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