<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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission File Number 1-9733
CASH AMERICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2018239
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102
(Address of principal executive offices) (Zip Code)
(817) 335-1100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal
year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
25,611,976 common shares, $.10 par value, were outstanding as of July 31, 1999
================================================================================
<PAGE> 2
CASH AMERICA INTERNATIONAL, INC.
INDEX TO 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL STATEMENTS
Page
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1999
and 1998 and December 31, 1998 .......................................... 1
Consolidated Statements of Income -
Three Months and Six Months Ended June 30, 1999 and 1998 ................ 2
Consolidated Statements of Stockholders' Equity -
Three Months and Six Months Ended June 30, 1999 and 1998 ................ 3
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1999 and 1998 ................................. 4
Notes to Consolidated Financial Statements .............................. 5
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition ........................... 9
PART II. OTHER INFORMATION .................................................... 28
SIGNATURE ...................................................................... 30
</TABLE>
<PAGE> 3
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except share data) (UNAUDITED)
- --------------------------------------------------------------------------------------------------------
June 30, December 31,
1999 1998 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,133 $ 5,541 $ 4,417
Loans 132,127 125,678 128,637
Merchandise held for disposition, net 64,770 55,472 65,417
Inventory 2,096 4,826 3,093
Finance and service charges receivable 20,476 19,083 19,733
Prepaid expenses and other 9,391 6,424 7,129
Income taxes recoverable 7,843 - 5,870
Deferred tax assets 7,504 12,800 10,134
- --------------------------------------------------------------------------------------------------------
Total current assets 247,340 229,824 244,430
Property and equipment, net 62,231 68,202 73,347
Intangible assets, net 90,818 89,522 88,284
Other assets 4,340 3,363 4,762
Investment in and advances
to unconsolidated subsidiary 16,524 - -
- --------------------------------------------------------------------------------------------------------
Total assets $ 421,253 $ 390,911 $ 410,823
========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 14,635 $ 20,630 $ 19,848
Customer deposits 4,602 4,277 4,151
Income taxes currently payable 2,923 2,130 2,133
Current portion of long-term debt 4,699 4,286 4,686
- --------------------------------------------------------------------------------------------------------
Total current liabilities 26,859 31,323 30,818
Deferred tax liabilities 1,249 - 3,273
Long-term debt 199,936 177,946 189,288
- --------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $.10 par value per
share, 80,000,000 shares authorized 3,024 3,024 3,024
Paid in surplus 127,352 126,250 126,615
Retained earnings 108,813 96,893 102,722
Accumulated other comprehensive loss (4,865) (2,084) (2,414)
Notes receivable - stockholders (5,417) (2,509) (3,263)
- --------------------------------------------------------------------------------------------------------
228,907 221,574 226,684
Less -- shares held in treasury, at cost (35,698) (39,932) (39,240)
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 193,209 181,642 187,444
- --------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 421,253 $ 390,911 $ 410,823
========================================================================================================
</TABLE>
See notes to consolidated financial statements.
Page 1
<PAGE> 4
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands, except per share data) (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Finance and service charges $ 30,033 $ 28,004 $ 61,528 $ 55,867
Proceeds from disposition of merchandise 52,861 48,225 114,082 102,363
Check cashing machine sales - 302 82 1,102
Check cashing royalties and fees 973 886 2,411 1,726
Rental operations 2,468 835 3,918 1,388
- --------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 86,335 78,252 182,021 162,446
- --------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 35,076 30,972 75,492 65,586
Cost of check cashing machines sold - 292 38 1,026
Rental operations 565 248 888 396
- --------------------------------------------------------------------------------------------------------------------
NET REVENUE 50,694 46,740 105,603 95,438
====================================================================================================================
OPERATING EXPENSES
Lending operations 29,741 27,837 59,866 54,428
Check cashing operations - 1,782 1,728 3,017
Rental operations 967 469 1,478 678
Administration 6,299 6,316 13,659 12,570
Depreciation 3,815 3,342 7,728 6,559
Amortization 1,197 981 2,385 1,843
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses 42,019 40,727 86,844 79,095
- --------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 8,675 6,013 18,759 16,343
Interest expense, net 3,226 3,269 6,557 6,276
Equity in loss of unconsolidated subsidiary 2,346 - 2,933 80
Gain from issuance of subsidiary's stock
(net of income taxes) (22) - (1,150) -
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 3,125 2,744 10,419 9,987
Provision for income taxes 1,201 1,110 3,695 3,819
- --------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,924 $ 1,634 $ 6,724 $ 6,168
- --------------------------------------------------------------------------------------------------------------------
Net income per share:
Basic $ .08 $ .07 $ .27 $ .25
Diluted .07 .06 .25 .24
- --------------------------------------------------------------------------------------------------------------------
Weighted average shares:
Basic 25,416 24,788 25,304 24,610
Diluted 26,552 26,398 26,484 26,061
====================================================================================================================
</TABLE>
See notes to consolidated financial statements.
Page 2
<PAGE> 5
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
(In thousands, except share data) (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
COMMON STOCK
-------------------- PAID IN RETAINED COMPREHENSIVE
SHARES AMOUNT SURPLUS EARNINGS INCOME
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1998 30,235,164 $ 3,024 $126,615 $102,722
Comprehensive income:
Net income 6,724 $ 6,724
--------
Other comprehensive
income - Foreign
currency translation
adjustments (2,451)
--------
Comprehensive income $ 4,273
--------
Dividends declared (633)
Treasury shares acquired
Treasury shares reissued (159)
Tax benefit from exercise
of option shares 896
Change in notes
receivable - stockholders
- ----------------------------------------------------------------------------------------------------------
Balance at
June 30, 1999 30,235,164 $ 3,024 $127,352 $108,813
==========================================================================================================
Balance at
December 31, 1997 30,235,164 $ 3,024 $122,155 $ 91,337
Comprehensive income:
Net income 6,168 $ 6,168
--------
Other comprehensive
income - Foreign
currency translation
adjustments 374
--------
Comprehensive income $ 6,542
--------
Dividends declared (612)
Treasury shares acquired
Treasury shares reissued 3,735
Tax benefit from exercise
of option shares 360
Change in notes
receivable - stockholders
- ----------------------------------------------------------------------------------------------------------
Balance at
June 30, 1998 30,235,164 $ 3,024 $126,250 $ 96,893
==========================================================================================================
<CAPTION>
(In thousands, except share data) (UNAUDITED)
- -------------------------------------------------------------------------------------
ACCUMULATED NOTES
OTHER RECEIVABLE - TREASURY STOCK
COMPREHENSIVE STOCK- ----------------------
INCOME (LOSS) HOLDERS SHARES AMOUNT
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at
December 31, 1998 $ (2,414) $ (3,263) 5,114,218 $ (39,240)
Comprehensive income:
Net income
Other comprehensive
income - Foreign
currency translation
adjustments (2,451)
Comprehensive income
Dividends declared
Treasury shares acquired 3,851 (58)
Treasury shares reissued (471,520) 3,600
Tax benefit from exercise
of option shares
Change in notes
receivable - stockholders (2,154)
- -------------------------------------------------------------------------------------
Balance at
June 30, 1999 $ (4,865) $ (5,417) 4,646,549 $ (35,698)
=====================================================================================
Balance at
December 31, 1997 $ (2,458) $ (2,362) 5,812,519 $ (44,400)
Comprehensive income:
Net income
Other comprehensive
income - Foreign
currency translation
adjustments 374
Comprehensive income
Dividends declared
Treasury shares acquired 16,619 (233)
Treasury shares reissued (615,936) 4,701
Tax benefit from exercise
of option shares
Change in notes
receivable - stockholders (147)
- -------------------------------------------------------------------------------------
Balance at
June 30, 1998 $ (2,084) $ (2,509) 5,213,202 $ (39,932)
=====================================================================================
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 6
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
Six Months Ended
June 30,
1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,724 $ 6,168
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 7,728 6,559
Amortization 2,385 1,843
Equity in loss of unconsolidated subsidiary 2,933 80
Gain from issuance of subsidiary's stock (1,150) --
Changes in operating assets and liabilities-
Merchandise held for disposition and inventory 212 (236)
Finance and service charges receivable (1,083) (885)
Prepaid expenses and other (3,060) (2,721)
Accounts payable and accrued expenses (2,238) 4,105
Customer deposits, net 450 255
Current income taxes (341) (1,358)
Deferred taxes, net 407 1,327
- -------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,967 15,137
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans forfeited and transferred to merchandise held for disposition 67,736 58,555
Loans repaid or renewed 149,770 142,303
Loans made, including loans renewed (222,121) (207,504)
- -------------------------------------------------------------------------------------------------------
Net increase in loans (4,615) (6,646)
- -------------------------------------------------------------------------------------------------------
Acquisitions, net of cash acquired (6,106) (20,877)
Effect on cash of de-consolidation of subsidiary (4,795) --
Advances to unconsolidated subsidiaries (500) (120)
Purchases of property and equipment (10,578) (9,617)
Proceeds from sales of property and equipment -- 883
- -------------------------------------------------------------------------------------------------------
Net cash used by investing activities (26,594) (36,377)
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments) borrowings under bank lines of credit 16,300 36,135
Payments on notes payable, capital lease and other obligations (4,502) (10,857)
Net proceeds from reissuance of treasury shares 1,287 1,218
Treasury shares sold (purchased) (58) (233)
Dividends paid (633) (612)
- -------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 12,394 25,651
- -------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (51) 11
- -------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND CASH EQUIVALENTS (1,284) 4,422
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,417 1,119
- -------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,133 $ 5,541
=======================================================================================================
SUPPLEMENTAL DISCLOSURES
NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchase transactions-
Treasury shares reissued $ -- $ 7,131
Liabilities assumed -- 8,221
Loans to stockholders for exercise of stock options 2,154 22
=======================================================================================================
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 7
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of Cash
America International, Inc. and its majority-owned subsidiaries (the "Company").
