<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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:
25,384,701 common shares, $.10 par value, were outstanding as of November 5,
1999.
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<PAGE> 2
CASH AMERICA INTERNATIONAL, INC.
INDEX TO 10-Q
PART I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 1999
and 1998 and December 31, 1998 ...................................... 1
Consolidated Statements of Income -
Three Months and Nine Months Ended September 30, 1999 and 1998 ...... 2
Consolidated Statements of Stockholders' Equity -
Three Months and Nine Months Ended September 30, 1999 and 1998 ...... 3
Consolidated Statements of Cash Flows -
Nine Months Ended September 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 ....................... 10
PART II. OTHER INFORMATION ................................................ 29
SIGNATURE .................................................................. 30
</TABLE>
<PAGE> 3
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998 1998
--------- --------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,020 $ 3,267 $ 4,417
Loans 134,291 133,053 128,637
Merchandise held for disposition, net 73,352 64,653 65,417
Inventory 1,857 4,081 3,093
Finance and service charges receivable 21,530 19,772 19,733
Prepaid expenses and other 8,260 6,312 7,129
Income taxes recoverable 7,601 -- 5,870
Deferred tax assets 7,393 14,681 10,134
--------- --------- ------------
Total current assets 257,304 245,819 244,430
Property and equipment, net 59,381 70,378 73,347
Intangible assets, net 91,568 89,394 88,284
Other assets 5,017 3,681 4,762
Investment in and advances
to unconsolidated subsidiary 14,163 -- --
--------- --------- ------------
Total assets $ 427,433 $ 409,272 $ 410,823
========= ========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 16,418 $ 17,984 $ 19,848
Customer deposits 5,046 4,829 4,151
Income taxes currently payable 3,402 4,934 2,133
Current portion of long-term debt 4,706 4,625 4,686
--------- --------- ------------
Total current liabilities 29,572 32,372 30,818
Deferred tax liabilities 1,298 -- 3,273
Long-term debt 203,317 192,455 189,288
--------- --------- ------------
Stockholders' equity:
Common stock, $.10 par value per
share, 80,000,000 shares authorized 3,024 3,024 3,024
Paid in surplus 127,354 126,346 126,615
Retained earnings 108,918 98,677 102,722
Accumulated other comprehensive loss (2,659) (1,138) (2,414)
Notes receivable - stockholders (5,820) (2,655) (3,263)
--------- --------- ------------
230,817 224,254 226,684
Less -- shares held in treasury, at cost (37,571) (39,809) (39,240)
--------- --------- ------------
Total stockholders' equity 193,246 184,445 187,444
--------- --------- ------------
Total liabilities and stockholders' equity $ 427,433 $ 409,272 $ 410,823
========= ========= ============
</TABLE>
See notes to consolidated financial statements.
Page 1
<PAGE> 4
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE
Finance and service charges $ 30,641 $ 30,096 $ 92,169 $ 85,963
Proceeds from disposition of merchandise 50,824 48,022 164,906 150,385
Check cashing machine sales -- 401 82 1,503
Check cashing royalties and fees 969 1,103 3,380 2,829
Rental operations 3,134 890 7,052 2,278
--------- --------- --------- ---------
TOTAL REVENUE 85,568 80,512 267,589 242,958
--------- --------- --------- ---------
COSTS OF REVENUE
Disposed merchandise 34,774 31,106 110,266 96,692
Cost of check cashing machines sold -- 375 38 1,401
Rental operations 879 234 1,767 630
--------- --------- --------- ---------
NET REVENUE 49,915 48,797 155,518 144,235
--------- --------- --------- ---------
OPERATING EXPENSES
Lending operations 30,667 28,402 90,533 82,830
Check cashing operations -- 1,882 1,728 4,899
Rental operations 1,503 378 2,981 1,056
Administration 6,279 6,370 19,938 18,940
Depreciation 3,601 3,535 11,329 10,094
Amortization 1,115 1,141 3,500 2,984
--------- --------- --------- ---------
Total operating expenses 43,165 41,708 130,009 120,803
--------- --------- --------- ---------
INCOME FROM OPERATIONS 6,750 7,089 25,509 23,432
Interest expense, net 3,433 3,666 9,990 9,942
Equity in loss of unconsolidated subsidiary 2,204 -- 5,137 80
Loss (gain) from issuance of subsidiary's stock
(net of income taxes) 125 -- (1,025) --
--------- --------- --------- ---------
Income before income taxes 988 3,423 11,407 13,410
Provision for income taxes 566 1,326 4,261 5,145
--------- --------- --------- ---------
NET INCOME $ 422 $ 2,097 $ 7,146 $ 8,265
========= ========= ========= =========
Net income per share:
Basic $ .02 $ .08 $ .28 $ .33
Diluted .02 .08 .27 .32
--------- --------- --------- ---------
Weighted average shares:
Basic 25,458 25,030 25,356 24,754
Diluted 26,021 26,417 26,337 26,186
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
Page 2
<PAGE> 5
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In thousands, except share data) (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER
----------------------- PAID IN RETAINED COMPREHENSIVE COMPREHENSIVE
SHARES AMOUNT SURPLUS EARNINGS INCOME INCOME (LOSS)
------------ --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1998 30,235,164 $ 3,024 $ 126,615 $ 102,722 $ (2,414)
Comprehensive income:
Net income 7,146 $ 7,146
-------------
Other comprehensive
income - Foreign
currency translation
adjustments (245) (245)
-------------
Comprehensive income $ 6,901
-------------
Dividends declared (950)
Treasury shares acquired
Treasury shares reissued (212)
Tax benefit from exercise
of option shares 951
Change in notes
receivable - stockholders
------------ --------- --------- --------- ------------- -------------
Balance at
September 30, 1999 30,235,164 $ 3,024 $ 127,354 $ 108,918 $ (2,659)
