<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 June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission File Number 1-9733
CASH AMERICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2018239
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102
(Address of principal executive offices) (Zip Code)
(817) 335-1100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal
year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS:
25,060,658 common shares, $.10 par value, were outstanding as of July 31, 1998
===============================================================================
<PAGE> 2
CASH AMERICA INTERNATIONAL, INC.
INDEX TO 10-Q
PART I. FINANCIAL STATEMENTS
Page
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1998
and 1997 and December 31, 1997 ......................... 1
Consolidated Statements of Income - Three Months and
Six Months Ended June 30, 1998 and 1997 ................ 2
Consolidated Statements of Comprehensive Income -
Three Months and Six Months Ended June 30, 1998
and 1997 ............................................... 3
Consolidated Statements of Stockholders' Equity -
Six Months Ended June 30, 1998 and 1997 ................ 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 ................ 5
Notes to Consolidated Financial Statements ............. 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition ... 10
PART II. OTHER INFORMATION ................................... 26
SIGNATURE ..................................................... 28
<PAGE> 3
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
(UNAUDITED)
...............................................................................................
June 30, December 31,
1998 1997 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,541 $ 1,994 $ 1,119
Loans 125,678 109,815 112,240
Merchandise held for disposition, net 55,472 47,233 53,468
Inventories 4,826 -- 2,130
Finance and service charges receivable 19,083 15,948 17,414
Prepaid expenses and other 7,509 5,131 5,523
Deferred tax assets 12,800 11,507 12,529
- -----------------------------------------------------------------------------------------------
Total current assets 230,909 191,628 204,423
Property and equipment, net 68,202 63,573 64,258
Intangible assets, net 89,522 65,659 64,977
Other assets 3,363 7,031 7,621
- -----------------------------------------------------------------------------------------------
Total assets $ 391,996 $ 327,891 $ 341,279
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 20,630 $ 12,284 $ 14,971
Customer deposits 4,277 3,800 3,740
Income taxes currently payable 2,130 3,390 3,819
Current portion of long-term debt 4,286 4,286 4,286
- -----------------------------------------------------------------------------------------------
Total current liabilities 31,323 23,760 26,816
Long-term debt 177,946 145,877 146,142
- -----------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $.10 par value per
share, 80,000,000 shares authorized 3,024 3,024 3,024
Paid in surplus 126,250 121,919 122,155
Retained earnings 96,893 82,168 91,337
Accumulated other comprehensive loss (2,084) (1,983) (2,458)
Notes receivable - stockholders (1,424) (841) (1,337)
- -----------------------------------------------------------------------------------------------
222,659 204,287 212,721
Less -- shares held in treasury, at cost (39,932) (46,033) (44,400)
- -----------------------------------------------------------------------------------------------
Total stockholders' equity 182,727 158,254 168,321
- -----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 391,996 $ 327,891 $ 341,279
===============================================================================================
</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)
<TABLE>
<CAPTION>
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Finance and service charges $ 28,004 $ 24,967 $ 55,867 $ 50,438
Proceeds from disposition of merchandise 48,225 43,975 102,363 94,139
Check-cashing machine sales 302 -- 1,102 --
Check-cashing royalties and fees 886 477 1,726 1,361
Rental operations 835 -- 1,388 --
- ---------------------------------------------------------------------------------------------------
TOTAL REVENUE 78,252 69,419 162,446 145,938
===================================================================================================
COSTS OF REVENUE
Disposed merchandise 30,972 27,738 65,586 60,199
Cost of check-cashing machines sold 292 -- 1,026 --
Rental operations 248 -- 396 --
- ---------------------------------------------------------------------------------------------------
NET REVENUE 46,740 41,681 95,438 85,739
===================================================================================================
OPERATING EXPENSES
Lending operations 27,837 24,208 54,428 48,939
Check-cashing operations 1,782 470 3,017 980
Rental operations 469 -- 678 --
Administration 6,329 5,520 12,631 11,262
Depreciation 3,342 3,128 6,559 6,389
Amortization 981 773 1,843 1,654
- ---------------------------------------------------------------------------------------------------
Total operating expenses 40,740 34,099 79,156 69,224
- ---------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 6,000 7,582 16,282 16,515
Interest expense, net 3,269 2,751 6,276 5,557
Other (income) expense (13) 93 19 151
- ---------------------------------------------------------------------------------------------------
Income before income taxes 2,744 4,738 9,987 10,807
Provision for income taxes 1,110 1,727 3,819 4,006
- ---------------------------------------------------------------------------------------------------
NET INCOME $ 1,634 $ 3,011 $ 6,168 $ 6,801
===================================================================================================
Net income per share:
Basic $ .07 $ .12 $ .25 $ .28
Diluted .06 .12 .24 .27
- ---------------------------------------------------------------------------------------------------
Weighted average shares:
Basic 24,788 24,190 24,610 24,219
Diluted 26,398 24,949 26,061 24,913
===================================================================================================
</TABLE>
See notes to consolidated financial statements.
Page 2
<PAGE> 5
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INCOME $ 1,634 $ 3,011 $ 6,168 $ 6,801
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments (69) 522 374 (1,597)
------- ------- ------- -------
Total other comprehensive income (loss) (69) 522 374 (1,597)
------- ------- ------- -------
COMPREHENSIVE INCOME $ 1,565 $ 3,533 $ 6,542 $ 5,204
======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 6
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands, except share data) (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED NOTES
COMMON STOCK OTHER RECEIVABLE - TREASURY STOCK
----------------------- PAID IN RETAINED COMPREHENSIVE STOCK- ----------------------
SHARES AMOUNT SURPLUS EARNINGS LOSS HOLDERS SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1997 30,235,164 $ 3,024 $ 122,155 $ 91,337 $ (2,458) $ (1,337) 5,812,519 $ (44,400)
Net income 6,168
Other comprehensive income 374
Dividends declared (612)
Treasury shares purchased 16,619 (233)
Treasury shares reissued 3,735 (615,936) 4,701
Tax benefit from exercise
of option shares 360
Change in notes
receivable - stockholders (87)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at
June 30, 1998 30,235,164 $ 3,024 $ 126,250 $ 96,893 $ (2,084) $ (1,424) 5,213,202 $ (39,932)
===================================================================================================================================
Balance at
December 31, 1996 30,235,164 $ 3,024 $ 121,878 $ 75,973 $ (386) $ (1,065) 5,975,670 $ (45,397)
Net income 6,801
Other comprehensive loss (1,597)
Dividends declared (606)
Treasury shares purchased 141,754 (1,304)
Treasury shares reissued 16 (87,838) 668
Tax benefit from exercise
of option shares 25
Change in notes
receivable - stockholders 224
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at
June 30, 1997 30,235,164 $ 3,024 $ 121,919 $ 82,168 $ (1,983) $ (841) 6,029,586 $ (46,033)
===================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 7
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
- -------------------------------------------------------------------------------------------------
Six Months Ended
June 30,
1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 6,168 $ 6,801
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6,559 6,389
Amortization 1,843 1,654
Changes in operating assets and liabilities-
Finance and service charges receivable (885) (1,065)
Merchandise held for disposition and inventories (236) 2,187
Prepaid expenses and other (2,641) 215
Accounts payable and accrued expenses 4,105 (1,785)
Customer deposits, net 255 828
Income taxes payable (1,358) (310)
Deferred taxes, net 1,327 (352)
- --------------------------------------------------------------------------------------------------
Net cash provided by operating activities 15,137 14,562
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans forfeited and transferred to merchandise held for disposition 58,555 53,741
Loans repaid or renewed 142,303 132,487
Loans made, including loans renewed (207,504) (190,779)
- --------------------------------------------------------------------------------------------------
Net change in loans (6,646) (4,551)
- --------------------------------------------------------------------------------------------------
Acquisitions, net of cash acquired (20,877) (3,715)
Investment in and advances to affiliates (120) (350)
Purchases of property and equipment (9,617) (7,253)
Proceeds from sales of property and equipment 883 --
- --------------------------------------------------------------------------------------------------
Net cash used by investing activities (36,377) (15,869)
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under bank lines of credit 36,135 7,329
Payments on notes payable and other obligations (10,587) (4,286)
Net change in notes receivable - stockholders -- 224
Net proceeds from reissuance of treasury shares 1,218 684
Treasury shares purchased (233) (1,304)
Dividends paid (612) (606)
- -------------------------------------------------------------------------------------------------
Net cash provided by financing activities 25,651 2,041
- --------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 11 (74)
- --------------------------------------------------------------------------------------------------
CHANGE IN CASH AND CASH EQUIVALENTS 4,422 660
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,119 1,334
- --------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,541 $ 1,994
==================================================================================================
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES
Noncash activity in conjunction with purchase transactions:
Fair value of assets acquired $ 36,229 $ 3,834
Less treasury shares reissued (7,131) --
Less liabilities assumed (8,221) (119)
--------- ---------
Net cash paid $ 20,877 $ 3,715
========= =========
==================================================================================================
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 8
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ----------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of Cash
America International, Inc. and its majority-owned subsidiaries (the "Company").