All significant intercompany accounts and transactions have been eliminated in
consolidation.
In January 1999, the manned check cashing business of Mr. Payroll
Corporation ("Mr. Payroll"), a wholly owned subsidiary of the Company, was
transferred to a new wholly owned, consolidated subsidiary. Through March 9,
1999, Mr. Payroll's remaining assets and liabilities, consisting of its
automated check cashing machine ("CCM") business, and the results of its
operations were included in the consolidated financial statements. Effective as
of the close of business on March 9, 1999, Mr. Payroll sold, in a private
placement, newly issued shares of its senior convertible preferred stock and
common stock. As of June 30, 1999, the Company owns 40.2% of the voting interest
in Mr. Payroll, and is accounting for its investment and its share of the
results of Mr. Payroll's operations after March 9, 1999, by the equity method
(see Note 3).
The financial statements as of June 30, 1999 and 1998, and for the three
month and six month periods then ended are unaudited but, in management's
opinion, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such interim
periods. Operating results for the three month 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
month and six month periods ended June 30, 1998, have been reclassified to
conform to the presentation format adopted in 1999. These reclassifications have
no effect on the net income previously reported.
These financial statements and related notes should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's 1998 Annual Report to Stockholders.
2. REVENUE RECOGNITION
Lending Operations o Pawn loans ("loans") are made on the pledge of tangible
personal property. The Company accrues finance and service charge revenue on all
loans that the Company deems collection is probable based on historical loan
redemption statistics. For loans not repaid, the carrying value of the forfeited
collateral ("merchandise held for disposition") is stated at the lower of cost
(cash amount loaned) or market.
Page 5
<PAGE> 8
Revenue is recognized at the time of disposition of merchandise. Interim
customer payments for layaway sales are recorded as deferred revenue and
subsequently recognized as revenue during the period in which final payment is
received.
Check Cashing Operations o The Company records fees derived from its owned check
cashing locations in the period in which the service is provided. Royalties
derived from franchised locations are recorded on the accrual basis. Prior to
the de-consolidation of Mr. Payroll's CCM business, CCM sales revenue was
recorded upon installation and activation of the CCM.
Rental Operations o Tire and wheel rentals are paid on a weekly basis in advance
and receipts are recorded on the cash basis. Customers may return the tires and
wheels at any time and have no obligation to complete the rental agreement.
Rent-A-Tire, Inc. ("Rent-A-Tire") has also entered into agreements to operate
and manage stores for unrelated investors. The investors own the stores and
incur all costs to operate them. Management fees earned by Rent-A-Tire are
recorded in revenue over the life of the agreement. In addition, Rent-A-Tire
receives initial compensation for its efforts in constructing and opening each
store.
3. ISSUANCE OF SUBSIDIARY'S STOCK
In March 1999, Wells Fargo Cash Centers, Inc. ("Cash Centers"), a wholly owned
subsidiary of Wells Fargo Bank, N.A. ("Wells Fargo"), made a contribution to Mr.
Payroll of $21.0 million of cash and assets valued at $6.0 million that
primarily consisted of an existing network of approximately 200 automated teller
machines operating in gaming establishments. In addition, Wells Fargo agreed to
provide Mr. Payroll a $5.0 million revolving credit facility, up to $17.0
million in equipment lease financing, and cash for use in its CCMs and ATMs in
specified markets at negotiated rates. In return, Cash Centers received newly
issued shares of Mr. Payroll's senior convertible preferred stock representing
45% of its voting interest. Also, certain members of the newly constituted
management of Mr. Payroll subscribed for newly issued shares of common stock of
Mr. Payroll, representing 10% of its voting interest. In addition, the Company
assigned 10% of its senior convertible preferred stock to the former owners of
Mr. Payroll in consideration for the termination of an option issued in
conjunction with the Company's original acquisition of Mr. Payroll.
In May 1999, Mr. Payroll sold additional newly issued shares of common stock,
reducing the Company's voting interest to 40.2% from 40.5%. The Company's
ownership is represented by the shares of senior convertible preferred stock
issued in March 1999. The Company recognized a net gain of $1.1 million (after
applicable income taxes of $3.4 million) as a result of the transactions
described above.
4. ACQUISITIONS
During 1999, the Company acquired three pawnshops in purchase transactions for
an aggregate cash consideration of $2.3 million. The excess purchase price over
net assets acquired of $1.1 million is being amortized on a straight-line basis
over the expected period of benefit of 20 to 40 years. Also during 1999,
Rent-A-Tire acquired nine tire rental stores that it previously managed, in
purchase transactions for $3.8 million of cash. The excess
Page 6
<PAGE> 9
purchase price over net assets acquired of $2.4 million is being amortized on a
straight-line basis over the expected period of benefit of 15 years.
5. LONG-TERM DEBT
The Company's long-term debt instruments and balances outstanding as of June 30
are as follows (balances in thousands of U.S. dollars):
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Line of Credit up to $150 million
due June 30, 2003 $ 109,225 $ 85,250
U.K. Line of Credit up to(pound)10 million
due April 30, 2001 9,622 4,253
Swedish Lines of Credit up to SEK 215 million 16,299 21,300
8.33% senior unsecured notes due 2003 17,143 21,429
8.14% senior unsecured notes due 2007 20,000 20,000
7.10% senior unsecured notes due 2008 30,000 30,000
Capital lease obligations payable 1,846 --
6.25% subordinated unsecured notes due 2004 500 --
- ------------------------------------------------------------------------------------------
204,635 182,232
Less current portion 4,699 4,286
- ------------------------------------------------------------------------------------------
Long-term debt $199,936 $177,946
==========================================================================================
</TABLE>
6. 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 (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average shares - Basic 25,416 24,788 25,304 24,610
Effect of shares applicable to stock option plans 1,095 1,587 1,142 1,434
Effect of shares applicable to nonqualified savings plan 41 23 38 17
- ---------------------------------------------------------------------------------------------------------------
Weighted average shares - Diluted 26,552 26,398 26,484 26,061
===============================================================================================================
</TABLE>
Page 7
<PAGE> 10
7. OPERATING SEGMENT INFORMATION
The Company has two reportable operating segments in the lending industry and
one each in the check cashing and rental industries. While the United States and
foreign lending segments offer the same services, each is managed separately due
to the different operational strategies required. The automated check cashing
and rental operations are managed separately because they offer different
services and products, each of which requires its own technical, marketing and
operational strategy.