============ ========= ========= ========= ============= =============
Balance at
December 31, 1997 30,235,164 $ 3,024 $ 122,155 $ 91,337 $ (2,458)
Comprehensive income:
Net income 8,265 $ 8,265
------------
Other comprehensive
income - Foreign
currency translation
adjustments 1,320 1,320
------------
Comprehensive income $ 9,585
------------
Dividends declared (925)
Treasury shares acquired
Treasury shares reissued 3,795
Tax benefit from exercise
of option shares 396
Change in notes
receivable - stockholders
------------ --------- --------- --------- ------------- -------------
Balance at
September 30, 1998 30,235,164 $ 3,024 $ 126,346 $ 98,677 $ (1,138)
============ ========= ========= ========= ============= =============
<CAPTION>
NOTES
RECEIVABLE- TREASURY STOCK
STOCK- ---------------------
HOLDERS SHARES AMOUNT
----------- ---------- ----------
<S> <C> <C> <C>
Balance at
December 31, 1998 $ (3,263) 5,114,218 $ (39,240)
Comprehensive income:
Net income
Other comprehensive
income - Foreign
currency translation
adjustments
Comprehensive income
Dividends declared
Treasury shares acquired 323,281 (2,491)
Treasury shares reissued (544,807) 4,160
Tax benefit from exercise
of option shares
Change in notes
receivable - stockholders (2,557)
----------- ---------- ----------
Balance at
September 30, 1999 $ (5,820) 4,892,692 $ (37,571)
=========== ========== ==========
Balance at
December 31, 1997 $ (2,362) 5,812,519 $ (44,400)
Comprehensive income:
Net income
Other comprehensive
income - Foreign
currency translation
adjustments
Comprehensive income
Dividends declared
Treasury shares acquired 20,511 (286)
Treasury shares reissued (641,269) 4,877
Tax benefit from exercise
of option shares
Change in notes
receivable - stockholders (293)
----------- ---------- ----------
Balance at
September 30, 1998 $ (2,655) 5,191,761 $ (39,809)
=========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 6
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,146 $ 8,265
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 11,329 10,094
Amortization 3,500 2,984
Equity in loss of unconsolidated subsidiary 5,137 80
Gain from issuance of subsidiary's stock (1,025) --
Changes in operating assets and liabilities-
Merchandise held for disposition and inventory (7,850) (8,395)
Finance and service charges receivable (1,788) (1,438)
Prepaid expenses and other (1,543) (2,866)
Accounts payable and accrued expenses (2,162) 1,447
Customer deposits, net 883 801
Current income taxes 374 2,665
Deferred taxes, net (320) (2,074)
--------- ---------
Net cash provided by operating activities 13,681 11,563
========= =========
CASH FLOWS FROM INVESTING ACTIVITIES
Loans forfeited and transferred to merchandise held for disposition 107,583 95,206
Loans repaid or renewed 223,661 216,909
Loans made, including loans renewed (335,576) (325,126)
--------- ---------
Net increase in loans (4,332) (13,011)
--------- ---------
Acquisitions, net of cash acquired (8,104) (21,787)
Effect on cash of de-consolidation of subsidiary (4,795) --
Advances to unconsolidated subsidiaries (602) (120)
Purchases of property and equipment (15,147) (15,380)
Proceeds from sales of property and equipment 5,831 1,037
--------- ---------
Net cash used by investing activities (27,149) (49,261)
========= =========
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under bank lines of credit 18,705 48,745
Proceeds from capital lease obligations -- 1,853
Payments on notes payable and other obligations (4,587) (10,892)
Net proceeds from reissuance of treasury shares 1,391 1,307
Treasury shares purchased (2,491) (286)
Dividends paid (950) (925)
--------- ---------
Net cash provided by financing activities 12,068 39,802
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 3 44
--------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS (1,397) 2,148
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,417 1,119
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,020 $ 3,267
========= =========
SUPPLEMENTAL DISCLOSURES
NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchase transactions-
Treasury shares reissued $ -- $ 7,131
Liabilities assumed -- 8,227
Loans to stockholders for exercise of stock options 2,557 234
========= =========
</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 Series A preferred
stock and common stock. Mr. Payroll's name was subsequently changed to
innoVentry Corp. ("innoVentry"). As of September 30, 1999, the Company owned
39.1% of the voting interest in innoVentry, and it is accounting for its
investment and its share of the results of innoVentry's operations after March
9, 1999, by the equity method (see Note 3).
The financial statements as of September 30, 1999 and 1998, and for the
three month and nine 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 nine 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 nine month periods ended September 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 collectible 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 the 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 revenue is recorded when payment is received. 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 Series A 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 Series A 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. Mr. Payroll's name was subsequently changed to innoVentry.
Since March 1999, innoVentry has sold additional newly issued shares of common
stock, reducing the Company's voting interest to 39.1%. The Company's ownership
is represented by the shares of senior convertible Series A preferred stock
issued in March 1999. The Company recognized a net gain of $1.0 million (after
applicable income taxes of $3.3 million) as a result of the transactions
described above.