All significant intercompany accounts and transactions have been eliminated in
consolidation. Through January 31, 1998, the Company had a 49% ownership
interest in Express Rent A Tire, Ltd. ("Express") that was accounted for by the
equity method of accounting, whereby the Company recorded its 49% share of
earnings or losses in its consolidated financial statements. Effective February
1, 1998, the Company increased its ownership interest in Express to 99.9% and
reorganized it into a new corporation, Rent-A-Tire, Inc. ("Rent-A-Tire") (see
Note 3). The acquisition of additional interests has been accounted for as a
purchase and, accordingly, the assets and liabilities of Rent-A-Tire and the
results of its operations have been included in the consolidated financial
statements since February 1, 1998.
The financial statements as of June 30, 1998 and 1997, and for the
three months and six 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 month and six month periods are not
necessarily indicative of the results that may be expected for the full fiscal
year.
Certain amounts in the consolidated financial statements for the three
months and six months ended June 30, 1997, and the consolidated balance sheet at
December 31, 1997, have been reclassified to conform to the presentation format
adopted in 1998. These reclassifications have no effect on the net income
previously reported.
These financial statements and related notes should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1997 Annual Report to Stockholders.
2. REVENUE RECOGNITION
Lending Operations o Pawn loans ("loans") are made on the pledge of tangible
personal property. The Company accrues finance and service charge revenue on all
loans that the Company deems collection is probable based on historical loan
redemption statistics. For loans not repaid, the carrying value of the forfeited
collateral ("merchandise held for disposition") is stated at the lower of cost
(cash amount loaned) or market.
Page 6
<PAGE> 9
Revenue is recognized at the time of disposition of merchandise.
Interim customer payments for layaway sales are recorded as deferred revenue and
subsequently recognized as revenue during the period in which final payment is
received.
Check-Cashing Operations o Check-cashing machine sales revenue is recorded upon
installation and activation of the machine. The Company records fees derived
from its owned check-cashing locations and machines on the cash basis, which
approximates the accrual basis. Royalties derived from franchised locations are
recorded on the accrual basis.
Rental Operations o Tire and wheel rentals are paid on a weekly basis in advance
and receipts are recorded on the cash basis. Customers may return the tires and
wheels at any time and have no obligation to complete the rental agreement.
Rent-A-Tire has entered into agreements to operate and manage stores for an
unrelated group of investors. The investors own and provide 100% financing for
the stores, and incur all costs to operate them. Rent-A-Tire receives initial
compensation for its efforts in constructing and opening each store and a fixed
monthly management fee.
3. INVESTMENT IN AFFILIATE
Effective February 1, 1998, the Company exercised its option to increase its
ownership interest in Express from 49% to 90%. In conjunction with the
reorganization of Express into Rent-A-Tire, the Company also acquired an
additional 9.9% ownership interest. The sellers have an option to repurchase
9.9% of Rent-A-Tire for a nominal amount. The option is exerciseable upon sixty
days written notice.
4. LONG-TERM DEBT
The Company's long-term debt instruments and balances outstanding as of June 30
are as follows:
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
U.S. Line of Credit up to $150 million
due June 30, 2003 $ 85,250 $ 78,225
U.K. Line of Credit up to L. 10 million
due April 30, 2000 4,253 2,247
Swedish Lines of Credit up to SEK 215 million 21,300 23,976
8.33% senior unsecured notes due 2003 21,429 25,715
8.14% senior unsecured notes due 2007 20,000 20,000
7.10% senior unsecured notes due 2008 30,000 --
- ------------------------------------------------------------------------------
182,232 150,163
Less current portion 4,286 4,286
- ------------------------------------------------------------------------------
Long-term debt $177,946 $145,877
- ------------------------------------------------------------------------------
</TABLE>
Page 7
<PAGE> 10
In August 1998, the U.K. Line of Credit was increased from 5 million
pounds sterling to 10 million pounds sterling and its maturity was extended
to April 30, 2000.
5. NET INCOME PER SHARE
The reconciliation of basic and diluted weighted average common shares
outstanding for the three month and six month periods ended June 30, follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
- ---------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Weighted average shares - Basic 24,788 24,190 24,610 24,219
Plus shares applicable to stock option plans 1,587 759 1,434 694
Plus shares applicable to nonqualified savings plan 23 -- 17 --
- ---------------------------------------------------------------------------------------------------
Weighted average shares - Diluted 26,398 24,949 26,061 24,913
- ---------------------------------------------------------------------------------------------------
</TABLE>
6. OPERATION SEGMENT INFORMATION
The Company has two reportable operating segments in the lending industry and
one each in the check-cashing and rental industries. The United States and
foreign lending segments offer the same services. However, each is managed
separately due to the different operational strategies required. The
check-cashing and rental operations are managed separately because they offer
different services and products, each of which requires its own technical,
marketing and operational strategy.
Page 8
<PAGE> 11
Information concerning the segments is set forth below (in thousands):
<TABLE>
<CAPTION>
Lending
------------------------------------------
United Check-
States Foreign Total Cashing Rental Consolidated
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three Months
Ended June 30, 1998:
Total revenue $ 69,961 $ 6,468 $ 76,429 $ 988 $ 835 $ 78,252
Income (loss)
from operations 5,753 2,634 8,387 (2,236) (151) 6,000
Total assets at end of period 290,621 77,780 368,401 18,517 5,078 391,996
- ------------------------------------------------------------------------------------------------------------------
Three Months
Ended June 30, 1997:
Total revenue $ 62,848 $ 6,094 $ 68,942 $ 477 n/a $ 69,419
Income (loss)
from operations 5,226 2,810 8,036 (454) n/a 7,582
Total assets at end of period 245,363 72,732 318,095 9,796 n/a 327,891
- ------------------------------------------------------------------------------------------------------------------
Six Months
Ended June 30, 1998:
Total revenue $145,629 $ 12,912 $158,541 $ 2,517 $ 1,388 $162,446
Income (loss)
from operations 14,690 5,458 20,148 (3,655) (211) 16,282
- ------------------------------------------------------------------------------------------------------------------
Six Months
Ended June 30, 1997:
Total revenue $132,248 $ 12,329 $144,577 $ 1,361 n/a $145,938
Income (loss)
from operations 11,221 5,764 16,985 (470) n/a 16,515
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
7. LITIGATION
The Company is a defendant in certain lawsuits encountered in the ordinary
course of its business. In the opinion of management, the resolution of these
matters will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.
Page 9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SUMMARY CONSOLIDATED FINANCIAL DATA
SECOND QUARTER ENDED JUNE 30, 1998 vs.
SECOND QUARTER ENDED JUNE 30, 1997
- ------------------------------------------------------------------------------
(Dollars in thousands)
The following table sets forth selected consolidated financial data with
respect to the Company and its consolidated lending operations as of June 30,
1998 and 1997, and for the three months then ended.
<TABLE>
<CAPTION>
1998 1997 Change
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 28,004 $ 24,967 12%
Proceeds from disposition of merchandise 48,225 43,975 10%
Check-cashing machine sales 302 -- --
Check-cashing royalties and fees 886 477 86%
Rental operations 835 -- --
- ---------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 78,252 69,419 13%
- ---------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 30,972 27,738 12%
Cost of check-cashing machines sold 292 -- --
Rental operations 248 -- --
- ---------------------------------------------------------------------------------------------------------------
NET REVENUE $ 46,740 $ 41,681 12%
- ---------------------------------------------------------------------------------------------------------------
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source -
Finance and service charges 59.9% 59.9% --
Margin on disposition of merchandise 36.9% 39.0% (5)%
Check-cashing operations 1.9% 1.1% 73%
Rental operations 1.3% -- --
Expenses as a percentage of net revenue --
Operations and administration 77.9% 72.5% 7%
Depreciation and amortization 9.2% 9.4% (2)%
Interest, net 7.0% 6.6% 6%
Income from operations before depreciation
and amortization as a percentage of total revenue 13.2% 16.5% (20)%
Income before income taxes as a percentage of total revenue 3.5% 6.8% (49)%
- ---------------------------------------------------------------------------------------------------------------
CONSOLIDATED LENDING OPERATIONS:
Annualized yield on loans 96% 95% 1%
Average loan balance per average location in operation $ 268 $ 270 (1)%
Average loan amount at end of period (not in thousands) $ 99 $ 95 4%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 35.8% 36.9% (3)%
Average annualized merchandise turnover 2.3X 2.4x (4)%
Average merchandise held for disposition
per average location $ 122 $ 119 3%
Locations in operation --
Beginning of period 415 385
Acquired 43 6
Start-ups 3 6
Combined or closed (2) (2)
End of period 459 395 16%
Average number of locations in operation(a) 436 389 12%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 10
<PAGE> 13
SIX MONTHS ENDED JUNE 30, 1998 vs.
SIX MONTHS ENDED JUNE 30, 1997
- -------------------------------------------------------------------------------
(Dollars in thousands)
The following table sets forth selected consolidated financial data with
respect to the Company and its consolidated lending operations as of June 30,
1998 and 1997, and for the six months then ended.