Information concerning the segments is set forth below (in thousands):
<TABLE>
<CAPTION>
Lending
------------------------------
United Check
States Foreign Total Cashing(A) Rental Consolidated
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended June
30, 1999:
Total revenue $ 76,242 $ 7,625 $ 83,867 $ -- $ 2,468 $ 86,335
Income
from operations 5,518 2,920 8,438 -- 237 8,675
Total assets at end of
period 307,943 81,951 389,894 16,524 14,835 421,253
- ------------------------------------------------------------------------------------------------------
Three Months Ended June
30, 1998:
Total revenue 69,961 6,468 76,429 988 835 78,252
Income (loss)
from operations 5,781 2,637 8,418 (2,254) (151) 6,013
Total assets at end of
period 289,536 77,780 367,316 18,517 5,078 390,911
======================================================================================================
Six Months Ended
June 30, 1999:
Total revenue $162,579 $ 15,070 $177,649 $ 454 $ 3,918 $182,021
Income (loss)
from operations 15,277 5,904 21,181 (2,637) 215 18,759
- ------------------------------------------------------------------------------------------------------
Six Months Ended
June 30, 1998:
Total revenue 145,629 12,912 158,541 2,517 1,388 162,446
Income (loss)
from operations 14,743 5,486 20,229 (3,675) (211) 16,343
======================================================================================================
</TABLE>
(A) Only CCM operations are included in 1999. See Note 3
8. LITIGATION
The Company is a defendant in certain lawsuits encountered in the ordinary
course of its business. In the opinion of management, the resolution of these
matters will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.
Page 8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SUMMARY CONSOLIDATED FINANCIAL DATA
SECOND QUARTER ENDED JUNE 30, 1999 vs.
SECOND QUARTER ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
(Dollars in thousands)
The following table sets forth selected consolidated financial data with
respect to the Company and its consolidated lending operations as of June 30,
1999 and 1998, and for the three months then ended.
<TABLE>
<CAPTION>
1999 1998 Change
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 30,033 $ 28,004 7%
Proceeds from disposition of merchandise 52,861 48,225 10%
Check cashing machine sales -- 302 (100)%
Check cashing royalties and fees 973 886 10%
Rental operations 2,468 835 196%
- ----------------------------------------------------------------------------------------------------
TOTAL REVENUE 86,335 78,252 10%
- ----------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 35,076 30,972 13%
Cost of check cashing machines sold -- 292 (100)%
Rental operations 565 248 128%
- ----------------------------------------------------------------------------------------------------
NET REVENUE $ 50,694 $ 46,740 8%
- ----------------------------------------------------------------------------------------------------
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source--
Finance and service charges 59.2% 59.9% (1)%
Margin on disposition of merchandise 35.1% 36.9% (5)%
Check cashing operations 1.9% 1.9% --
Rental operations 3.8% 1.3% 199%
Expenses as a percentage of net revenue--
Operations and administration 73.0% 77.9% (6)%
Depreciation and amortization 9.9% 9.2% 8%
Interest, net 6.4% 7.0% (9)%
Income from operations before depreciation
and amortization as a percentage of total revenue 15.9% 13.2% 20%
Income before income taxes as a percentage of total revenue 3.6% 3.5% 3%
- ----------------------------------------------------------------------------------------------------
CONSOLIDATED LENDING OPERATIONS:
Annualized yield on loans 95% 96% (1)%
Average loan balance per average location in operation $ 272 $ 268 1%
Average loan amount at end of period (not in thousands) $ 100 $ 99 1%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 33.6% 35.8% (6)%
Average annualized merchandise turnover 2.2x 2.3x (4)%
Average merchandise held for disposition
per average location $ 137 $ 122 12%
Lending locations in operation--
Beginning of period 461 415
Acquired 3 43
Start-ups 2 3
Combined or closed -- (2)
End of period 466 459 2%
Average number of locations in operation (a) 464 436 6%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 9
<PAGE> 12
SIX MONTHS ENDED JUNE 30, 1999 vs.
SIX MONTHS ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
(Dollars in thousands)
The following table sets forth selected consolidated financial data with
respect to the Company and its consolidated lending operations as of June 30,
1999 and 1998, and for the six months then ended.
<TABLE>
<CAPTION>
1999 1998 Change
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 61,528 $ 55,867 10%
Proceeds from disposition of merchandise 114,082 102,363 11%
Check cashing machine sales 82 1,102 (93)%
Check cashing royalties and fees 2,411 1,726 40%
Rental operations 3,918 1,388 182%
- --------------------------------------------------------------------------------------------------------
TOTAL REVENUE 182,021 162,446 12%
- --------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 75,492 65,586 15%
Cost of check cashing machines sold 38 1,026 (96)%
Rental operations 888 396 124%
- --------------------------------------------------------------------------------------------------------
NET REVENUE $ 105,603 $ 95,438 11%
- --------------------------------------------------------------------------------------------------------
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source--
Finance and service charges 58.3% 58.5% --
Margin on disposition of merchandise 36.5% 38.5% (5)%
Check cashing operations 2.3% 1.9% 21%
Rental operations 2.9% 1.1% 164%
Expenses as a percentage of net revenue--
Operations and administration 72.7% 74.1% (2)%
Depreciation and amortization 9.6% 8.8% 9%
Interest, net 6.2% 6.6% (6)%
Income from operations before depreciation
and amortization as a percentage of total revenue 15.9% 15.2% 5%
Income before income taxes as a percentage of total revenue 5.7% 6.1% (7)%
- --------------------------------------------------------------------------------------------------------
CONSOLIDATED LENDING OPERATIONS:
Annualized yield on loans 98% 99% (1)%
Average loan balance per average location in operation $ 272 $ 270 1%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 33.8% 35.9% (6)%
Average annualized merchandise turnover 2.4X 2.5x (4)%
Average merchandise held for disposition
per average location $ 139 $ 126 10%
Lending locations in operation--
Beginning of period 464 401
Acquired 3 56
Start-ups 2 4
Combined or closed (3) (2)
End of period 466 459 2%
Average number of locations in operation (a) 464 424 9%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 10
<PAGE> 13
GENERAL
The Company is a diversified provider of specialty financial services to
individuals in the United States, United Kingdom and Sweden. The Company offers
secured non-recourse loans, commonly referred to as pawn loans, to individuals
through its lending operations. The pawn loan portfolio generates finance and
service charge revenue. The disposition of merchandise, primarily collateral
from unredeemed pawn loans, is a related but secondary source of net revenue
from the Company's lending function. The Company also provides check cashing
services through its franchised and company owned Mr. Payroll(R) manned check
cashing centers and rental of tires and wheels through its subsidiary,
Rent-A-Tire, Inc. ("Rent-A-Tire").
The Company expanded its lending operations during the eighteen month
period ended June 30, 1999, by adding a net sixty-five locations. Nine locations
were established, sixty-four operating units were acquired, and eight locations
were combined or closed. As of June 30, 1999, the Company operated 466 lending
units--414 in sixteen states in the United States, forty-one jewelry-only units
in the United Kingdom, and eleven loan-only and primarily jewelry-only units in
Sweden.