Page 6
<PAGE> 9
4. ACQUISITIONS
During 1999, the Company acquired five pawnshops in purchase transactions for an
aggregate cash consideration of $4.3 million. The excess purchase price over net
assets acquired of $2.3 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 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
September 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 $111,700 $100,000
U.K. Line of Credit up to(pound)10 million
due April 30, 2001 11,859 3,570
Swedish Lines of Credit up to SEK 215 million 15,060 20,263
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 1,761 1,818
6.25% subordinated unsecured notes due 2004 500 --
-------- --------
208,023 197,080
Less current portion 4,706 4,625
-------- --------
Long-term debt $203,317 $192,455
======== ========
</TABLE>
6. NET INCOME PER SHARE
The reconciliation of basic and diluted weighted average common shares
outstanding for the three month and nine month periods ended September 30,
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
1999 1998 1999 1998
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Weighted average shares - Basic 25,458 25,030 25,356 24,754
Effect of shares applicable to stock option plans 522 1,355 942 1,409
Effect of shares applicable to nonqualified savings plan 41 32 39 23
----------- ------------ ----------- ------------
Weighted average shares - Diluted 26,021 26,417 26,337 26,186
----------- ------------ ----------- ------------
</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 rental and check cashing 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 rental operation is
managed separately because different services and products are offered thus
requiring its own technical, marketing and operational strategy. The same is
true with respect to the CCM operations, which the Company has not controlled
since March 1999 (see Note 3).
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
September 30, 1999:
Total revenue $ 74,396 $ 8,038 $ 82,434 $ -- $ 3,134 $ 85,568
Income (loss)
from operations 3,747 3,152 6,899 -- (149) 6,750
Total assets at end of
period 307,948 88,822 396,770 14,163 16,500 427,433
-------- -------- -------- ----------- -------- -------------
Three Months Ended
September 30, 1998:
Total revenue 71,317 7,044 78,361 1,261 890 80,512
Income (loss)
from operations 6,410 3,089 9,499 (2,296) (114) 7,089
Total assets at end of
period 306,065 79,047 385,112 18,856 5,304 409,272
======== ======== ======== =========== ======== =============
Nine Months Ended
September 30, 1999:
Total revenue $236,975 $ 23,108 $260,083 $ 454 $ 7,052 $ 267,589
Income (loss)
from operations 19,024 9,056 28,080 (2,637) 66 25,509
-------- -------- -------- ----------- -------- -------------
Nine Months Ended
September 30, 1998:
Total revenue 216,946 19,956 236,902 3,778 2,278 242,958
Income (loss)
from operations 21,153 8,575 29,728 (5,971) (325) 23,432
======== ======== ======== =========== ======== =============
</TABLE>
(A) Only CCM operations are included in 1999. See Note 3
Page 8
<PAGE> 11
8. SALE AND LEASEBACK
During July and September 1999, under sale-leaseback agreements, the Company
sold certain buildings and improvements utilized in lending operations with a
net book value of $4.2 million for $5.8 million cash. Annual payments under the
operating lease agreements are $.7 million. The gain of $1.6 million is being
amortized over the 15 year basic lease term.
9. 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.
10. SUBSEQUENT EVENT
In October 1999, the Company, Cash Centers, and a third party each purchased $10
million of innoVentry's newly issued senior convertible Series B preferred
stock. As a result of the transactions, the Company's voting interest in
innoVentry was reduced to 38.5% from 39.1%.
Page 9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SUMMARY CONSOLIDATED FINANCIAL DATA
THIRD QUARTER ENDED SEPTEMBER 30, 1999 vs.
THIRD QUARTER ENDED SEPTEMBER 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 September
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 $ 30,641 $ 30,096 2%
Proceeds from disposition of merchandise 50,824 48,022 6%
Check cashing machine sales -- 401 (100)%
Check cashing royalties and fees 969 1,103 (12)%
Rental operations 3,134 890 252%
-------- -------- --------
TOTAL REVENUE 85,568 80,512 6%
-------- -------- --------
COSTS OF REVENUE
Disposed merchandise 34,774 31,106 12%
Cost of check cashing machines sold -- 375 (100)%
Rental operations 879 234 276%
-------- -------- --------
NET REVENUE $ 49,915 $ 48,797 2%
======== ======== ========
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source--
Finance and service charges 61.4% 61.7% --
Margin on disposition of merchandise 32.2% 34.7% (7)%
Check cashing operations 1.9% 2.3% (17)%
Rental operations 4.5% 1.3% 236%
Expenses as a percentage of net revenue--
Operations and administration 77.0% 75.9% 1%
Depreciation and amortization 9.4% 9.6% (2)%
Interest, net 6.9% 7.5% (8)%
Income from operations before depreciation
and amortization as a percentage of total revenue 13.4% 14.6% (8)%
Income before income taxes as a percentage of total revenue 1.2% 4.3% (72)%
-------- -------- --------
CONSOLIDATED LENDING OPERATIONS:
Annualized yield on loans 91% 92% (1)%
Average loan balance per average location in operation $ 286 $ 282 1%
Average loan amount at end of period (not in thousands) $ 102 $ 100 2%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 31.6% 35.2% (10)%
Average annualized merchandise turnover 2.0x 2.1x (5)%
Average merchandise held for disposition
per average location $ 148 $ 131 13%
Lending locations in operation--
Beginning of period 466 459
Acquired 2 2
Start-ups 1 2
Combined or closed -- (3)
End of period 469 460 2%
Average number of locations in operation (a) 468 460 2%
======== ======== ========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 10
<PAGE> 13
NINE MONTHS ENDED SEPTEMBER 30, 1999 vs.
NINE MONTHS ENDED SEPTEMBER 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 September
30, 1999 and 1998, and for the nine months then ended.