<TABLE>
<CAPTION>
1998 1997 Change
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 55,867 $ 50,438 11%
Proceeds from disposition of merchandise 102,363 94,139 9%
Check-cashing machine sales 1,102 -- --
Check-cashing royalties and fees 1,726 1,361 27%
Rental operations 1,388 -- --
- ----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 162,446 145,938 11%
- ----------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 65,586 60,199 9%
Cost of check-cashing machines sold 1,026 -- --
Rental operations 396 -- --
- ----------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 95,438 $ 85,739 11%
- ----------------------------------------------------------------------------------------------------------------------
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source -
Finance and service charges 58.6% 58.8% --
Margin on disposition of merchandise 38.5% 39.6% (3)%
Check-cashing operations 1.9% 1.6% 19%
Rental operations 1.0% -- --
Expenses as a percentage of net revenue --
Operations and administration 74.1% 71.4% 4%
Depreciation and amortization 8.8% 9.4% (6)%
Interest, net 6.6% 6.5% 2%
Income from operations before depreciation
and amortization as a percentage of total revenue 15.2% 16.8% (10)%
Income before income taxes as a percentage of total revenue 6.1% 7.4% (18)%
- ----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED LENDING OPERATIONS
Annualized yield on loans 99% 97% 2%
Average loan balance per average location in operation $ 270 $ 272 (1)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 35.9% 36.1% (1)%
Average annualized merchandise turnover 2.5x 2.6x (4)%
Average merchandise held for disposition
per average location $ 126 $ 122 3%
Locations in operation --
Beginning of period 401 382
Acquired 56 6
Start-ups 4 10
Combined or closed (2) (3)
End of period 459 395 16%
Average number of locations in operation(a) 424 386 10%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 11
<PAGE> 14
GENERAL
The Company is a diversified provider of specialty financial services
to individuals in the United States, United Kingdom and Sweden. The Company
offers secured non-recourse loans, commonly referred to as pawn loans, to
individuals through its lending operations. Pawn loans earn finance and service
charge revenue. The disposition of merchandise, primarily collateral from
unredeemed pawn loans, is a related but secondary source of net revenue from the
Company's lending function. The Company also provides check-cashing services
through its subsidiary, Mr. Payroll Corporation ("Mr. Payroll") and rental of
tires and wheels through its subsidiary, Rent-A-Tire, Inc. ("Rent-A-Tire").
The Company expanded its lending operations during the eighteen-month
period ended June 30, 1998, by adding a net seventy-seven locations. Seventeen
locations were established, sixty-six operating units were acquired, and six
locations were combined or closed. As of June 30, 1998, the Company operated 459
lending units--409 in sixteen states in the United States, thirty-nine
jewelry-only and loan-only units in the United Kingdom, and eleven loan-only and
primarily jewelry-only units in Sweden.
During the eighteen months ended June 30, 1998, Mr. Payroll has focused
on the development of an automated check-cashing machine. The first two machines
were installed in June 1997, and forty-five units were in operation as of June
30, 1998. Eight machines were installed in the second quarter of 1998. As of
June 30, 1998, Mr. Payroll also had 140 franchised and ten company owned manned
check-cashing centers in twenty-one states compared to 151 franchised centers as
of June 30, 1997.
Through January 31, 1998, the Company had a 49% ownership interest in
Express Rent A Tire, Ltd. ("Express") that was accounted for by the equity
method of accounting, whereby the Company recorded its 49% share of earnings or
losses in its consolidated financial statements. Effective February 1, 1998, the
Company increased its ownership interest to 99.9% and reorganized the operations
of Express into Rent-A-Tire. The acquisition of additional interests has been
accounted for as a purchase and, accordingly, the assets and liabilities of
Rent-A-Tire and the results of its operations have been included in the
consolidated financial statements since February 1, 1998. As of June 30, 1998,
Rent-A-Tire owns and operates four tire and wheel rental stores and manages nine
additional tire and wheel rental stores under the Rent-A-Tire name including
five that were added during the second quarter of 1998.
SECOND QUARTER ENDED JUNE 30, 1998, COMPARED TO THE
SECOND QUARTER ENDED JUNE 30, 1997
RESULTS OF OPERATIONS
Consolidated net revenue increased 12% to $46.7 million during the
second quarter ended June 30, 1998 (the "current quarter"), from $41.7 million
during the second quarter ended June 30, 1997 (the "prior year quarter"). Of the
12% increase, 7% was attributable to the net addition of sixty-four lending
locations since June 30, 1997, 3% was attributable to
Page 12
<PAGE> 15
gains from same unit lending operations (those in operation for more than one
year), and 2% was attributable to increases in the check-cashing and rental
segments of the Company.
Net revenue from lending operations increased $4.3 million to $45.5
million during the current quarter from $41.2 million during the prior year
quarter, primarily due to a $3.1 million contribution by the lending units added
since June 30, 1997. The principal components of lending operations net revenue
are finance and service charges and net revenue from the disposition of
merchandise. The remaining component, foreign check-cashing operations,
commenced in the third quarter of 1997 and accounted for $.2 million of the
increase.
Finance and service charges are impacted by changes in both the average
outstanding amount of pawn loans and the annualized yield on such loans. Finance
and service charges increased $3.0 million, or 12%, in the current quarter over
the prior year quarter. An 11% increase in the average outstanding amount of
pawn loans, which occurred as a result of a 9% increase in the average number of
loans outstanding and a 3% increase in the average loan amount, contributed $2.8
million of the total increase. A 1% increase in the annualized loan yield
provided the remaining $.2 million increase. Same units contributed $1.6 million
of the $3.0 million increase.
The consolidated annualized loan yield, which represents a weighted
average of the distinctive loan yields realized in the three countries in which
the Company operates, increased to 96% in the current quarter from 95% in the
prior year quarter even though both the domestic and blended foreign loan yields
decreased. The consolidated increase occurred due to a greater percentage of
higher-yielding domestic loans in the consolidated loan portfolio for the
current quarter as compared to the prior year quarter. The domestic annualized
loan yield decreased to 125% for the current quarter compared to 126% for the
prior year quarter. The decrease can be attributed to a 21% increase in domestic
pawn loan balances at June 30, 1998, over the balances at June 30, 1997. The net
addition of sixty-two domestic lending locations accounted for 12% of the
increase, while same units contributed 9% of the increase. The blended yield on
average foreign pawn loans outstanding decreased to 50% for the current quarter
from 52% in the prior year quarter. The decline in foreign loan yields resulted
from lower returns on the disposition of unredeemed collateral at auction
accompanied by a 5% increase in pawn loan balances at June 30, 1998, as compared
to June 30, 1997.
Net revenue from the disposition of merchandise is determined by the
combination of the amount of proceeds received from the disposition of
merchandise and the average margin earned therefrom. A $4.3 million, or 10%,
increase in proceeds from the disposition of merchandise for the current quarter
over the prior year quarter contributed an increase of $1.6 million in net
revenue from the disposition of merchandise. The $1.6 million increase was
offset by $.5 million resulting from a lower margin earned upon disposition in
the current quarter compared to the prior year quarter. The net result was an
increase of $1.1 million, or 6%, in net revenue from the disposition of
merchandise. Same unit increases, which the Company believes is attributable to
stronger customer demand, accounted for $1.0 million of the $4.3 million
increase in proceeds for merchandise dispositions.
Page 13
<PAGE> 16
The margin on disposition of merchandise declined to 35.8% in the
current quarter from 36.9% during the prior year quarter. A reduced margin from
the disposition of scrap jewelry accounted for 31% of the total reduction of
margin received from disposition of merchandise. Excluding the effect of the
disposition of scrap jewelry, the margin on disposition of merchandise was 37.1%
for the current quarter compared to 38.3% in the prior year quarter due to the
Company's continued emphasis on rapid disposition of merchandise. The
merchandise turnover rate was 2.3 times compared to 2.4 times in the prior year
quarter.
Net revenue of Mr. Payroll in the current quarter increased 46%
compared to the prior year quarter. Mr. Payroll's decision to emphasize the
development and implementation of its automated check-cashing machine, which
remains in an early growth stage, began to affect the composition of the
components of net revenue during the prior year quarter. Check-cashing royalties
and fees earned from the operations of the check-cashing machines and the owned
and franchised check-cashing centers, increased 44% and represented 95% and 96%
of net revenue in the current and prior year quarters, respectively. Gross
profit realized on check-cashing machine sales, which did not begin until the
latter stages of 1997, accounted for 1% of net revenue in the current quarter.
The change in franchise fees, which accounted for the remaining 4% of net
revenue in both periods, was negligible.
Net revenue of $.6 million was contributed by Rent-A-Tire in the
current quarter. Prior to February 1, 1998, the Company's 49% share of earnings
or losses of Rent-A-Tire's predecessor was recorded in other expense.
Consolidated operations and administration expenses as a percentage of
net revenue were 77.9% in the current quarter compared to 72.5% for the prior
year quarter. Total operations and administration expenses increased $6.2
million, or 21%, in the current quarter as compared to the prior year quarter.
Domestic lending operations contributed $3.3 million of the increase primarily
due to higher personnel, occupancy, and office expenses mostly attributable to
new units which accounted for $2.5 million of the domestic increase. Foreign
lending operations contributed $.3 million of the increase. Mr. Payroll
contributed $1.9 million of the increase, primarily due to increased personnel,
communications, and travel expenses related to the development and marketing of
the check-cashing machine. The expenses of Rent-A-Tire, which was not
consolidated prior to February 1, 1998, contributed $.7 million of the increase.
Depreciation and amortization expenses as a percentage of net revenue
decreased to 9.2% in the current quarter from 9.4% in the prior year quarter.
Depreciation and amortization expenses increased 11% principally due to the
effect of the increase in additional lending units.