During the first quarter of 1999, the Company restructured the business of
its check cashing subsidiary, Mr. Payroll Corporation ("Mr. Payroll"), in a
series of transactions designed to isolate and accelerate the development and
deployment of the automated check cashing machine ("CCM"). In January 1999, the
Company transferred its manned check cashing operations out of Mr. Payroll into
a new, wholly owned subsidiary of the Company. As of June 30, 1999, the Company
operated 128 franchised and nine company owned manned check cashing centers,
continuing to do business under the Mr. Payroll name, in twenty states compared
to 136 franchised and 10 company owned centers as of June 30, 1998. Operations
related to the development of CCMs remained in Mr. Payroll. On March 9, 1999,
Wells Fargo Cash Centers, Inc. ("Cash Centers"), a wholly owned subsidiary of
Wells Fargo Bank, N.A. ("Wells Fargo"), made a contribution to Mr. Payroll of
$21.0 million of cash and assets valued at $6.0 million that primarily consisted
of an existing network of approximately 200 automated teller machines operated
in gaming establishments. In return, Cash Centers received newly issued shares
of Mr. Payroll's senior convertible preferred stock representing 45% of Mr.
Payroll's voting interest. Also, certain members of the newly constituted
management of Mr. Payroll subscribed for newly issued shares of common stock of
Mr. Payroll, representing 10% of its voting interest. In addition, the Company
assigned 10% of its senior convertible preferred stock to the former owners of
Mr. Payroll in consideration for the termination of an option issued in
conjunction with the Company's original acquisition of Mr. Payroll. Upon
completion of the transactions, the Company's residual ownership interest in Mr.
Payroll was 40.5%, Mr. Payroll was de-consolidated and the Company began
accounting for its investment and its share of the results of Mr. Payroll's
operations after March 9, 1999, by the equity method. In May 1999, Mr. Payroll
sold additional shares of newly issued common stock. As of June 30, 1999, the
Company's ownership interest in Mr. Payroll is 40.2%. See Note 3 of Notes to
Consolidated Financial Statements.
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Through January 31, 1998, the Company had a 49% ownership interest in
Express Rent A Tire, Ltd. ("Express") that was accounted for by the equity
method of accounting. Effective February 1, 1998, the Company increased its
ownership interest to 99.9% and reorganized the operations of Express into
Rent-A-Tire. The acquisition of additional interests was accounted for as a
purchase and, accordingly, the assets and liabilities of Rent-A-Tire and the
results of its operations have been included in the consolidated financial
statements since February 1, 1998. As of June 30, 1999, Rent-A-Tire owned and
operated thirteen tire and wheel rental stores, including nine that were
previously managed and were purchased in 1999, and it managed thirteen
additional tire and wheel rental stores under the Rent-A-Tire name, including
eight that were added during the first six months of 1999.
RESULTS OF OPERATIONS
SECOND QUARTER ENDED JUNE 30, 1999, COMPARED TO THE
SECOND QUARTER ENDED JUNE 30, 1998
Net Revenue: Consolidated. Consolidated net revenue increased 8% to $50.7
million during the second quarter ended June 30, 1999 (the "current quarter"),
from $46.7 million during the second quarter ended June 30, 1998 (the "prior
year quarter"). Of the 8% increase, 2% was attributable to gains from same unit
lending operations (those in operation for more than one year), 5% was
attributable to the new lending units in operation for less than one year during
the quarter, and 1% was attributable to increases in the check cashing and
rental operations of the Company.
Net Revenue: Lending Activities. Net revenue from lending operations
increased $3.3 million to $48.8 million during the current quarter from $45.5
million during the prior year quarter. The new lending units in operation for
less than one year during the quarter contributed $2.4 million of the increase.
The principal components of lending operations net revenue are finance and
service charges, which accounted for $2.0 million of the total increase, and net
revenue from the disposition of merchandise, which accounted for $.5 million of
the total increase. The remaining components, domestic manned check cashing
operations and foreign check cashing operations accounted for $.8 million of the
total increase.
Finance and service charges are affected by changes in both the average
outstanding balance of the pawn loan portfolio and the annualized yield on such
loans. Finance and service charges increased a net amount of $2.0 million, or
7%, in the current quarter over the prior year quarter. The Company's continued
emphasis on increasing its investment in pawn loans resulted in an 8% increase
in the average outstanding balance of pawn loans and thus provided the base for
increased finance and service charges revenue. Average outstanding pawn loans
increased due to a 6% increase in the average number of pawn loans outstanding
combined with a 2% increase in the average loan amount. Same units contributed
$1.2 million of the $2.0 million net increase.
The consolidated annualized loan yield, which represents the blended
result as derived from the distinctive loan yields realized in the three
countries in which the Company operates, was
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95% in the current quarter compared to 96% in the prior year quarter. The
domestic annualized loan yield was 122% for the current quarter compared to 125%
for the prior year quarter. The loan yield decline can be attributed to a higher
concentration of lower-yielding loans in the portfolio. The higher concentration
arises from higher loan amounts in some markets and the expansion into
lower-yielding markets during 1998. The blended yield on average foreign pawn
loans outstanding was 52% for the current quarter compared to 50% in the prior
year quarter. The increase in foreign loan yields resulted from slightly higher
loan yields on redeemed loans in Sweden, and marginally higher returns on the
disposition of unredeemed collateral at auction.
Net revenue from the disposition of merchandise represents the proceeds
received from the disposition of merchandise in excess of the cost of
merchandise disposed. Proceeds from the disposition of merchandise in the
current quarter were $4.6 million, or 10%, higher than the prior year quarter
primarily due to the addition of the new lending units. The margin on
disposition of merchandise declined to 33.6% in the current quarter from 35.8%
during the prior year quarter. Excluding the effect of the disposition of scrap
jewelry, the margin on disposition of merchandise fell to 35.9% for the current
quarter from 37.1% in the prior year quarter primarily due to price discounting
and a higher average cost of items disposed. The margin on disposition of scrap
jewelry was negligible in the current quarter as a result of the decline in the
price of gold. The net result of the increased proceeds and reduced margin was a
$.5 million, or 3%, increase in net revenue from the disposition of merchandise.
The merchandise turnover rate declined to 2.2 times in the current quarter
compared to 2.3 times in the prior year quarter due to higher average
merchandise balances. In order to maintain merchandise at desired levels over
the remainder of 1999, additional price discounting may be necessary. This
combined with any further decline in the price of gold may result in continued
downward pressure on the Company's margin on disposition of merchandise.
Net Revenue: Other Activities. The restructuring of the Company's check
cashing operations and resulting de-consolidation of Mr. Payroll caused a
decline in other net revenue in the current year quarter of $.7 million from the
prior year quarter. Following de-consolidation, the Company began accounting for
its investment in Mr. Payroll by the equity method and, accordingly, the
Company's 40.2% share of the results of operations of Mr. Payroll are recorded
in "Equity in loss of unconsolidated subsidiary."
Net revenue of Rent-A-Tire increased to $1.9 million in the current quarter
from $.6 million for the prior year quarter primarily due to the addition of
nine stores that were previously managed by Rent-A-Tire, and an increase in the
number of managed stores to 13 at June 30, 1999.
Operations and Administration Expenses. Consolidated operations and
administration expenses as a percentage of net revenue decreased to 73% in the
current quarter compared to 78% for the prior year quarter primarily due to the
de-consolidation of Mr. Payroll which accounted for $2.7 million of operations
and administration expenses in the prior year quarter. Excluding the effect of
Mr. Payroll in the prior year quarter, consolidated operations and
administration expenses as a percentage of net revenue were 73% in both the
current quarter and the prior year quarter. Total operations and administration
expenses, excluding Mr. Payroll, increased $3.3 million, or 10%, in the
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current quarter as compared to the prior year quarter. Domestic lending
operations contributed $2.4 million of the increase as a result of higher
personnel, occupancy, selling, and other office and administration expenses
primarily attributable to new units which accounted for $2.0 million of the
domestic increase. Foreign lending operations contributed $.1 million of the
increase and Rent-A-Tire accounted for the remaining $.8 million of the
increase.