<TABLE>
<CAPTION>
1999 1998 CHANGE
--------- --------- ---------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 92,169 $ 85,963 7%
Proceeds from disposition of merchandise 164,906 150,385 10%
Check cashing machine sales 82 1,503 (95)%
Check cashing royalties and fees 3,380 2,829 19%
Rental operations 7,052 2,278 210%
--------- --------- ---------
TOTAL REVENUE 267,589 242,958 10%
--------- --------- ---------
COSTS OF REVENUE
Disposed merchandise 110,266 96,692 14%
Cost of check cashing machines sold 38 1,401 (97)%
Rental operations 1,767 630 180%
--------- --------- ---------
NET REVENUE $ 155,518 $ 144,235 8%
========= ========= =========
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source--
Finance and service charges 59.3% 59.6% --
Margin on disposition of merchandise 35.1% 37.2% (6)%
Check cashing operations 2.2% 2.0% 10%
Rental operations 3.4% 1.2% 183%
Expenses as a percentage of net revenue--
Operations and administration 74.1% 74.7% (1)%
Depreciation and amortization 9.5% 9.1% 5%
Interest, net 6.4% 6.9% (7)%
Income from operations before depreciation
and amortization as a percentage of total revenue 15.1% 15.0% 1%
Income before income taxes as a percentage of total revenue 4.3% 5.5% (22)%
--------- --------- ---------
CONSOLIDATED LENDING OPERATIONS:
Annualized yield on loans 96% 96% --
Average loan balance per average location in operation $ 277 $ 274 1%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 33.1% 35.7% (7)%
Average annualized merchandise turnover 2.2x 2.3x (4)%
Average merchandise held for disposition
per average location $ 142 $ 128 11%
Lending locations in operation--
Beginning of period 464 401
Acquired 5 58
Start-ups 3 6
Combined or closed (3) (5)
End of period 469 460 2%
Average number of locations in operation (a) 465 435 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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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 twenty-one
month period ended September 30, 1999, by adding a net sixty-eight locations.
Ten locations were established, sixty-six operating units were acquired, and
eight locations were combined or closed. As of September 30, 1999, the Company
operated 469 lending units--417 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 September 30, 1999, the
Company operated 134 franchised and 10 company owned manned check cashing
centers, continuing to do business under the Mr. Payroll name, in twenty states
compared to 128 franchised and 10 company owned centers as of September 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 Series A 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 Series A 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. Mr. Payroll subsequently
changed its name to innoVentry Corp. ("innoVentry"). Since March 1999,
innoVentry has sold additional shares of newly issued common stock to certain
employees, directors and consultants. As of September 30, 1999, the Company's
ownership interest in innoVentry was 39.1%. 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 September 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 nineteen
additional tire and wheel rental stores under the Rent-A-Tire name, including
fourteen that were added during the first nine months of 1999.
RESULTS OF OPERATIONS
THIRD QUARTER ENDED SEPTEMBER 30, 1999, COMPARED TO THE
THIRD QUARTER ENDED SEPTEMBER 30, 1998
Net Revenue: Consolidated. Consolidated net revenue increased 2% to
$49.9 million during the third quarter ended September 30, 1999 (the "current
quarter"), from $48.8 million during the third quarter ended September 30, 1998
(the "prior year quarter"). The net increase of 2% consisted of a 3%
contribution from new lending units in operation for less than one year during
the quarter, a 2% decrease in net revenue from same unit lending operations
(those in operation for more than one year), and a 1% increase in check cashing
and rental operations net revenue.
Net Revenue: Lending Activities. Net revenue from lending operations
increased $.4 million to $47.7 million during the current quarter from $47.3
million during the prior year quarter. The new lending units in operation for
less than one year during the quarter contributed $.5 million of net revenue.
The principal components of lending operations net revenue are finance and
service charges, which increased $.6 million, and net revenue from the
disposition of merchandise, which declined $.9 million. The remaining
components, domestic manned check cashing operations and foreign check cashing
operations, increased $.7 million.
Fluctuations in finance and service charges are driven 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 $.6 million, or 2%, in the current quarter over the prior year quarter
primarily as a result of the addition of new lending units. Virtually all of the
growth occurred in the United Kingdom's operations as a result of a 21% increase
in average outstanding pawn loans, the effect of which was partially offset by a
2% decrease in annualized loan yield. The average investment in pawn loans, both
domestically and in Sweden, remained constant compared to prior year averages as
both the average number of loans outstanding and the average amount per
outstanding loan remained relatively unchanged. While the domestic average
outstanding loan balance remained constant, the balance outstanding declined 1%
during the current quarter compared to a 7% increase during the prior year
quarter. This decline is primarily
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attributable to a decrease in loan demand leading to a lower average loan amount
and fewer loans outstanding at the end of the current quarter. Management
believes this trend will continue, resulting in lower average domestic loan
balances and finance and service charges until loan demand or customer count
increases.
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 91% in the current quarter compared
to 92% in the prior year quarter. The domestic annualized loan yield was
virtually unchanged at 114.5% for the current quarter compared to 114.3% for the
prior year quarter. The blended yield on average foreign pawn loans outstanding
was 52% for both the current quarter and the prior year quarter. Slightly higher
loan yields on redeemed loans in Sweden were offset by a slightly lower loan
yield on redeemed loans in the United Kingdom and marginally lower returns on
the disposition of unredeemed collateral at auction in both countries.