Net interest expense as a percentage of net revenue increased to 7.0%
in the current quarter from 6.6% in the prior year quarter. The amount increased
$.5 million, or 19%, primarily due to the effect of a higher average level of
debt related to the Company's growth, combined with a slightly higher effective
blended borrowing cost. Average debt outstanding
Page 14
<PAGE> 17
increased 17% to $168.2 million during the current quarter from $143.6 million
during the prior year quarter. The effective blended borrowing cost increased to
7.8% for the current quarter from 7.7% for the prior year quarter.
Other expense includes $124 thousand of losses in the prior year
quarter attributable to the Company's 49% equity interest in the losses of
Express.
The Company's consolidated effective income tax rate increased to 40%
for the current quarter from 36% for the prior year quarter primarily as a
result of a foreign dividend tax credit received in the prior year quarter
combined with the effect in the current quarter of lower pre-tax income and
higher non-deductible intangible asset amortization. The effective tax rate of
the domestic lending operations increased to 40% for the current quarter
compared to 38% for the prior year quarter primarily as a result of the benefit
of the prior year quarter foreign dividend tax credit that was partially offset
by a lower effective state income tax rate in the current quarter. The effective
tax rate of the foreign lending operations decreased to 33% for the current
quarter from 34% for the prior year quarter as a result of a rate reduction in
the United Kingdom.
SIX MONTHS ENDED JUNE 30, 1998, COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 1997
RESULTS OF OPERATIONS
Consolidated net revenue increased 11% to $95.4 million during the six
months ended June 30, 1998 (the "current period"), from $85.7 million during the
six months ended June 30, 1997 (the "prior year period"). Of the 11% increase,
6% was attributable to the net addition of sixty-four locations since June 30,
1997, 4% was attributable to gains from same unit lending operations, and 1% was
attributable to increases in the check-cashing and rental segments of the
Company.
Net revenue from lending operations increased $8.6 million to $93.0
million during the current period from $84.4 million during the prior year
period, primarily due to a $4.8 million contribution by the lending units added
since June 30, 1997. Finance and service charges, net revenue from the
disposition of merchandise, and foreign check-cashing operations accounted for
$5.4 million, $2.9 million, and $.3 million, respectively, of the total
increase.
Finance and service charges increased $5.4 million in the current
period as a result of a 9% increase in the average outstanding amount of pawn
loans that contributed $4.4 million to the increase and a 2% increase in the
annualized loan yield that provided the remaining $1.0 million. Same units
contributed $3.4 million of the increase in finance and service charges.
The consolidated annualized loan yield increased to 99% in the current
period from 97% in the prior year period. The domestic annualized loan yield
increased to 128% for the current period compared to 127% for the prior year
period primarily due to higher loan
Page 15
<PAGE> 18
redemption rates. The blended yield on average foreign pawn loans outstanding
decreased to 52% for the current period from 54% in the prior year period. The
decline in foreign loan yields resulted from lower returns on the disposition of
unredeemed collateral at auction.
An $8.3 million, or 9%, increase in proceeds from the disposition of
merchandise for the current period over the prior year period contributed an
increase of $3.0 million in net revenue from the disposition of merchandise. The
$3.0 million increase was offset by $.1 million resulting from a slightly lower
margin earned upon disposition in the current period compared to the prior year
period. The net result was an increase of $2.9 million, or 8%, in net revenue
from the disposition of merchandise. Same unit increases, which the Company
believes is attributable to stronger customer demand, accounted for $3.5 million
of the $8.3 million increase in proceeds from merchandise dispositions.
The margin on disposition of merchandise declined to 35.9% in the
current period from 36.1% during the prior year period. The margin from the
disposition of scrap jewelry decreased $.2 million in the current period as
compared to the prior year period. Excluding the effect of the disposition of
scrap jewelry, the margin on disposition of merchandise was 37.3% for the
current period compared to 37.9% in the prior year period. The merchandise
turnover rate decreased slightly to 2.5 times from 2.6 times in the prior year
period.
Net revenue of Mr. Payroll in the current period increased 10% compared
to the prior year period. Mr. Payroll's decision to emphasize the development
and implementation of its automated check-cashing machine began to affect the
composition of the components of net revenue in the prior year period.
Check-cashing royalties and fees earned from the operations of check-cashing
machines and owned and franchised check-cashing centers, increased 31% and
represented 93% and 78% of net revenue in the current and prior year periods,
respectively. Gross profit realized on check-cashing machine sales, which did
not begin until the latter stages of 1997, accounted for 5% of net revenue in
the current period. Franchise fees and other income accounted for 2% and 22% of
net revenue in the current period and the prior year period, respectively.
Net revenue of $1.0 million was contributed by Rent-A-Tire in the
current period. Prior to February 1, 1998, the Company's 49% share of earnings
or losses of Rent-A-Tire's predecessor was recorded in other expense.
Consolidated operations and administration expenses as a percentage of
net revenue were 74.1% in the current period compared to 71.4% for the prior
year period. Total operations and administration expenses increased $9.6 million
in the current period as compared to the prior year period. Domestic lending
operations contributed $4.8 million of the increase primarily due to higher
personnel, occupancy, and office expenses mostly attributable to new units which
accounted for $3.2 million of the domestic increase. Foreign lending operations
contributed $.5 million of the increase. Mr. Payroll contributed $3.2 million
primarily due to increased personnel, communications, and travel expenses
related to the development and marketing of the check-cashing machine. The
expenses of Rent-A-Tire,
Page 16
<PAGE> 19
which was not consolidated prior to February 1, 1998, contributed $1.1 million
of the increase.
Depreciation and amortization expenses as a percentage of net revenue
decreased to 8.8% in the current period from 9.4% in prior year period.
Depreciation and amortization expenses increased 4% principally due to the
effect of the increase in additional lending units.
Net interest expense as a percentage of net revenue increased to 6.6%
in the current period from 6.5% in the prior year period. The amount increased
$.7 million, or 13%, primarily due to the effect of a higher average level of
debt outstanding to support increased growth of operations and investment in
subsidiaries. Average debt outstanding increased 10% to $161.2 million during
the current period from $146.6 million during the prior year period. The
effective blended borrowing cost increased to 7.8% for the current period from
7.6% for the prior year period.
Other expense includes $79 thousand and $175 thousand of losses in the
current period and prior year period, respectively, attributable to the
Company's 49% equity interest in the losses of Express.
The Company's consolidated effective income tax rate increased to 38%
for the current period from 37% for the prior year period primarily due to a
foreign dividend tax credit received in the prior year period. The effective tax
rate of the domestic lending operations remained constant at 39% for each period
since the benefit of the prior year period foreign dividend tax credit was
offset by a lower effective state income tax rate in the current period. The
effective tax rate of the foreign lending operations decreased to 33% for the
current period from 34% for the prior year period primarily due to a rate
reduction in the United Kingdom.
LIQUIDITY AND CAPITAL RESOURCES
In management's opinion, the Company's cash flow and liquidity remain
strong. Cash and cash equivalents increased $4.4 million to $5.5 million at June
30, 1998, from $1.1 million at December 31, 1997. During the six months ended
June 30, 1998, $36.1 million of cash was provided by net borrowings on the
Company's bank lines of credit, $15.1 million of cash was provided by operating
activities, $1.2 million was provided by the issuance of common shares pursuant
to the Company's stock option plans, and $.9 million was provided by proceeds
from sales of property and equipment. The cash increases were partially offset
by the Company's investments of $20.9 million to acquire fifty-six new lending
locations and to repurchase 10 manned check-cashing centers, $9.6 million for
capital expenditures, $6.7 million to increase pawn loan balances, and $.1
million in advances to Express. The Company also made a scheduled payment of
$4.3 million on its 8.33% senior unsecured notes, paid $6.6 million of
obligations in connection with acquisitions, paid $.6 million in dividends, and
purchased $.2 million of treasury shares for the Company's Nonqualified Savings
Plan. The Company intends to continue to market and enhance Mr. Payroll's
automated check-cashing system and anticipates that Mr. Payroll will incur
future losses until sufficient revenues are generated from the sale and
operation of automated check-cashing machines.
Page 17
<PAGE> 20
The Company expects to continue its plan to add approximately 5 to 15
new lending units during the remainder of 1998, which would add approximately 60
to 70 units for the full year. These additions may occur through new openings or
acquisitions of existing locations.
On January 22, 1997, the Company announced that its Board of Directors
had authorized management to purchase up to one million shares of its common
stock in the open market. During the six months ended June 30, 1998, the Company
made no purchases under the program. Purchases may be made from time to time in
the open market and it is expected that funding of the program will come from
operating cash flow and existing bank facilities.
Management believes that borrowings available under its revolving
credit facilities, cash generated from operations and current working capital of
$200 million should be sufficient to meet the Company's anticipated future
capital requirements.
IMPACT OF FOREIGN CURRENCY EXCHANGE RATES
The Company is subject to the risk of unexpected changes in foreign
currency rates by virtue of its operations in the United Kingdom and Sweden. The
Company's foreign assets, liabilities, and earnings are converted into U.S.
dollars for consolidation into the Company's financial statements. At June 30,
1998, the Company had recorded a cumulative other comprehensive loss of $2.1
million as a result of fluctuations in foreign currency exchange rates. Future
earnings and comparisons with prior periods reported by the Company may
fluctuate depending on applicable currency exchange rates in effect during the
periods.