Depreciation and Amortization. Depreciation and amortization expenses as a
percentage of net revenue increased to 10% in the current quarter from 9% in the
prior year quarter. Depreciation and amortization expenses increased 16%
principally due to the effect of the increase in additional lending units during
1998.
Interest Expense. Net interest expense as a percentage of net revenue
declined to 6.4% in the current quarter from 7.0% in the prior year quarter. The
amount decreased a net $.1 million, or 1.3%, due to the effect of a 14.5%
reduction in the Company's blended borrowing costs that was partially offset by
a higher average debt balance. The effective blended borrowing cost decreased to
6.7% in the current quarter from 7.8% in the prior year quarter. Average debt
outstanding increased 15.3% to $193.9 million during the current quarter from
$168.2 million during the prior year quarter due to the Company's expansion and
investment in Mr. Payroll in 1998.
Other Items. Equity in the loss of unconsolidated subsidiary includes $2.3
million of losses in the current quarter from the Company's 40.2% equity
interest in the losses incurred by the CCM business following Mr. Payroll's
de-consolidation. The Company anticipates that these losses will increase over
the next several periods as the CCM business expands its operations.
Income Taxes. The Company's consolidated effective income tax rate
decreased to 39% for the current quarter from 40% for the prior year quarter.
The effective tax rate of the domestic lending operations increased to 42% for
the current quarter compared to 40% for the prior year quarter primarily due to
higher non-deductible intangible asset amortization and other miscellaneous
items in the current quarter. The effective tax rate of the foreign lending
operations decreased to 32% for the current quarter from 33% for the prior year
quarter primarily as a result of a greater proportion of the foreign income in
the current quarter being earned in Sweden, which has a lower tax rate than the
United Kingdom. The Company recognizes deferred tax benefits from the equity
losses arising from its investment in Mr. Payroll. However, the Company
anticipates that Mr. Payroll's losses incurred after August 1999 will not
provide recognizable tax benefits until it is more likely than not that such
benefits will be realized. As a result, it is likely that the Company's
consolidated effective income tax rate will begin to increase in late 1999.
SIX MONTHS ENDED JUNE 30, 1999, COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 1998
Net Revenue: Consolidated. Consolidated net revenue increased 11% to $105.6
million during the six months ended June 30, 1999 (the "current period"), from
$95.4 million during the six months ended June 30, 1998 (the "prior year
period"). Of the 11%
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increase, 2% was attributable to gains from same unit lending operations, 8% was
attributable to the new lending units in operation for less than one year during
the current period, and 1% was attributable to increases in the check cashing
and rental operations of the Company.
Net Revenue: Lending Activities. Net revenue from lending operations
increased $9.2 million to $102.2 million during the current period from $93.0
million during the prior year period. The new lending units in operation for
less than one year during the current period contributed $7.3 million of the
increase. Finance and service charges, net revenue from the disposition of
merchandise, and domestic manned check cashing operations combined with foreign
check cashing operations accounted for $5.6 million, $1.8 million, and $1.8
million, respectively, of the total increase.
The finance and service charges net increase of $5.6 million was primarily
attributable to an 11% increase in the average outstanding balance of pawn
loans. This increase accounted for $5.9 million in additional revenue, while a
1% decrease in the annualized loan yield resulted in a $.3 million decline. Same
units contributed $2.9 million of the $5.6 million net increase.
The consolidated annualized loan yield declined to 98% in the current
period from 99% in the prior year period. The domestic annualized loan yield was
125% for the current period compared to 128% for the prior year period. The loan
yield decline can be attributed to a higher concentration of lower-yielding
loans in the portfolio. The higher concentration arises from higher loan amounts
in some markets and the expansion into lower-yielding markets during 1998. The
blended yield on average foreign pawn loans outstanding increased to 53% for the
current period from 52% in the prior year period primarily due to improved
yields on redeemed loans in Sweden.
Proceeds from the disposition of merchandise in the current period were
$11.7 million, or 11%, higher than the prior year period. Same unit increases
accounted for $4.1 million of the $11.7 million increase. The margin on
disposition of merchandise declined to 33.8% in the current period from 35.9%
during the prior year period. The margin from the disposition of scrap jewelry
decreased $.5 million in the current period as compared to the prior year period
mostly due to the decline in the price of gold. Excluding the effect of the
disposition of scrap jewelry, the margin on disposition of merchandise was 35.6%
for the current period compared to 37.3% in the prior year period. The net
result was a $1.8 million, or 5%, increase in net revenue from the disposition
of merchandise. The merchandise turnover rate decreased slightly to 2.4 times
from 2.5 times in the prior year period.
Net Revenue: Other Activities. The restructuring of the Company's check
cashing operations and de-consolidation of Mr. Payroll resulted in a decline in
other net revenue in the current period of $1.0 million from the prior year
period.
Net revenue of Rent-A-Tire increased to $3.0 million in the current period
from $1.0 million for the prior year period primarily due to the addition of
nine stores that were previously managed by Rent-A-Tire, and an increase in the
number of managed stores to 13 at June 30, 1999. Also, prior to February 1,
1998, the Company's 49% share of
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earnings or losses of Rent-A-Tire's predecessor was recorded in "Equity in loss
of unconsolidated subsidiary."
Operations and Administration Expenses. Consolidated operations and
administration expenses as a percentage of net revenue were 73% in the current
period compared to 74% for the prior year period. Excluding the effect of Mr.
Payroll's operations and administration expenses and net revenue, the ratios
were 70% in both periods. Total operations and administration expenses,
excluding Mr. Payroll, increased $7.9 million in the current period as compared
to the prior year period. Domestic lending operations contributed $6.0 million
of the increase primarily due to higher personnel, occupancy, and office
expenses mostly attributable to new units that accounted for $5.2 million of the
domestic increase. Foreign lending operations contributed $.5 million of the
increase. The expenses of Rent-A-Tire, which was not consolidated prior to
February 1, 1998, comprised $1.4 million of the increase.
Depreciation and Amortization. Depreciation and amortization expenses as a
percentage of net revenue increased to 10% in the current period from 9% in the
prior year period. Depreciation and amortization expenses increased 20%
principally due to the effect of the increase in additional lending units during
1998.
Interest Expense. Net interest expense as a percentage of net revenue
decreased to 6.2% in the current period from 6.6% in the prior year period. The
amount increased $.3 million, or 4%, primarily due to the effect of a higher
average debt balance outstanding to support increased growth of operations and
investment in subsidiaries that was virtually offset by a lower effective
blended borrowing cost. Average debt outstanding increased 21% to $195.6 million
during the current period from $161.2 million during the prior year period. The
effective blended borrowing cost declined to 6.8% for the current period from
7.8% for the prior year period.
Other Items. Equity in the loss of unconsolidated subsidiary includes $2.9
million of losses in the current period from the Company's equity interest in
the losses incurred by Mr. Payroll's CCM business after its de-consolidation.
The prior year period includes $80 thousand of losses attributable to the
Company's equity interest in the losses of Express prior to its consolidation on
February 1, 1998.
The Company recorded a gain of $1.1 million, net of applicable income
taxes, as a result of the transactions described above involving Mr. Payroll.