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 $2.8 million, or 6%, higher than the prior year quarter
primarily due to a $2.2 million increase from same units. The margin on
disposition of merchandise declined to 31.6% in the current quarter from 35.2%
during the prior year quarter. Excluding the effect of the disposition of scrap
jewelry, the margin on disposition of merchandise fell to 33.2% for the current
quarter from 36.6% 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 contributing to the lower overall margin on all
merchandise disposed in the current quarter. The net result of the increased
proceeds and reduced margin was a $.9 million, or 5%, decrease in net revenue
from the disposition of merchandise. The merchandise turnover rate declined to
2.0 times in the current quarter compared to 2.1 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, which 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 de-consolidation of innoVentry caused a decline in other
net revenue in the current year quarter of $1.0 million from the prior year
quarter. Following de-consolidation, the Company began accounting for its
investment in innoVentry by the equity method and, accordingly, the Company's
share of the results of operations of innoVentry is recorded in "Equity in loss
of unconsolidated subsidiary."
Net revenue of Rent-A-Tire increased to $2.3 million in the current
quarter from $.6 million for the prior year quarter primarily due to the
acquisitions of nine stores and an increase in the number of managed stores to
19 at September 30, 1999.
Operations and Administration Expenses. Consolidated operations and
administration expenses as a percentage of net revenue increased to 77% in the
current quarter compared to 76% for the prior year quarter primarily due to
higher operations expenses in the domestic lending and rental segments that were
partially offset by a $3.0
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million decline resulting from the de-consolidation of innoVentry. Total
operations and administration expenses, excluding innoVentry, increased $4.4
million, or 13%, in the current quarter as compared to the prior year quarter.
Domestic lending operations contributed $1.7 million of the increase as a result
of higher personnel, selling, and administration expenses primarily attributable
to new units which accounted for $1.3 million of the domestic increase. Domestic
manned check cashing operations accounted for $.8 million of the increase
including $.2 million of losses from fraudulently cashed income tax refund
checks. Foreign lending operations contributed $.4 million of the increase and
Rent-A-Tire accounted for the remaining $1.5 million of the increase as a result
of the expansion of its operations.
Depreciation and Amortization. Depreciation and amortization expenses
as a percentage of net revenue were 9% in both the current quarter and the prior
year quarter. The amount of depreciation and amortization expenses was
approximately the same in both periods.
Interest Expense. Net interest expense as a percentage of net revenue
declined to 6.9% in the current quarter from 7.5% in the prior year quarter. The
amount decreased a net $.2 million, or 6.4%, due to the effect of a 11.5%
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
6.5% in the current quarter from 7.4% in the prior year quarter. Average debt
outstanding increased 5.8% to $208.6 million during the current quarter from
$197.1 million during the prior year quarter due to the Company's expansion and
investments in innoVentry and Rent-A-Tire during the last twelve months.
Other Items. Equity in the loss of unconsolidated subsidiary includes
$2.2 million of losses in the current quarter from the Company's equity interest
in the losses incurred by innoVentry following its de-consolidation. The Company
anticipates that these losses will increase as innoVentry expands its
operations.
Income Taxes. The Company's consolidated effective income tax rate
increased to 57% for the current quarter from 39% for the prior year quarter.
The effective tax rate of the domestic lending operations increased to 56% for
the current quarter compared to 40% for the prior year quarter primarily due to
a greater proportion of non-deductible items in relation to pre-tax income in
the current quarter. The effective tax rate of the foreign lending operations
decreased to 31% for the current quarter from 32% for the prior year quarter as
a result of a tax rate reduction on April 1, 1999, in the United Kingdom as well
as 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 has recognized deferred tax benefits from the equity losses arising from
its investment in innoVentry. However, the Company anticipates that innoVentry's
losses incurred after October 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 increase in late 1999.
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<PAGE> 18
NINE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
Net Revenue: Consolidated. Consolidated net revenue increased 8% to
$155.5 million during the nine months ended September 30, 1999 (the "current
period"), from $144.2 million during the nine months ended September 30, 1998
(the "prior year period"). Of the 8% increase, 4% was attributable to the new
lending units in operation for less than one year during the current period, 2%
was attributable to the domestic and foreign manned check cashing operations, 1%
was attributable to gains from same unit lending operations, and 1% was
attributable to net increases in the CCM and rental operations of the Company.
Net Revenue: Lending Activities. Net revenue from lending operations
increased $9.6 million to $149.8 million during the current period from $140.2
million during the prior year period. The new lending units in operation for
less than one year during the current period contributed $6.0 million of the
increase, same units contributed $1.1 million, and domestic and foreign check
cashing operations contributed $2.5 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 $6.2 million, $.9 million, and $2.5 million, respectively, of the
total increase.
The finance and service charges net increase of $6.2 million was
primarily attributable to an 8% increase in the average outstanding balance of
pawn loans. This increase accounted for $6.8 million in additional revenue,
while a fractionally lower annualized loan yield resulted in a $.6 million
decline. Same units contributed $2.9 million of the $6.2 million net increase.
The consolidated annualized loan yield was constant at 96% in both the
current period and the prior year period. The domestic annualized loan yield was
122% for the current period compared to 123% 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
$14.5 million, or 10%, higher than the prior year period. Same unit increases
accounted for $6.3 million of the $14.5 million increase. The margin on
disposition of merchandise declined to 33.1% in the current period from 35.7%
during the prior year period. The margin from the disposition of scrap jewelry
decreased $.9 million in the current period as compared to the prior year period
mostly due to the decline in the average price of gold during the period.
Excluding the effect of the disposition of scrap jewelry, the margin on
disposition of merchandise was 34.9% for the current period compared to 37.1% in
the prior year period. The net result was a $.9 million, or 2%, increase in net
revenue from the
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disposition of merchandise. The merchandise turnover rate decreased slightly to
2.2 times from 2.3 times in the prior year period.