COMPUTER SYSTEMS - THE YEAR 2000 ISSUE
The Company has undertaken considerable effort to assess the actions
and resources that will be required to make its systems Year 2000 compliant. The
Company is utilizing both internal and external resources to identify, correct
or reprogram, and test systems for Year 2000 compliance. It is the Company's
belief that its proprietary pawnshop operating system is the only one of its
computer systems that presents Year 2000 issues that are likely to be material
to its ongoing business operations. The Company has completed a significant
portion of the work that it has determined will be necessary to make its
pawnshop operating system Year 2000 compliant, and it anticipates that it will
complete all of the work, including the necessary testing, by the end of 1998.
Because a number of steps remain to be performed, the Company has not yet
determined the total Year 2000 compliance expense and related potential effect
on earnings. However, the Company continues to believe, based on currently
available information, that the total expense and related potential effect on
earnings will not be material and that it will be able to manage its total Year
2000 transition without any material adverse effect on its business operations.
Page 18
<PAGE> 21
DOMESTIC LENDING OPERATIONS
- ------------------------------------------------------------------------------
(Dollars in thousands)
The following table sets forth selected financial data for the Company's
domestic lending operations as of June 30, 1998 and 1997, and for the three
months then ended.
<TABLE>
<CAPTION>
1998 1997 Change
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 22,328 $ 19,312 16%
Proceeds from disposition of merchandise 47,633 43,536 9%
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 69,961 62,848 11%
- --------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 30,484 27,427 11%
- --------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 39,477 $ 35,421 11%
====================================================================================================================
OTHER DATA
Net revenue contribution by source -
Finance and service charges 56.6% 54.5% 4%
Margin on disposition of merchandise 43.4% 45.5% (5)%
Expenses as a percentage of net revenue --
Operations and administration 76.0% 75.5% 1%
Depreciation and amortization 9.4% 9.8% (4)%
Interest, net 5.9% 6.1% (3)%
Income from operations before depreciation
and amortization as a percentage of total revenue 13.5% 13.8% (2)%
Income before income taxes as a percentage of total revenue 5.0% 4.7% 6%
Annualized yield on loans 125% 126% (1)%
Average loan balance per average location in operation $ 186 $ 181 3%
Average loan amount at end of period (not in thousands) $ 79 $ 73 8%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 36.0% 37.0% (3)%
Average annualized merchandise turnover 2.4X 2.4x --
Average merchandise held for disposition
per average location $ 134 $ 134 --
Locations in operation --
Beginning of period 365 337
Acquired 43 6
Start-ups 3 6
Combined or closed (2) (2)
End of period 409 347 18%
Average number of locations in operation (a) 386 341 13%
====================================================================================================================
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 19
<PAGE> 22
DOMESTIC LENDING OPERATIONS
- -------------------------------------------------------------------------------
(Dollars in thousands)
The following table sets forth selected financial data for the Company's
domestic lending operations as of June 30, 1998 and 1997, and for the six months
then ended.
<TABLE>
<CAPTION>
1998 1997 Change
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 44,457 $ 38,901 14%
Proceeds from disposition of merchandise 101,172 93,347 8%
- --------------------------------------------------------------------------------------------------------------------
TOTAL OF REVENUE 145,629 132,248 10%
- --------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 64,638 59,632 8%
- --------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 80,991 $ 72,616 12%
====================================================================================================================
OTHER DATA
Net revenue contribution by source -
Finance and service charges 54.9% 53.6% 2%
Margin on disposition of merchandise 45.1% 46.4% (3)%
Expenses as a percentage of net revenue --
Operations and administration 72.9% 74.7% (2)%
Depreciation and amortization 8.9% 9.9% (10)%
Interest, net 5.5% 6.0% (8)%
Income from operations before depreciation
and amortization as a percentage of total revenue 15.1% 13.9% 9%
Income before income taxes as a percentage of total revenue 7.0% 5.1% 37%
Annualized yield on loans 128% 127% 1%
Average loan balance per average location in operation $ 187 $ 183 2%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 36.1% 36.1% --
Average annualized merchandise turnover 2.5X 2.6x (4)%
Average merchandise held for disposition
per average location $ 139 $ 139 --
Locations in operation --
Beginning of period 352 334
Acquired 55 6
Start-ups 4 10
Combined or closed (2) (3)
End of period 409 347 18%
Average number of locations in operation (a) 374 338 11%
====================================================================================================================
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period
Page 20
<PAGE> 23
FOREIGN LENDING OPERATIONS
- -------------------------------------------------------------------------------
(Dollars in thousands)
The table below sets forth selected consolidated financial data in U.S.
dollars for Harvey & Thompson and Svensk Pantbelaning as of June 30, 1998, and
1997, and for the three months then ended, using the following currency exchange
rates:
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Harvey & Thompson (pounds sterling per U.S. dollar)--
Balance sheet data - end of period currency exchange rate .5996 .6006
Income statement data - three months average currency exchange rate .6045 .6101
Svensk Pantbelaning (Swedish Kronor per U.S. dollar)--
Balance sheet data - end of period currency exchange rate 7.9799 7.7190
Income statement data - three months average currency exchange rate 7.8127 7.7100
- ----------------------------------------------------------------------------------------------------------------------------
1998 1997 CHANGE
- ----------------------------------------------------------------------------------------------------------------------------
REVENUE
Finance and service charges $ 5,676 $ 5,655 --
Proceeds from disposition of merchandise 592 439 35%
Check-cashing fees 200 -- --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 6,468 6,094 6%
Cost of disposed merchandise 488 311 57%
- ---------------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 5,980 $ 5,783 3%
===========================================================================================================================
OTHER DATA
Net revenue contribution by source-
Finance and service charges 94.9% 97.8% (3)%
Margin on disposition of merchandise 1.7% 2.2% (23)%
Check-cashing fees 3.4% -- --
Expenses as a percentage of net revenue-
Operations and administration 49.9% 46.0% 8%
Depreciation and amortization 6.1% 5.4% 13%
Interest, net 10.3% 9.8% 5%
Income from operations before depreciation and amortization
as a percentage of total revenue 46.3% 51.3% (10)%
Income before income taxes as a percentage of total revenue 31.3% 37.0% (15)%
Annualized yield on loans 50% 52% (4)%
Average loan balance per average location in operation $ 905 $ 903 --
Average loan amount at end of period (not in thousands) $ 177 $ 175 1%
Margin on disposition of merchandise as a percentage of proceeds
from disposition of merchandise 17.6% 29.2% (40)%
Average annualized merchandise turnover 1.4X 3.9X (64)%
Average merchandise held for disposition per average location $ 28 $ 7 300%
Locations in operation-
Beginning of period 50 48
Acquired -- --
Start-ups -- --
Combined or closed -- --
End of period 50 48 4%
Average number of locations in operation 50 48 4%
===========================================================================================================================
</TABLE>
Page 21
<PAGE> 24
<TABLE>
<CAPTION>
FOREIGN LENDING OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(Dollars in thousands)
The table below sets forth selected consolidated financial data in U.S.
dollars for Harvey & Thompson and Svensk Pantbelaning as of June 30, 1998, and
1997, and for the six months then ended, using the following currency exchange
rates:
1998 1997
- -----------------------------------------------------------------------------------------------------------------------
Harvey & Thompson (pounds sterling per U.S. dollar)--
Income statement data - six months average currency exchange rate .6061 .6112
Svensk Pantbelaning (Swedish Kronor per U.S. dollar)--
Income statement data six months average currency exchange rate 7.9155 7.5240
- -----------------------------------------------------------------------------------------------------------------------
1998 1997 CHANGE
- -----------------------------------------------------------------------------------------------------------------------
REVENUE
Finance and service charges $11,410 $11,537 (1)%
Proceeds from disposition of merchandise 1,191 792 50%
Check-cashing fees 311 -- --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 12,912 12,329 5%
Cost of disposed merchandise 948 567 67%
- -----------------------------------------------------------------------------------------------------------------------
NET REVENUE $11,964 $11,762 2%
=======================================================================================================================
OTHER DATA
Net revenue contribution by source-
Finance and service charges 95.4% 98.1% (3)%
Margin on disposition of merchandise 2.0% 1.9% 5%
Check-cashing fees 2.6% -- --
Expenses as a percentage of net revenue-
Operations and administration 48.5% 45.6% 6%
Depreciation and amortization 5.9% 5.3% 11%
Interest, net 10.0% 9.8% 2%
Income from operations before depreciation and amortization
as a percentage of total revenue 47.7% 51.9% (8)%
Income before income taxes as a percentage of total revenue 33.2% 37.5% (11)%
Annualized yield on loans 52% 54% (4)%
Average loan balance per average location in operation $ 887 $ 902 (2)%
Margin on disposition of merchandise as a percentage of proceeds
from disposition of merchandise 20.4% 28.4% (28)%
Average annualized merchandise turnover 1.6X 4.2X (62)%
Average merchandise held for disposition per average location $ 24 $ 6 300 %
Locations in operation-
Beginning of period 49 48
Acquired 1 --
Start-ups -- --
Combined or closed -- --
End of period 50 48 4%
Average number of locations in operation 50 48 4%
=======================================================================================================================
</TABLE>
Page 22
<PAGE> 25
Other Operations
- -------------------------------------------------------------------------------
(Dollars in thousands)
The following table sets forth selected financial data with respect to the
Company's other domestic operations as of June 30, 1998 and 1997, and for the
three months then ended.