Income Taxes. The Company's consolidated effective income tax rate,
excluding the effect of the income taxes recorded on the reduction of its equity
interest in Mr. Payroll's CCM business, increased to 40% for the current period
from 38% for the prior year period. The effective tax rate of the domestic
lending operations increased to 40% in the current period from 39% in the prior
year period primarily as a result of higher non-deductible intangible asset
amortization and other miscellaneous items in the current period. The effective
tax rate of the foreign lending operations decreased to 31% for the current
period from 33% for the prior year period primarily due to a greater proportion
of foreign income in the current period being earned in Sweden.
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LIQUIDITY AND CAPITAL RESOURCES
In management's opinion, the Company's cash flow and liquidity remain
strong. Cash and cash equivalents decreased $1.3 million to $3.1 million at June
30, 1999, from $4.4 million at December 31, 1998. During the current period,
$13.0 million of cash was provided by net operating activities, $16.3 million
was provided by borrowings under bank lines of credit and $1.3 million was
provided by the issuance of common shares pursuant to the Company's stock option
plans. The cash increases were more than offset by the Company's investments of
$6.1 million to acquire three lending units and nine tire rental stores and
$10.6 million for capital expenditures, including $3.3 million related to Mr.
Payroll's CCM operations. As a result of the de-consolidation of Mr. Payroll's
CCM operations following the transactions described above, cash was reduced by
$4.8 million. The Company also advanced $.5 million on a short-term basis to Mr.
Payroll's CCM operations following the de-consolidation. In addition, the
Company increased its pawn loan balances by $4.6 million, repaid $4.5 million of
notes payable and capital lease obligations, paid $.6 million in dividends,
purchased $.1 million of treasury shares for the Company's Nonqualified Savings
Plan, and recorded a $.1 million reduction from the effect of foreign exchange
rate changes on cash.
As a result of the transactions described above involving Mr. Payroll, the
Company has eliminated its obligation to continue to fund the development and
deployment of the CCM while remaining in a position to share in Mr. Payroll's
growth potential. However, in the event Mr. Payroll requires additional capital
in the future, the Company may make additional investments in Mr. Payroll. The
new management of Mr. Payroll intends to continue to develop and market the CCM
as a financial services machine. The Company anticipates that Mr. Payroll will
incur future losses until sufficient revenues are generated from its sales and
operations.
The Company may add up to 13 additional lending units during the remainder
of 1999, for a net addition of approximately 15 units for the full year. These
additions may occur through a combination of new openings and acquisitions of
existing locations. Rent-A-Tire has purchased nine tire rental stores during the
first six months of 1999 and may purchase up to five additional stores during
the remainder of the year.
On January 22, 1997, the Company announced that its Board of Directors had
authorized management to purchase up to one million shares of its common stock
in the open market. Subsequent to June 30, 1999, the Company purchased 185,000
shares for an aggregate amount of $1.5 million 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 $220.5
million should be sufficient to meet the Company's anticipated future capital
requirements.
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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,
1999, the Company had recorded a cumulative other comprehensive loss of $4.9
million as a result of fluctuations in foreign currency exchange rates. Future
earnings and comparisons with prior periods reported by the Company may
fluctuate depending on applicable currency exchange rates in effect during the
periods.
COMPUTER SYSTEMS - THE YEAR 2000 ISSUE
Background. Many computer systems and equipment with embedded computer
chips in use today were designed and developed using two digits, rather than
four, to specify the year. As a result, such systems and equipment may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations.
The Company's Year 2000 Efforts. In 1997, the Company began formulating a
comprehensive plan to assess the actions and resources needed to address its
Year 2000 issues. The plan provides for the identification and assessment of the
Year 2000 issues for the Company's various internal systems and equipment;
necessary remediation, including modification, upgrading and replacement of
hardware and software; and adequate testing to ensure Year 2000 compliance. The
plan involves the utilization of both internal and external resources, including
the engagement of an independent expert to assist in the evaluation of the
various Year 2000 issues and efforts. The Company is applying all aspects of
this plan to both its information technology ("IT") systems and non-IT systems.
Computer equipment and software commonly thought of as IT systems include
point-of-sale, accounting, data processing, telephone, and other miscellaneous
systems. Non-IT systems include alarm systems, security observation equipment,
HVAC units, fax machines, and other miscellaneous systems. The Company believes
that it has identified the internal business systems that are susceptible to
system failures or processing errors as a result of the Year 2000 issue. Those
systems considered most critical to continuing operations have received the
highest priority.
Currently, the Company believes that its Year 2000 identification,
assessment, and remediation efforts related to those systems most critical to
continuing operations are substantially complete. While the majority of the
testing efforts have been completed, the Company anticipates that additional
testing will occur after June 30, 1999, on other support systems. The Company
believes that its pawnshop operating systems constitute its only critical
internal business systems. The Company's proprietary pawnshop operating system
used in its domestic lending business has been upgraded and tested for Year 2000
compliance. The Company is in the process of upgrading its Sweden pawnshop
operating system for Year 2000 compliance. The Company expects to complete the
upgrade and testing of this system by September 30, 1999. A proprietary pawnshop
operating system for the Company's United Kingdom lending operations has been
developed, implemented
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and tested for Year 2000 compliance. During the current period, the Company
upgraded its accounting applications, human resources, and payroll software
systems to a version that its vendor has represented is Year 2000 compliant.
Testing to ensure compliance is ongoing and is scheduled to be completed by
September 30, 1999.
The Company has substantially completed the assessment phase with respect
to its non-IT systems issues. Based on this assessment, the Company does not
believe that its non-IT system remediation efforts will be significant. The
Company currently estimates that all necessary non-IT system remediation and
testing efforts should be completed by October 31, 1999.
Third Parties. The Company previously initiated formal communications with
critical third parties that provide services or goods which are essential to its
operations in order to: (1) determine the extent to which the Company is
vulnerable to any failure by such third parties to remediate their respective
Year 2000 problems; and (2) resolve such problems to the extent practicable.
These third parties include financial institutions, utility suppliers, and
providers of communication services and equipment. Based on the responses
received to date from these third parties, the Company has no reason to believe
that they will not address their significant Year 2000 issues on a timely basis.
However, the responses of third parties are beyond the control of the Company.
In the event that the Company is unable to obtain satisfactory assurance that a
critical third party provider has successfully and timely achieved Year 2000
compliance, and the Company is unable to replace such a provider with an
alternative provider, the Company's operations could be adversely impacted.
Estimated Year 2000 Costs. The Company currently estimates that its total
Year 2000 project cost will be approximately $2.6 million to $3.0 million.
Through June 30, 1999, the Company has expended approximately $1.8 million.
Costs to replace computerized systems, hardware or equipment (currently
estimated to be approximately $1.5 million to $1.7 million) are included in the
above estimate. The remaining costs include estimated internal and external
costs to repair software problems, test all systems, and acquire license
upgrades that have been accelerated due to Year 2000 issues. No major non-Year
2000 projects have been deferred because of Year 2000 activities. The Company
has funded, and expects to continue to fund, the expenditures related to its
Year 2000 initiatives either through cash generated from operations and current
working capital, or its existing revolving credit facilities.
Risks of Year 2000 Problems. Based on the progress it has made in
addressing its Year 2000 issues and its plan and timetable to complete its
compliance program, the Company does not currently foresee significant risks
associated with its Year 2000 issues. However, management believes that it is
not possible to determine with complete certainty that all Year 2000 problems
affecting the Company have been identified or will be corrected. Likewise,
because of its constant progress in addressing its various Year 2000 issues, the
Company has not yet determined the most reasonably likely worst case scenario
relating to Year 2000 problems. Nevertheless, management expects that the
Company could likely suffer the following consequences: (1) a significant number
of operational inconveniences and inefficiencies for the Company and its
customers that could divert management's time and attention and financial and
human resources from its ordinary
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business activities; and (2) a lesser number of serious system failures that may
require significant efforts by the Company to prevent or alleviate material
business disruptions.