Net Revenue: Other Activities. The restructuring of the Company's check
cashing operations and de-consolidation of innoVentry resulted in a decline in
other net revenue in the current period of $2.0 million from the prior year
period.
Net revenue of Rent-A-Tire increased to $5.3 million in the current
period from $1.6 million for the prior year period primarily due to the
acquisitions of nine stores and an increase in the number of managed stores to
nineteen at September 30, 1999. Also, prior to February 1, 1998, the Company's
49% share of earnings or losses of Rent-A-Tire's predecessor was recorded in
"Equity in loss of unconsolidated subsidiary."
Operations and Administration Expenses. Consolidated operations and
administration expenses as a percentage of net revenue were 74% in the current
period compared to 75% for the prior year period. Excluding the effect of
innoVentry's operations and administration expenses and net revenues, the ratios
were 72% in the current period and 70% in the prior year period. Total
operations and administration expenses, excluding innoVentry, increased $12.3
million in the current period as compared to the prior year period. Domestic
lending operations contributed $6.6 million of the increase primarily due to
higher personnel, occupancy, and other administrative expenses mostly
attributable to new units that accounted for $5.4 million of the increase.
Domestic manned check cashing operations accounted for $1.9 million of the
increase and foreign lending operations contributed $1.0 million. The expenses
of Rent-A-Tire comprised $2.8 million of the increase due to the growth in the
number of tire rental stores in operation.
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 13%
principally due to the effect of the increase in additional lending units during
1998 and the number of tire rental stores.
Interest Expense. Net interest expense as a percentage of net revenue
decreased to 6.4% in the current period from 6.9% in the prior year period. The
amount increased $.1 million, or 1%, primarily due to the effect of a higher
average debt balance outstanding to support increased growth of operations and
investments in subsidiaries that was virtually offset by a lower effective
blended borrowing cost. Average debt outstanding increased 16% to $200.1 million
during the current period from $173.1 million during the prior year period. The
effective blended borrowing cost declined to 6.7% for the current period from
7.7% for the prior year period.
Other Items. Equity in the loss of unconsolidated subsidiary includes
$5.1 million of losses in the current period from the Company's equity interest
in the losses incurred by innoVentry 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.
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The Company recorded a gain of $1.0 million, net of applicable income
taxes, as a result of the transactions described above involving innoVentry.
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 the CCM business, increased to 41% for the current period from 38%
for the prior year period. The effective tax rate of the domestic lending
operations increased to 41% in the current period from 39% in the prior year
period primarily as a result of higher non-deductible items in relation to
pre-tax income 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 and a reduction in the United Kingdom tax
rate on April 1, 1999.
LIQUIDITY AND CAPITAL RESOURCES
In management's opinion, the Company's cash flow and liquidity remain
strong. Cash and cash equivalents decreased $1.4 million to $3.0 million at
September 30, 1999, from $4.4 million at December 31, 1998. During the current
period, $13.7 million of cash was provided by net operating activities, $18.7
million was provided by borrowings under bank lines of credit, $5.8 million was
provided by the sale of property and equipment and $1.4 million was provided by
the issuance of common shares pursuant to the Company's stock option plans. The
cash increases were offset by the Company's investments of $8.1 million to
acquire five lending units and nine tire rental stores and $15.1 million for
capital expenditures, including $3.3 million related to Mr. Payroll's CCM
operations while consolidated. As a result of the de-consolidation of the CCM
operations following the transactions described above, cash was reduced by $4.8
million. The Company also advanced $.6 million on a short-term basis to
innoVentry following the de-consolidation. In addition, the Company increased
its pawn loan balances by $4.3 million, repaid $4.6 million of notes payable and
capital lease obligations, paid $1.0 million in dividends and purchased $2.5
million of treasury shares.
As a result of the transactions described above involving innoVentry,
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 innoVentry's
growth potential. However, in October 1999, the Company, Cash Centers, and a
third party each purchased $10 million of innoVentry's newly issued senior
convertible Series B preferred stock. As a result, the Company's voting interest
in innoVentry declined to 38.5%. In the event innoVentry requires additional
capital in the future, the Company may make additional investments. In the event
the Company does not participate in additional capital fundings of innoVentry,
the Company's ownership interest will be diluted. Management believes that
innoVentry intends to continue to develop and market the CCM as a financial
services machine. The Company anticipates that innoVentry will incur future
losses until sufficient revenues are generated from its sales and operations.
The Company may add up to 5 additional lending units during the
remainder of 1999, for a net addition of approximately 10 units for the full
year. These additions may occur through a combination of new openings and
acquisitions of existing locations. Rent-
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A-Tire has purchased nine tire rental stores during the first nine months of
1999 and may purchase up to five additional stores during the remainder of the
year.
Through September 30, 1999, the Company purchased 320,000 shares of its
common stock in the open market for an aggregate amount of $2.5 million. On
October 19, 1999, the Company's Board of Directors terminated the open market
purchase authorization established in 1997 and established a new authorization
for the purchase of up to one million shares of its common stock in the open
market. Purchases may be made from time to time 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
$227.7 million should be sufficient to meet the Company's anticipated future
capital requirements.
IMPACT OF FOREIGN CURRENCY EXCHANGE RATES
The Company is subject to the risk of unexpected changes in foreign
currency rates by virtue of its operations in the United Kingdom and Sweden. The
Company's foreign assets, liabilities, and earnings are converted into U.S.
dollars for consolidation into the Company's financial statements. At September
30, 1999, the Company had recorded a cumulative other comprehensive loss of $2.7
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
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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 September 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. As of September 30, 1999,
the upgrade has been completed for the majority of the Sweden pawnshops and the
remainder are scheduled to be upgraded by November 30, 1999. A proprietary
pawnshop operating system for the Company's United Kingdom lending operations
has been developed, implemented and tested for Year 2000 compliance. During the
year, 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 was completed in October 1999.