<TABLE>
<CAPTION>
1998 1997 Change
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CHECK-CASHING OPERATIONS:
REVENUE
Check-cashing machine sales $ 302 $ -- --
Check-cashing royalties and fees 686 477 44%
- ---------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 988 477 107%
- ---------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Cost of check-cashing machines sold 292 -- --
- ---------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 696 $ 477 46%
=====================================================================================================================
OTHER DATA
Franchised check-cashing units --
Checks cashed per average unit $1,308 $ 1,165 12%
Royalties and franchise fees per average unit $ 3 $ 3 --
Units in operation at end of period 150 151 (1)%
Average units in operation for the period (a) 149 151 (1)%
Automated check-cashing machines in service --
Checks cashed per average machine $ 623 $ 240 160%
Verification and check-cashing fees per average
machine $ 4 -- --
Machines at end of period 45 2 2150%
Average number of machines for the period (a) 40 1 3900%
=====================================================================================================================
=====================================================================================================================
RENTAL OPERATIONS:
REVENUE
Tire and wheel rentals $ 588 n/a --
Tire and wheel sales 20 n/a --
Management fees and other 227 n/a --
- ---------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 835 n/a --
- ---------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Tire and wheel rentals 233 n/a --
Tire and wheel sales 15 n/a --
- ---------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 587 n/a --
=====================================================================================================================
OTHER DATA (OWNED LOCATIONS)
Rental agreements outstanding at end of period $1,417 n/a --
Average balance per rental agreement
at end of period (not in thousands) $ 920 n/a --
Locations in operation at end of period 4 n/a --
Average locations in operation for the period (a) 4 n/a --
=====================================================================================================================
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 23
<PAGE> 26
OTHER OPERATIONS
- -------------------------------------------------------------------------------
(Dollars in thousands)
- -------------------------------------------------------------------------------
The following table sets forth selected financial data with respect to the
Company's other domestic operations as of June 30, 1998 and 1997, and for the
six months then ended.
<TABLE>
<CAPTION>
1998 1997 Change
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CHECK-CASHING OPERATIONS:
REVENUE
Check-cashing machine sales $ 1,102 $ -- --
Check-cashing royalties and fees 1,415 1,361 4%
- -----------------------------------------------------------------------------------------------
TOTAL REVENUE 2,517 1,361 85%
- -----------------------------------------------------------------------------------------------
COSTS OF REVENUE
Cost of check-cashing machines sold 1,026 -- --
- -----------------------------------------------------------------------------------------------
NET REVENUE $ 1,491 $ 1,361 10%
===============================================================================================
OTHER DATA
Franchised check-cashing units --
Checks cashed per average unit $ 2,903 $ 2,509 16%
Royalties and franchise fees per average unit $ 8 $ 9 (11)%
Average units in operation for the period (a) 148 151 (2)%
Automated check-cashing machines in service --
Checks cashed per average machine $ 1,206 -- --
Verification and check-cashing fees per average
machine $ 7 -- --
Average number of machines for the period (a) 36 -- --
===============================================================================================
===============================================================================================
RENTAL OPERATIONS:
REVENUE
Tire and wheel rentals $ 978 n/a --
Tire and wheel sales 35 n/a --
Management fees and other 375 n/a --
- -----------------------------------------------------------------------------------------------
TOTAL REVENUE 1,388 n/a --
===============================================================================================
COSTS OF REVENUE
Tire and wheel rentals 369 n/a --
Tire and wheel sales 27 n/a --
- -----------------------------------------------------------------------------------------------
NET REVENUE $ 992 n/a --
===============================================================================================
OTHER DATA (OWNED LOCATIONS)
Average locations in operation period (a) 4 n/a --
===============================================================================================
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 24
<PAGE> 27
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES
THAT MAY AFFECT FUTURE RESULTS
Certain portions of this report contain forward-looking statements
about the business, financial condition and prospects of the Company. The actual
results of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties including,
without limitation, changes in demand for the Company's services, changes in
competition, the ability of the Company to open new operating units in
accordance with its plans, economic conditions, real estate market fluctuations,
interest rate fluctuations, changes in the capital markets, changes in tax and
other laws and governmental rules and regulations applicable to the Company's
business, and other risks indicated in the Company's filings with the Securities
and Exchange Commission. These risks and uncertainties are beyond the ability of
the Company to control, and, in many cases, the Company cannot predict all of
the risks and uncertainties that could cause its actual results to differ
materially from those indicated by the forward-looking statements. When used in
this report, the words "believes," "estimates," "plans," "expects,"
"anticipates" and similar expressions as they relate to the Company or its
management are intended to identify forward-looking statements.
Page 25
<PAGE> 28
PART II
Item 1. LEGAL PROCEEDINGS
See Note 7 of Notes to Consolidated Financial Statements
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 21, 1998, the Company's Annual Meeting of Shareholders was
held. All of the nominees for director identified in the Company's Proxy
Statement, filed pursuant to Regulation 14A under the Securities Exchange Act of
1934, were elected at the meeting to hold office until the next Annual Meeting
or until their successors are duly elected and qualified. The shareholders
ratified the Company's selection of independent auditors. There was no other
business brought before the meeting that required shareholder approval. Votes
were cast in the matters described below as follows (there were no broker
non-votes in matters (a) and (b) below):
(a) Election of directors
For Withheld
Jack R. Daugherty 21,844,711 78,674
A. R. Dike 21,844,724 78,661
Daniel R. Feehan 21,844,611 78,774
James H. Graves 21,751,524 171,861
B. D. Hunter 21,844,083 79,302
Timothy J. McKibben 21,757,124 166,261
Alfred J. Micallef 21,760,124 163,261
Clifton H. Morris, Jr. 21,839,324 84,061
Carl P. Motheral 21,836,788 86,597
Samuel W. Rizzo 21,844,711 78,674
Rosalin Rogers 21,760,130 163,255
Page 26
<PAGE> 29
(b) Ratification of Independent Auditors
For - 21,785,641
Against - 13,506
Abstain - 124,238
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - Second Amendment (June 24, 1998) to Amended and Restated
Senior Revolving Credit Facility Agreement dated as of
June 19, 1996.
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
Page 27
<PAGE> 30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASH AMERICA INTERNATIONAL, INC.
---------------------------------------------------
(Registrant)
BY: /s/ Thomas A. Bessant, Jr.
---------------------------------------------------
Thomas A. Bessant, Jr.
Executive Vice President and
Chief Financial Officer
Date: August 12, 1998
Page 28
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits
No. Description
<S> <C>
10.1 - Second Amendment (June 24, 1998) to Amended and
Restated Senior Revolving Credit Facility Agreement dated as
of June 19, 1996.
27 - Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDMENT TO AMENDED AND RESTATED
SENIOR REVOLVING CREDIT FACILITY AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED SENIOR REVOLVING CREDIT
FACILITY AGREEMENT (this "Second Amendment"), dated as of June 24, 1998, is
entered into among CASH AMERICA INTERNATIONAL, INC., a Texas corporation (the
"Borrower"), the lenders listed on the signature pages hereof (the "Lenders"),
NATIONSBANK, N.A. (successor by merger to NationsBank of Texas, N.A.), as
Administrative Agent (in said capacity, the "Administrative Agent").
BACKGROUND
A. The Borrower, certain of the Lenders, and the Administrative Agent
are parties to that certain Amended and Restated Senior Revolving Credit
Facility Agreement, dated as of June 19, 1996, as amended by that certain First
Amendment to Amended and Restated Senior Revolving Credit Facility Agreement,
dated as of December 11, 1997 (said Amended and Restated Senior Revolving Credit
Facility Agreement, as amended, the "Credit Agreement"; the terms defined in the
Credit Agreement and not otherwise defined herein shall be used herein as
defined in the Credit Agreement).
B. The Borrower, the Lenders, and the Administrative Agent desire to
amend the Credit Agreement to (i) increase the Commitment, (ii) add Chase Bank
of Texas, National Association ("Chase Texas") as a Lender, (iii) add Comerica
Bank-Texas as a Lender ("Comerica"), (iv) remove Citibank, N.A. ("Citibank") as
a Lender, (v) modify the calculation of Consolidated EBITDA, (vi) extend the
Maturity Date, (vii) revise the interest rate pricing, (viii) designate Wells
Fargo Bank (Texas), National Association, as Documentation Agent, and (ix) make
certain other changes therein.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the Borrower, the
Lenders, and the Administrative Agent covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) The definition of "Applicable Law" set forth in Section 1.1 of
the Credit Agreement is hereby amended to read as follows:
"`Applicable Law' means, (a) in respect of any Person, all
provisions of constitutions, statutes, rules, regulations and orders of
governmental bodies or regulatory agencies applicable to such Person
and its properties, including, without limiting the
<PAGE> 2
foregoing, all orders and decrees of all courts and arbitrators in
proceedings or actions to which the Person in question is a party, and
(b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, `Applicable Law'
means the laws of the United States of America, including without
limitation 12 USC Sections 85 and 86(a), as amended from time to time,
and any other statute of the United States of America now or at any
time hereafter prescribing the maximum rates of interest on loans and
extensions of credit, and the laws of the State of Texas, including,
without limitation, Article 5069-IH, Title 79, Revised Civil Statutes
of Texas, 1925, as amended (`Art. IH'), if applicable, and if Art. IH
is not applicable, Article 5069-ID, Title 79, Revised Civil Statutes,
1925, as amended (`Art. ID'), and any other statute of the State of
Texas now or at any time hereafter prescribing maximum rates of
interest on loans and extensions of credit; provided that the parties
hereto agree that the provisions of Chapter 346 of the Texas Finance
Code, as amended, shall not apply to Advances, this Agreement, the
Notes or any other Loan Papers."