Contingency Planning. The Company expects to complete the development of a
comprehensive contingency plan with respect to the Year 2000 issue by October
31, 1999. The Company's lending operations can operate, if necessary, on a
manual, non-computerized basis. As part of the contingency plan, manual
operating procedures will be reviewed with the store personnel during the fourth
quarter of 1999. Due to the widespread nature of potential Year 2000 issues, the
contingency planning process is an ongoing one which will require further
modifications as the Company obtains additional information regarding (1) the
Company's progress on critical internal business systems during the remediation
and testing phases; and (2) the status of third party Year 2000 readiness.
Depending on the systems affected, these plans could include accelerated
replacement of affected software or equipment, increased work hours for Company
personnel or contract personnel to accelerate remediation efforts, or
development of manual workarounds for information systems. If the Company is
required to implement any of these contingency plans, the implementation could
have an adverse effect on the Company's financial condition and results of
operations.
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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, 1999 and 1998, and for the three
months then ended.
<TABLE>
<CAPTION>
1999 1998 Change
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 23,848 $ 22,328 7%
Proceeds from disposition of merchandise 51,616 47,633 8%
Check cashing royalties and fees 778 -- --
- ----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 76,242 69,961 9%
- ----------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 34,001 30,484 12%
- ----------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 42,241 $ 39,477 7%
======================================================================================================================
OTHER DATA
Net revenue contribution by source--
Finance and service charges 56.5% 56.6% --
Margin on disposition of merchandise 41.7% 43.4% (4)%
Check cashing royalties and fees 1.8% -- --
Expenses as a percentage of net revenue--
Operations and administration 76.7% 75.9% 1%
Depreciation and amortization 10.2% 9.4% 8%
Interest, net 5.5% 5.9% (6)%
Income from operations before depreciation
and amortization as a percentage of total revenue 12.9% 13.6% (5)%
Income before income taxes as a percentage of total revenue 4.2% 5.0% (15)%
Annualized yield on loans 122% 125% (2)%
Average loan balance per average location in operation $ 191 $ 186 3%
Average loan amount at end of period (not in thousands) $ 80 $ 79 1%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 34.1% 36.0% (5)%
Average annualized merchandise turnover 2.2x 2.4x (8)%
Average merchandise held for disposition
per average location $ 149 $ 134 11%
Lending locations in operation--
Beginning of period 411 365
Acquired 1 43
Start-ups 2 3
Combined or closed -- (2)
End of period 414 409 1%
Average number of locations in operation (a) 413 386 7%
======================================================================================================================
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
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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, 1999 and 1998, and for the six months
then ended.
<TABLE>
<CAPTION>
1999 1998 Change
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 48,967 $ 44,457 10%
Proceeds from disposition of merchandise 111,945 101,172 11%
Check cashing royalties and fees 1,667 -- --
- ------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 162,579 145,629 12%
- ------------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 73,629 64,638 14%
- ------------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 88,950 $ 80,991 10%
========================================================================================================================
OTHER DATA
Net revenue contribution by source--
Finance and service charges 55.1% 54.9% --
Margin on disposition of merchandise 43.1% 45.1% (4)%
Check cashing royalties and fees 1.8% - --
Expenses as a percentage of net revenue--
Operations and administration 73.1% 72.9% --
Depreciation and amortization 9.7% 8.9% 9%
Interest, net 5.5% 5.5% --
Income from operations before depreciation
and amortization as a percentage of total revenue 14.7% 15.1% (3)%
Income before income taxes as a percentage of total revenue 6.4% 7.0% (9)%
Annualized yield on loans 125% 128% (2)%
Average loan balance per average location in operation $ 191 $ 187 2%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 34.2% 36.1% (5)%
Average annualized merchandise turnover 2.4x 2.5x (4)%
Average merchandise held for disposition
per average location $ 151 $ 139 9%
Lending locations in operation--
Beginning of period 414 352
Acquired 1 55
Start-ups 2 4
Combined or closed (3) (2)
End of period 414 409 1%
Average number of locations in operation (a) 413 374 10%
=======================================================================================================================
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 22
<PAGE> 25
FOREIGN LENDING OPERATIONS
================================================================================
(Dollars in thousands)
The following table sets forth selected consolidated financial data in U.S.
dollars for Harvey & Thompson and Svensk Pantbelaning as of June 30, 1999 and
1998, and for the three months then ended, using the following currency exchange
rates:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 Change
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Harvey & Thompson (U.K. pound sterling to the U.S. dollar)--
Balance sheet data - end of period rate .6340 .5996 (6)%
Income statement data - three months average rate .6222 .6045 (3)%
Svensk Pantbelaning (Swedish Kronor to the U.S. dollar)--
Balance sheet data - end of period rate 8.4443 7.9799 (6)%
Income statement data - three months average rate 8.4154 7.8127 (8)%
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 Change
- ----------------------------------------------------------------------------------------------------------------------
REVENUE
Finance and service charges $ 6,185 $ 5,676 9%
Proceeds from disposition of merchandise 1,245 592 110%
Check cashing fees 195 200 (3)%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 7,625 6,468 18%
- ----------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 1,075 488 120%
- ----------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 6,550 $ 5,980 10%
======================================================================================================================
OTHER DATA
Net revenue contribution by source--
Finance and service charges 94.4% 94.9% (1)%
Margin on disposition of merchandise 2.6% 1.7% 53%
Check cashing fees 3.0% 3.4% (12)%
Expenses as a percentage of net revenue--
Operations and administration 47.3% 49.8% (5)%
Depreciation and amortization 8.1% 6.1% 34%
Interest, net 5.0% 10.3% (51)%
Income from operations before depreciation
and amortization as a percentage of total revenue 45.3% 46.4% (2)%
Income before income taxes as a percentage of total revenue 34.0% 31.3% 9%
Annualized yield on loans 52% 50% 4%
Average loan balance per average location in operation $ 935 $ 905 3%
Average loan amount at end of period (not in thousands) $ 180 $ 177 2%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 13.7% 17.6% (22)%
Average annualized merchandise turnover 2.1x 1.4x 50%
Average merchandise held for disposition
per average location $ 41 $ 28 46%
Lending locations in operation--
Beginning of period 50 50
Acquired 2 --
Start-ups -- --
Combined or closed -- --
End of period 52 50 4%
Average number of locations in operation (a) 51 50 2%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 23
<PAGE> 26
FOREIGN LENDING OPERATIONS
================================================================================
(Dollars in thousands)
The following table sets forth selected consolidated financial data in U.S.
dollars for Harvey & Thompson and Svensk Pantbelaning as of June 30, 1999 and
1998, and for the six months then ended, using the following currency exchange
rates:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 Change
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Harvey & Thompson (U.K. pound sterling to the U.S. dollar)--
Income statement data - six months average rate .6174 .6061 (2)%
Svensk Pantbelaning (Swedish Kronor to the U.S. dollar)--
Income statement data - six months average rate 8.2017 7.9155 (4)%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1999 1998 Change
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 12,561 $ 11,410 10%
Proceeds from disposition of merchandise 2,137 1,191 79%
Check cashing fees 372 311 20%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 15,070 12,912 17%
- -----------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Disposed merchandise 1,863 948 97%
- -----------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 13,207 $ 11,964 10%
=======================================================================================================================
OTHER DATA
Net revenue contribution by source--
Finance and service charges 95.1% 95.4% --
Margin on disposition of merchandise 2.1% 2.0% 5%
Check cashing fees 2.8% 2.6% 6%
Expenses as a percentage of net revenue--
Operations and administration 47.5% 48.2% (1)%
Depreciation and amortization 7.8% 5.9% 31%
Interest, net 5.1% 10.0% (49)%
Income from operations before depreciation
and amortization as a percentage of total revenue 46.0% 48.0% (4)%
Income before income taxes as a percentage of total revenue 34.7% 33.2% 5%
Annualized yield on loans 53% 52% 2%
Average loan balance per average location in operation $ 931 $ 887 5%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 12.8% 20.4% (37)%
Average annualized merchandise turnover 2.1x 1.6x 31%
Average merchandise held for disposition
per average location $ 35 $ 24 46%
Lending locations in operation--
Beginning of period 50 49
Acquired 2 1
Start-ups -- --
Combined or closed -- --
End of period 52 50 4%
Average number of locations in operation (a) 51 50 2%
=======================================================================================================================
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 24
<PAGE> 27
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, 1999 and 1998, and for the
three months then ended.
