R. Feehan |
Chief Executive Officer and President |
Date: April 30, 2012
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cash America International, Inc. (the Company) on Form 10-Q for the quarterly period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Thomas A. Bessant, Jr., Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Thomas A. Bessant, Jr. |
Thomas A. Bessant, Jr. |
Executive Vice President and Chief Financial Officer |
Date: April 30, 2012
F[HP28U.LH@`!C,
Long-Term Debt (Narrative) (Details) (USD $)
|
3 Months Ended | 3 Months Ended | 3 Months Ended | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 29, 2011
Additional Credit Facility [Member]
|
Mar. 31, 2012
Multi-Currency Line Of Credit [Member]
|
Mar. 31, 2012
Domestic And Multi-Currency Line Of Credit Up To $100,000 Due 2013 [Member]
|
Mar. 31, 2012
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
Mar. 31, 2011
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
Mar. 31, 2012
Variable Rate Senior Unsecured Note Due 2015 [Member]
|
Mar. 31, 2012
Credit Agreement [Member]
|
Nov. 29, 2011
Credit Agreement [Member]
|
Mar. 30, 2011
Credit Agreement [Member]
|
Mar. 31, 2012
5.25% Convertible Senior Unsecured Notes Due 2029 [Member]
|
Mar. 30, 2011
Letter Of Credit Facility [Member]
|
Mar. 31, 2012
Standby Letters Of Credit [Member]
|
Mar. 31, 2012
LIBOR [Member]
Variable Rate Senior Unsecured Note Due 2015 [Member]
|
Mar. 31, 2012
Agent's Base Rate [Member]
Variable Rate Senior Unsecured Note Due 2015 [Member]
|
Mar. 31, 2012
Maximum [Member]
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
Mar. 31, 2011
Maximum [Member]
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
Mar. 31, 2012
Maximum [Member]
LIBOR [Member]
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
Mar. 31, 2012
Maximum [Member]
Agent's Base Rate [Member]
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
Mar. 31, 2012
Minimum [Member]
|
Mar. 31, 2012
Minimum [Member]
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
Mar. 31, 2011
Minimum [Member]
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
Mar. 31, 2012
Minimum [Member]
LIBOR [Member]
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
Mar. 31, 2012
Minimum [Member]
Agent's Base Rate [Member]
Domestic And Multi-Currency Line Of Credit Up To $280,000 Due 2015 [Member]
|
|
Debt Instrument [Line Items] | |||||||||||||||||||||||
Maximum borrowing capacity | $ 100,000,000 | $ 50,000,000 | $ 100,000,000 | $ 280,000,000 | $ 380,000,000 | $ 430,000,000 | $ 330,000,000 | ||||||||||||||||
Debt instrument, maturity year | 2013 | 2015 | 2015 | 2029 | |||||||||||||||||||
Proceeds from initial public offering | 350,000,000 | ||||||||||||||||||||||
Aggregate principal amount of senior notes | 50,000,000 | ||||||||||||||||||||||
Debt instrument basis spread on variable rate | 3.50% | 2.00% | 3.25% | 1.75% | 2.00% | 0.50% | |||||||||||||||||
Commitment fee, percentage | 0.38% | 0.50% | 0.25% | ||||||||||||||||||||
Weighted average interest rate | 3.03% | 3.75% | |||||||||||||||||||||
Debt payable in quarterly installments starting March 12, 2012 | 2,100,000 | ||||||||||||||||||||||
Number of pricing tranches | 4 | 4 | |||||||||||||||||||||
Letter of credit facility, amount | $ 20,000,000 | $ 18,100,000 | |||||||||||||||||||||
Debt instrument, maturity date | May 29, 2013 | Mar. 31, 2015 | |||||||||||||||||||||
Debt instrument, maturity days | 31 | 31 | 3 | 3 |
Derivative Instruments (Effect Of Derivative Instruments) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 31, 2012
|
Mar. 31, 2011
|
|||||
Derivatives Designated As Hedges [Member]
|
||||||
Derivative [Line Items] | ||||||
Gains (Losses) Recognized in Income | ||||||
Gains Recognized in OCI | 12 | 15 | ||||
Gains (Losses) Reclassified From OCI into Income | ||||||
Non-Designated Derivatives [Member]
|
||||||
Derivative [Line Items] | ||||||
Gains (Losses) Recognized in Income | (2,910) | (1,456) | ||||
Gains Recognized in OCI | ||||||
Gains (Losses) Reclassified From OCI into Income | ||||||
Interest Rate Contracts [Member] | Derivatives Designated As Hedges [Member]
|
||||||
Derivative [Line Items] | ||||||
Gains (Losses) Recognized in Income | ||||||
Gains Recognized in OCI | 12 | 15 | ||||
Gains (Losses) Reclassified From OCI into Income | ||||||
Forward Currency Exchange Contracts [Member] | Non-Designated Derivatives [Member]
|
||||||
Derivative [Line Items] | ||||||
Gains (Losses) Recognized in Income | (2,910) | [1] | (1,456) | [1] | ||
Gains Recognized in OCI | [1] | [1] | ||||
Gains (Losses) Reclassified From OCI into Income | [1] | [1] | ||||
|