(b) The definition of "Applicable Margin" set forth in Section 1.1 of
the Credit Agreement is hereby amended to read as follows:
"`Applicable Margin' means, for any particular date for any
LIBOR Advance, that rate of interest per annum equal to the rate set
forth below opposite the Leverage Ratio which is in effect for such
particular date:
Leverage Ratio Applicable Margin
------------------------------- -----------------
Greater than 0.45 to 1 1.00%
Less than or equal to 0.45 to 1 0.75%
The Applicable Margin payable by the Borrower on the Revolving Credit
Advances outstanding hereunder shall be adjusted on each Adjustment
Date, according to the performance of the Borrower for the most recent
fiscal quarter. For purposes of the foregoing, if the financial
statements of the Borrower setting forth the Leverage Ratio are not
received by the Administrative Agent by the date required pursuant to
Section 5.1(a) or 5.1(b), the Applicable Margin shall be determined as
if the Leverage Ratio is greater than 0.45 to 1 until such time as such
financial statements are received."
(c) The definition of "Commitment" set forth in Section 1.1 of the
Credit Agreement is hereby amended to read as follows:
"`Commitment' means $150,000,000, as reduced pursuant to
Section 2.6 hereof."
- 2 -
<PAGE> 3
(d) The definition of "Consolidated EBITDA" set forth in Section 1.1 of
the Credit Agreement is hereby amended by (i) deleting "." at the end thereof
and inserting ";" in lieu thereof and (ii) adding the following proviso at the
end thereof:
"provided, however, Consolidated EBITDA as determined as set forth
immediately preceding shall be (i) increased (on a non-cumulative
basis) to account for the acquisition of Doc Holliday's (A) for the
four fiscal quarters ending June 30, 1998, by $4,000,000, (B) for the
four fiscal quarters ending September 30, 1998, by $4,000,000, and (C)
for the four fiscal quarters ending December 31, 1998, by $2,000,000,
and (ii) adjusted to (A) include the pro forma EBITDA related to any
operating assets acquired (other than in respect of the acquisition of
Doc Holliday's) during any period of four consecutive fiscal quarters
(provided that the aggregate consideration for such assets acquired in
one transaction or a series of related transactions consisting of cash,
property (other than capital stock of the Borrower or any of its
Subsidiaries) and the amount of indebtedness assumed in respect of such
acquisition is in excess of $7,500,000) and based on audited financial
statements in form and substance reasonably satisfactory to the
Administrative Agent as if acquired at the beginning of such four
fiscal quarters and (B) exclude the EBITDA related to any operating
assets disposed of during any period of four consecutive fiscal
quarters (provided that the aggregate consideration for such assets
sold in one transaction or a series of related transactions consisting
of cash, property and the amount of indebtedness assumed in respect of
such acquisition is in excess of $7,500,000) as if disposed of at the
beginning of such four fiscal quarters."
(e) The definition of "Highest Lawful Rate" set forth in Section 1.1 of
the Credit Agreement is hereby amended to read as follows:
"`Highest Lawful Rate' shall mean at the particular time in
question the maximum rate of interest which, under Applicable Law, the
Lenders are then permitted to charge on the Obligations. If the maximum
rate of interest which, under Applicable Law, the Lenders are permitted
to charge on the Obligations shall change after the date hereof, the
Highest Lawful Rate shall be automatically increased or decreased, as
the case may be, from time to time as of the effective time of each
change in the Highest Lawful Rate without notice to the Borrower. For
purposes of determining the Highest Lawful Rate under the Applicable
Law of the State of Texas, the applicable rate ceiling shall be (a) the
weekly rate ceiling described in and computed in accordance with the
provisions of Art. ID.003, or (b) if the parties subsequently contract
as allowed by Applicable Law, the quarterly ceiling or the annualized
ceiling computed pursuant to Art. ID.008; provided, however, that at
any time the weekly rate ceiling, the quarterly ceiling or the
annualized ceiling shall be less than 18% per annum or more than 24%
per annum, the provisions of Art. ID.009(a) and (b) shall control for
purposes of such determination, as applicable."
(f) The definition of "Maturity Date" set forth in Section 1.1 of the
Credit Agreement is hereby amended to read as follows:
- 3 -
<PAGE> 4
"`Maturity Date' means June 30, 2003, or the earlier date of
termination in whole of the Commitment pursuant to Section 2.6 or 7.2
hereof."
(g) Section 1.1 of the Credit Agreement is further hereby amended by
(i) deleting the defined term "Art. 1.04" therefrom and (ii) adding the defined
terms "Doc Holliday's" and "Documentation Agent" thereto in proper alphabetical
order to read as follows:
"`Doc Holliday's' means Doc Holliday's Pawnbrokers and
Jewellers, Inc., a Delaware corporation."
"`Documentation Agent' means Wells Fargo Bank (Texas),
National Association.
(h) Article 4 of the Credit Agreement is hereby amended by adding a new
Section 4.24 thereto to read as follows:
"Section 4.24 Year 2000 Compliance. The Borrower has (a)
initiated a review and assessment of the areas within its and each of
its Subsidiaries' business and operations (including those affected by
its material suppliers and vendors other than the Lenders) that could
be materially adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Borrower or any of its
Subsidiaries (or its material suppliers and vendors other than the
Lenders) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December
31, 1999), (b) developed a plan and timeline for addressing the Year
2000 Problem on a timely basis, and (c) to date, implemented that plan
substantially in accordance with that timetable. The Borrower
reasonably believes that all computer applications (including those of
its material suppliers and vendors other than the Lenders) that are
material to its or any of its Subsidiaries' business and operations
will on a timely basis be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that is, be
"Year 2000 Compliant"), except to the extent that a failure to do so
could not reasonably be expected to have a Material Adverse Effect".
(i) Section 5.14(c) of the Credit Agreement is hereby amended to read
as follows:
"(c) Minimum Inventory Turnover. The Borrower shall not
permit, as of the end of any fiscal quarter, the ratio of (i) cost of
goods sold by the Borrower and its Consolidated Subsidiaries (excluding
cost of goods sold by Mr. Payroll Corporation) for the most recent
twelve months to (ii) the average monthly inventory of the Borrower and
its Consolidated Subsidiaries (based on the sum of the fiscal month end
inventory balance of the Borrower and its Consolidated Subsidiaries for
the most recent thirteen fiscal months of the Borrower, divided by
thirteen, but excluding any inventory of Mr. Payroll Corporation) to be
less than 1.60 to 1.0. The Borrower shall not permit the inventory of
Mr. Payroll Corporation to exceed $10,000,000 in aggregate amount."
- 4 -
<PAGE> 5
(j) Article 5 of the Credit Agreement is hereby amended by adding a new
Section 5.18 thereto to read as follows:
"Section 5.18 Year 2000 Compliance. The Borrower will promptly
notify the Administrative Agent in the event the Borrower discovers or
determines that any computer application (including those of its
material suppliers and vendors other than the Lenders) that is material
to its or any of its Subsidiaries' business and operations will not be
Year 2000 Compliant on a timely basis, except to the extent that such
failure could not reasonably be expected to have a Material Adverse
Effect."
(k) Section 6.1 of the Credit Agreement is hereby amended by (i)
deleting "$10,000,000" in clause (ii) thereof and inserting "$20,000,000" in
lieu thereof, (ii) deleting "(pound)5,000,000" in clause (x) thereof and
inserting "(pound)10,000,000" in lieu thereof and (iii) deleting "$105,000,000"
in clause (xvi) thereof and inserting "$125,000,000" in lieu thereof.
(l) Section 6.3 of the Credit Agreement is hereby amended by deleting
"$5,000,000" in clause (vii) thereof and inserting "$10,000,000" in lieu
thereof.
(m) Section 6.8 of the Credit Agreement is hereby amended to read as
follows:
"Section 6.8 Lines of Business. The Borrower shall not, and
will not permit any of its Subsidiaries to, directly or indirectly,
engage in any business other than (a) the pawn shop business, (b) the
business of cashing checks and conducting related cash dispensing
transactions, (c) the business of offering tires and wheels on a "rent
to own" or comparable basis and performing ancillary automobile related
services, and (d) activities related to the above."
(n) Article 10 of the Credit Agreement is hereby amended by adding a
new Section 10.15 thereto to read as follows:
"Section 10.15 No Duties of Documentation Agent. The Borrower
and the Lenders acknowledge that the Documentation Agent shall have no
duties, responsibilities or liabilities in its capacity as
Documentation Agent hereunder."
(o) Exhibit F to the Credit Agreement is hereby amended to be in the
form of Exhibit F to this Second Amendment.
(p) The Specified Percentage of (i) Chase Texas and Comerica are
indicated beside their respective names on the signature pages hereof and (ii)
each of the other Lenders is amended to be the percentage beside each such
Lender's name on the signature pages hereof.