The Company has completed the assessment of its non-IT systems issues
and completed its remediation and testing efforts in October 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 $2.7 million to $3.0 million.
Through September 30, 1999, the Company has expended approximately $2.3 million.
Costs to replace computerized systems, hardware or equipment (currently
estimated to be approximately $1.7 million to $1.8 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
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initiatives either through cash generated from operations and current working
capital, or its existing revolving credit facilities.
Risks of Year 2000 Problems. Based on the progress it has made in
addressing its Year 2000 issues and its plan and timetable to complete its
compliance program, the Company does not currently foresee significant risks
associated with its Year 2000 issues. However, management believes that it is
not possible to determine with complete certainty that all Year 2000 problems
affecting the Company have been identified or will be corrected. Likewise,
because of its constant progress in addressing its various Year 2000 issues, the
Company has not yet determined the most reasonably likely worst case scenario
relating to Year 2000 problems. Nevertheless, management expects that the
Company could likely suffer the following consequences: (1) a significant number
of operational inconveniences and inefficiencies for the Company and its
customers that could divert management's time and attention and financial and
human resources from its ordinary business activities; and (2) a lesser number
of serious system failures that may require significant efforts by the Company
to prevent or alleviate material business disruptions.
Contingency Planning. The Company has completed a comprehensive
contingency plan with respect to the Year 2000 issue. The Company's lending
operations can operate, if necessary, on a manual, non-computerized basis. 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 may 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 September 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 $ 24,107 $ 24,076 --
Proceeds from disposition of merchandise 49,516 47,241 5%
Check cashing royalties and fees 773 -- --
-------- -------- --------
TOTAL REVENUE 74,396 71,317 4%
-------- -------- --------
COSTS OF REVENUE
Disposed merchandise 33,760 30,452 11%
-------- -------- --------
NET REVENUE $ 40,636 $ 40,865 (1)%
======== ======== ========
OTHER DATA
Net revenue contribution by source--
Finance and service charges 59.3% 58.9% --
Margin on disposition of merchandise 38.8% 41.1% (6)%
Check cashing royalties and fees 1.9% -- --
Expenses as a percentage of net revenue--
Operations and administration 80.9% 74.4% 9%
Depreciation and amortization 9.9% 9.9% --
Interest, net 6.2% 6.7% (7)%
Income from operations before depreciation
and amortization as a percentage of total revenue 10.4% 14.7% (29)%
Income before income taxes as a percentage of total revenue 1.7% 5.2% (68)%
Annualized yield on loans 115% 114% 1%
Average loan balance per average location in operation $ 201 $ 204 (1)%
Average loan amount at end of period (not in thousands) $ 79 $ 80 (1)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 31.8% 35.5% (10)%
Average annualized merchandise turnover 2.0x 2.1x (5)%
Average merchandise held for disposition
per average location $ 160 $ 143 12%
Lending locations in operation--
Beginning of period 414 409
Acquired 2 2
Start-ups 1 2
Combined or closed -- (3)
End of period 417 410 2%
Average number of locations in operation (a) 416 410 1%
======== ======== ========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 22
<PAGE> 25
DOMESTIC LENDING OPERATIONS
================================================================================
(Dollars in thousands)
The following table sets forth selected financial data for the Company's
domestic lending operations as of September 30, 1999 and 1998, and for the nine
months then ended.
<TABLE>
<CAPTION>
1999 1998 Change
--------- --------- ---------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 73,074 $ 68,533 7%
Proceeds from disposition of merchandise 161,461 148,413 9%
Check cashing royalties and fees 2,440 -- --
--------- --------- ---------
TOTAL REVENUE 236,975 216,946 9%
--------- --------- ---------
COSTS OF REVENUE
Disposed merchandise 107,389 95,090 13%
--------- --------- ---------
NET REVENUE $ 129,586 $ 121,856 6%
========= ========= =========
OTHER DATA
Net revenue contribution by source--
Finance and service charges 56.4% 56.2% --
Margin on disposition of merchandise 41.7% 43.8% (5)%
Check cashing royalties and fees 1.9% -- --
Expenses as a percentage of net revenue--
Operations and administration 75.6% 73.4% 3%
Depreciation and amortization 9.7% 9.3% 4%
Interest, net 5.7% 5.9% (3)%
Income from operations before depreciation
and amortization as a percentage of total revenue 13.4% 14.9% (10)%
Income before income taxes as a percentage of total revenue 4.9% 6.4% (23)%
Annualized yield on loans 122% 123% (1)%
Average loan balance per average location in operation $ 194 $ 193 1%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 33.5% 35.9% (7)%
Average annualized merchandise turnover 2.2x 2.3x (4)%
Average merchandise held for disposition
per average location $ 155 $ 142 9%
Lending locations in operation--
Beginning of period 414 352
Acquired 3 57
Start-ups 3 6
Combined or closed (3) (5)
End of period 417 410 2%
Average number of locations in operation (a) 414 385 8%
========= ========= =========
</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, Ltd. and Svensk Pantbelaning as of September 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, Ltd. (U.K. pound sterling per U.S. dollar)--