<TABLE>
<CAPTION>
1999 1998 Change
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CHECK CASHING OPERATIONS (A):
REVENUE
Check cashing machine sales $ -- $ 302 (100)%
Check cashing royalties and fees -- 686 (100)%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE -- 988 (100)%
- -----------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Cost of check cashing machines sold -- 292 (100)%
- -----------------------------------------------------------------------------------------------------------------------
NET REVENUE $ -- $ 696 (100)%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RENTAL OPERATIONS:
REVENUE
Tire and wheel rentals $ 1,158 $ 588 97%
Management fees 896 204 339%
Tire and wheel sales 200 20 900%
Lease income and other 214 23 830%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 2,468 835 196%
- -----------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Tire and wheel rentals 417 233 79%
Tire and wheel sales 148 15 887%
- -----------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 1,903 $ 587 224%
- -----------------------------------------------------------------------------------------------------------------------
OTHER DATA
Owned rental locations--
Rental agreements outstanding at end of period $ 4,911 $ 1,417 247%
Average balance per rental agreement
at end of period (not in thousands) $ 943 $ 920 3%
Locations in operation at end of period 13 4 225%
Average locations in operation for the period (b) 10 4 150%
Managed rental locations--
Locations in operation at end of period 13 9 44%
Average locations in operation for the period (b) 13 6 117%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Only CCM operations are included in 1999. See Note 3 of Notes to
Consolidated Financial Statements. (b) Averages based on accumulation of
month-end balances and dividing aggregate total by total months in the period.
Page 25
<PAGE> 28
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, 1999 and 1998, and for the
six months then ended.
<TABLE>
<CAPTION>
1999 1998 Change
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CHECK CASHING OPERATIONS (A):
REVENUE
Check cashing machine sales $ 82 $ 1,102 (93)%
Check cashing royalties and fees 372 1,415 (74)%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 454 2,517 (82)%
- -----------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Cost of check cashing machines sold 38 1,026 (96)%
- -----------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 416 $ 1,491 (72)%
=======================================================================================================================
=======================================================================================================================
RENTAL OPERATIONS:
REVENUE
Tire and wheel rentals $ 1,849 $ 978 89%
Management fees 1,378 338 308%
Tire and wheel sales 301 35 760%
Lease income and other 390 37 954%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE 3,918 1,388 182%
- -----------------------------------------------------------------------------------------------------------------------
COSTS OF REVENUE
Tire and wheel rentals 665 369 80%
Tire and wheel sales 223 27 726%
- -----------------------------------------------------------------------------------------------------------------------
NET REVENUE $ 3,030 $ 992 205%
- -----------------------------------------------------------------------------------------------------------------------
OTHER DATA
Owned rental locations--
Average locations in operation for the period (a) 7 4 75%
Managed rental locations--
Average locations in operation for the period (a) 14 5 180%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 26
<PAGE> 29
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
RESULTS
Certain portions of this report contain forward-looking statements about
the business, financial condition and prospects of the Company. The actual
results of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties including,
without limitation, changes in demand for the Company's services, changes in
competition, the ability of the Company to open new operating units in
accordance with its plans, economic conditions, real estate market fluctuations,
interest rate fluctuations, changes in the capital markets, changes in tax and
other laws and governmental rules and regulations applicable to the Company's
business, and other risks indicated in the Company's filings with the Securities
and Exchange Commission. Certain risks and uncertainties relating specifically
to the Company's Year 2000 efforts include, but are not limited to, the
availability of qualified personnel and other information technology resources;
the ability to identify and remediate all date sensitive lines of computer code
or to replace embedded computer chips in affected systems or equipment; and the
actions of various third parties with respect to Year 2000 problems. These risks
and uncertainties are beyond the ability of the Company to control, and, in many
cases, the Company cannot predict all of the risks and uncertainties that could
cause its actual results to differ materially from those indicated by the
forward-looking statements. When used in this report, the words "believes,"
"estimates," "plans," "expects," "anticipates" and similar expressions as they
relate to the Company or its management are intended to identify forward-looking
statements.
Page 27
<PAGE> 30
PART II
Item 1. LEGAL PROCEEDINGS
See Note 8 of Notes to Consolidated Financial Statements
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 20, 1999, 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. The shareholders also approved the
proposed Amendment to the Company's 1994 Long-Term Incentive Plan. 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 or abstentions other than those listed below):
(a) Election of directors
For Withheld
---------- --------
Jack R. Daugherty 23,172,168 140,521
A. R. Dike 23,172,181 140,508
Daniel R. Feehan 23,170,068 142,621
James H. Graves 23,170,979 141,710
B. D. Hunter 23,172,340 140,349
Timothy J. McKibben 23,169,673 143,016
Alfred J. Micallef 23,171,581 141,108
Clifton H. Morris, Jr. 23,164,281 148,408
Carl P. Motheral 23,163,727 148,962
Samuel W. Rizzo 23,163,868 148,821
Rosalin Rogers 23,093,479 219,210
Page 28
<PAGE> 31
(b) Ratification of Independent Auditors
For - 23,272,021
Against - 24,968
Abstain - 15,700
(c) Proposed Amendment to the Company's 1994 Long-Term Incentive Plan
For - 17,192,980
Against - 5,980,170
Abstain - 139,537
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - Amendment Two to 1994 Long-Term Incentive Plan
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
Page 29
<PAGE> 32
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 13, 1999
<PAGE> 33
Index to Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 - Amendment Two to 1994 Long-Term Incentive Plan
27 - Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
AMENDMENT TWO
TO THE
CASH AMERICA INTERNATIONAL, INC.
1994 LONG-TERM INCENTIVE PLAN
By action of the Shareholders of Cash America International, Inc. this day,
the Cash America International, Inc. 1994 Long-Term Incentive Plan (the "Plan")
is hereby amended as follows:
Section 5 of Plan is amended by revising the first sentence of paragraph (a) to
read as follows:
The maximum number of shares of Stock in respect of which Awards may be
made under the Plan shall be a total of 2,600,000 shares of Common Stock.
CASH AMERICA INTERNATIONAL, INC.
By: /s/ HUGH A. SIMPSON
------------------------------------------
Hugh A. Simpson, Executive Vice President,
General Counsel and Secretary
April 20, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,133
<SECURITIES> 0
<RECEIVABLES> 152,603
<ALLOWANCES> 0
<INVENTORY> 66,866
<CURRENT-ASSETS> 247,340
<PP&E> 134,657
<DEPRECIATION> 72,426
<TOTAL-ASSETS> 421,253
<CURRENT-LIABILITIES> 26,859
<BONDS> 199,936
0
0
<COMMON> 3,024
<OTHER-SE> 190,185
<TOTAL-LIABILITY-AND-EQUITY> 421,253
<SALES> 114,164
<TOTAL-REVENUES> 182,021
<CGS> 76,418
<TOTAL-COSTS> 139,490
<OTHER-EXPENSES> 23,772
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,557
<INCOME-PRETAX> 10,419
<INCOME-TAX> 3,695
<INCOME-CONTINUING> 6,724
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,724
<EPS-BASIC> 0.27
<EPS-DILUTED> 0.25
</TABLE>