- 5 -
<PAGE> 6
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendment contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the Credit
Agreement are true and correct on and as of the date hereof as if made
on and as of such date;
(b) no event has occurred and is continuing which constitutes
a Default or an Event of Default;
(c) the Borrower has full power and authority to execute and
deliver this Second Amendment, the $37,500,000 replacement Revolving
Credit Note payable to the order of NationsBank, N.A., the $37,500,000
replacement Revolving Credit Note payable to the order of Wells Fargo
Bank (Texas), National Association, the $33,000,000 replacement
Revolving Credit Note payable to the order of Bank One, Texas, N.A.,
the $16,250,000 replacement Revolving Credit Note payable to the order
of The Bank of Tokyo-Mitsubishi, Ltd., the $16,250,000 Revolving Credit
Note payable to the order of Chase Texas, and the $9,500,000 Revolving
Credit Note payable to the order of Comerica (collectively, the
"Revolving Credit Notes"), and this Second Amendment, the Credit
Agreement, as amended hereby, and the Revolving Credit Notes constitute
the legal, valid and binding obligations of the Borrower, enforceable
in accordance with their respective terms, except as enforceability may
be limited by applicable debtor relief laws and by general principles
of equity (regardless of whether enforcement is sought in a proceeding
in equity or at law) and except as rights to indemnity may be limited
by federal or state securities law;
(d) neither the execution, delivery and performance of this
Second Amendment, the Revolving Credit Notes or the Credit Agreement,
as amended hereby, nor the consummation of any transactions
contemplated herein or therein, will conflict with any Law to which the
Borrower or any Subsidiary is subject, or any indenture, agreement or
other instrument to which the Borrower or any Subsidiary or any of
their respective property is subject; and
(e) no authorization, approval, consent, or other action by,
notice to, or filing with, any governmental authority or other Person
(other than the Board of Directors of the Borrower), is required for
the execution, delivery or performance by the Borrower of this Second
Amendment, the Revolving Credit Notes, or the acknowledgment of this
Second Amendment by each Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This Second Amendment shall be
effective as of June 24, 1998 (and the revisions to the Applicable Margin set
forth herein shall be applicable to all LIBOR Advances outstanding on such
date), subject to the following:
- 6 -
<PAGE> 7
(a) the Administrative Agent shall have received counterparts
of this Second Amendment executed by the Lenders;
(b) the Administrative Agent shall have received counterparts
of this Second Amendment executed by the Borrower and acknowledged by
each Guarantor;
(c) the representations and warranties set forth in Section 2
of this Second Amendment shall be true and correct;
(d) Citibank shall have received payment in full of all
amounts due and owing to it under the Credit Agreement;
(e) each Lender shall have received its Revolving Credit Note;
(f) the Administrative Agent shall have received a certified
resolution of the Board of Directors of the Borrower authorizing the
execution, delivery and performance of this Second Amendment and the
Revolving Credit Notes;
(g) the Administrative Agent shall have received for the
account of each Lender (other than Citibank) an amendment fee equal to
the product of (a) 0.125% multiplied by (b) an amount equal to such
Lender's Specified Percentage (as amended, established or reaffirmed by
this Second Amendment) multiplied by the Commitment; and
(h) the Administrative Agent shall have received, in form and
substance satisfactory to the Administrative Agent and its counsel,
such other documents, certificates and instruments as the
Administrative Agent shall require.
4. GUARANTORS ACKNOWLEDGMENT. By signing below, each of the Guarantors
(a) acknowledges and consents to the execution, delivery and performance by the
Borrower of this Second Amendment, (b) agrees that its obligations in respect of
its Guaranty Agreement (i) are not released, modified, impaired or affected in
any manner by this Second Amendment or any of the provisions contemplated herein
and (ii) cover the Commitment as increased hereby, and (c) acknowledges that it
has no claims or offsets against, or defenses or counterclaims to, its Guaranty
Agreement.
5. DOC HOLLIDAY'S. By signing below, each of the Lenders agree that the
Borrower shall have until July 24, 1998 to cause Doc Holliday's to comply with
Section 5.15 of the Credit Agreement. Failure of Doc Holliday's to comply with
Section 5.15 of the Credit Agreement by July 24, 1998 shall be an Event of
Default under the Credit Agreement.
6. CITIBANK. Upon satisfaction of the conditions set forth in Section 3
of this Second Amendment, Citibank shall (a) not be a Lender under the Credit
Agreement and shall no longer have any rights or obligations with respect
hereto, except for those which expressly
- 7 -
<PAGE> 8
survive termination of the Credit Agreement or termination of any commitments
thereunder, and (b) mark its Revolving Credit Agreement "PAID IN FULL" and
return its Revolving Credit Note to the Borrower.
7. SECTION 10.6. The parties hereto agree that (a) the provisions of
Section 10.6 of the Credit Agreement shall not be required to be complied with
for the purpose of making Chase Texas and Comerica Lenders under the Credit
Agreement pursuant to this Second Amendment, and (b) by signing below, Chase
Texas and Comerica shall be Lenders under the Credit Agreement and each shall
have all rights and obligations of a Lender thereunder.
8. PURCHASE BY LENDERS. Simultaneously with the satisfaction of
conditions of effectiveness set forth in Section 3 hereof, each Lender shall be
deemed to have purchased without recourse an amount of each other Lender's
outstanding Advances such that after giving effect to this Second Amendment, the
percentage of each Lender's portion of the Commitment which has been satisfied
will be equal.
9. DOCUMENTATION AGENT. The parties hereto agree that Wells Fargo Bank
(Texas), National Association shall serve in the capacity of Documentation Agent
under the Credit Agreement.
10. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Second Amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder", or
words of like import shall mean and be a reference to the Credit
Agreement, as affected and amended by this Second Amendment.
(b) The Credit Agreement, as amended by this Second Amendment,
and all other Loan Papers shall remain in full force and effect and are
hereby ratified and confirmed.
11. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
costs and expenses of the Administrative Agent in connection with the
preparation, reproduction, execution and delivery of this Second Amendment and
the other instruments and documents to be delivered hereunder (including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under the Credit Agreement, as amended by
this Second Amendment).
12. EXECUTION IN COUNTERPARTS. This Second Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
- 8 -
<PAGE> 9
13. GOVERNING LAW; BINDING EFFECT. This Second Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon the Borrower, each Lender, and the Administrative Agent
and their respective successors and assigns.
14. HEADINGS. Section headings in this Second Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Second Amendment for any other purpose.
15. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SECOND
AMENDMENT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AS TO THE SUBJECT MATTER THEREIN AND HEREIN AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
===============================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
===============================================================================
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the date first above written.
CASH AMERICA INTERNATIONAL,
INC.
By: /s/ David J. Clay
------------------------------------
David J. Clay
Vice President and Treasurer
ACKNOWLEDGED AND AGREED FOR
PURPOSES OF SECTION 6 HEREOF:
CITIBANK, N.A.
By: /s/ David L. Harris
---------------------------------
Name: David L. Harris
Title: Vice President
NATIONSBANK, N.A., as Administrative
Agent and as a Lender
Specified Percentage:
25.0%
By: /s/ Todd Shipley
--------------------------------------
Todd Shipley
Senior Vice President
- 10 -
<PAGE> 11
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, as
Documentation Agent and as a Lender
Specified Percentage:
25.0%
By: /s/ Susan B.Sheffield
------------------------------------------
Name: Susan B.Sheffield
Title: Vice President
BANK ONE, TEXAS, N.A.
Specified Percentage:
22.0%
By: /s/ Barry B. Kromann
------------------------------------------
Name: Barry B. Kromann
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI,
LTD.
Specified Percentage:
10.833333%
By: /s/ John M. Mearns
------------------------------------------
Name: John M. Mearns
Title: Vice President and Manager
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
Specified Percentage:
10.833333%
By: /s/ B.B. Wuthrich
------------------------------------------
Name: B.B. Wuthrich
Title: Vice President
- 11 -
<PAGE> 12
COMERICA BANK-TEXAS
Specified Percentage:
6.333334%
By: /s/ Timothy C. Vela
Name: Timothy C. Vela
Title: Vice President
ACKNOWLEDGED AND AGREED:
CASH AMERICA, INC. OF SOUTH CAROLINA
FLORIDA CASH AMERICA, INC.
GEORGIA CASH AMERICA, INC.
CASH AMERICA, INC. OF LOUISIANA
CASH AMERICA, INC. OF NORTH CAROLINA
CASH AMERICA, INC. OF TENNESSEE
CASH AMERICA, INC. OF OKLAHOMA
CASH AMERICA, INC. OF KENTUCKY
CASH AMERICA PAWN, INC. OF OHIO
CASH AMERICA MANAGEMENT L.P., a Delaware
limited partnership, by its general
partner, Cash America Holding, Inc.
CASH AMERICA PAWN L.P., a Delaware limited
partnership, by its general
partner, Cash America Holding, Inc.
CASH AMERICA HOLDING, INC.
EXPRESS CASH INTERNATIONAL CORPORATION
CASH AMERICA, INC. OF ALABAMA
CASH AMERICA, INC. OF COLORADO
CASH AMERICA, INC. OF INDIANA
CASH AMERICA, INC.
CASH AMERICA OF MISSOURI, INC.
VINCENT'S JEWELERS AND LOAN, INC.
MR. PAYROLL CORPORATION
CASH AMERICA, INC. OF UTAH
CASH AMERICA FRANCHISING, INC.
By: /s/ David J. Clay
-------------------------------------
David J. Clay
Treasurer
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
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0
0
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