Balance sheet data - end of period rate .6071 .5882 (3)%
Income statement data - three months average rate .6245 .6040 (3)%
Svensk Pantbelaning (Swedish Kronor per U.S. dollar)--
Balance sheet data - end of period rate 8.1441 7.8438 (4)%
Income statement data - three months average rate 8.3119 8.0026 (4)%
-------- -------- ------
</TABLE>
<TABLE>
<CAPTION>
1999 1998 Change
-------- -------- ------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 6,534 $ 6,020 9%
Proceeds from disposition of merchandise 1,308 781 67%
Check cashing fees 196 243 (19)%
-------- -------- ------
TOTAL REVENUE 8,038 7,044 14%
-------- -------- ------
COSTS OF REVENUE
Disposed merchandise 1,014 654 55%
-------- -------- ------
NET REVENUE $ 7,024 $ 6,390 10%
======== ======== ======
OTHER DATA
Net revenue contribution by source--
Finance and service charges 93.0% 94.2% (1)%
Margin on disposition of merchandise 4.2% 2.0% 110%
Check cashing fees 2.8% 3.8% (27)%
Expenses as a percentage of net revenue--
Operations and administration 48.3% 46.1% 5%
Depreciation and amortization 6.8% 5.6% 23%
Interest, net 4.3% 7.7% (44)%
Income from operations before depreciation
and amortization as a percentage of total revenue 45.2% 48.9% (8)%
Income before income taxes as a percentage of total revenue 35.4% 36.8% (4)%
Annualized yield on loans 52% 52% --
Average loan balance per average location in operation $ 967 $ 924 5%
Average loan amount at end of period (not in thousands) $ 189 $ 179 6%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 22.5% 16.3% 38%
Average annualized merchandise turnover 1.6x 1.8x (11)%
Average merchandise held for disposition
per average location $ 50 $ 28 79%
Lending locations in operation--
Beginning of period 52 50
Acquired -- --
Start-ups -- --
Combined or closed -- --
End of period 52 50 4%
Average number of locations in operation (a) 52 50 4%
======== ======== ======
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 24
<PAGE> 27
FOREIGN LENDING OPERATIONS
================================================================================
(Dollars in thousands)
The following table sets forth selected consolidated financial data in U.S.
dollars for Harvey & Thompson, Ltd. and Svensk Pantbelaning as of September 30,
1999 and 1998, and for the nine months then ended, using the following currency
exchange rates:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 Change
-------- -------- ------
<S> <C> <C> <C>
Harvey & Thompson, Ltd. (U.K. pound sterling per U.S. dollar)--
Income statement data - nine months average rate .6200 .6054 (2)%
Svensk Pantbelaning (Swedish Kronor per U.S. dollar)--
Income statement data - nine months average rate 8.2381 7.9522 (4)%
-------- -------- ------
</TABLE>
<TABLE>
<CAPTION>
1999 1998 Change
-------- -------- ------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 19,095 $ 17,430 10%
Proceeds from disposition of merchandise 3,445 1,972 75%
Check cashing fees 568 554 3%
-------- -------- ------
TOTAL REVENUE 23,108 19,956 16%
-------- -------- ------
COSTS OF REVENUE
Disposed merchandise 2,877 1,602 80%
-------- -------- ------
NET REVENUE $ 20,231 $ 18,354 10%
======== ======== ======
OTHER DATA
Net revenue contribution by source--
Finance and service charges 94.4% 95.0% (1)%
Margin on disposition of merchandise 2.8% 2.0% 40%
Check cashing fees 2.8% 3.0% (7)%
Expenses as a percentage of net revenue--
Operations and administration 47.8% 47.5% 1%
Depreciation and amortization 7.4% 5.8% 28%
Interest, net 4.8% 9.2% (48)%
Income from operations before depreciation
and amortization as a percentage of total revenue 45.7% 48.3% (5)%
Income before income taxes as a percentage of total revenue 35.0% 34.5% 1%
Annualized yield on loans 53% 52% 2%
Average loan balance per average location in operation $ 951 $ 899 6%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 16.5% 18.8% (12)%
Average annualized merchandise turnover 1.9x 1.7x 12%
Average merchandise held for disposition
per average location $ 40 $ 25 60%
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 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 September 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 $ -- $ 401 (100)%
Check cashing royalties and fees -- 860 (100)%
-------- -------- ------
TOTAL REVENUE -- 1,261 (100)%
-------- -------- ------
COSTS OF REVENUE
Cost of check cashing machines sold -- 375 (100)%
-------- -------- ------
NET REVENUE $ -- $ 886 (100)%
======== ======== ======
RENTAL OPERATIONS:
REVENUE
Tire and wheel rentals $ 1,547 $ 552 180%
Management fees 1,060 291 264%
Tire and wheel sales 288 22 1209%
Lease income and other 239 25 856%
-------- -------- ------
TOTAL REVENUE 3,134 890 252%
-------- -------- ------
COSTS OF REVENUE
Tire and wheel rentals 665 217 206%
Tire and wheel sales 214 17 1159%
-------- -------- ------
NET REVENUE $ 2,255 $ 656 244%
======== ======== ======
OTHER DATA
Owned rental locations--
Rental agreements outstanding at end of period $ 4,319 $ 1,374 214%
Average balance per rental agreement
at end of period (not in thousands) $ 905 $ 894 1%
Locations in operation at end of period 13 4 225%
Average locations in operation for the period (b) 13 4 225%
Managed rental locations--
Locations in operation at end of period 19 10 90%
Average locations in operation for the period (b) 15 9 67%
======== ======== ======
</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 26
<PAGE> 29
OTHER OPERATIONS
================================================================================
(Dollars in thousands)
The following table sets forth selected financial data with respect to the
Company's other domestic operations as of September 30, 1999 and 1998, and for
the nine months then ended.
<TABLE>
<CAPTION>
1999 1998 Change
------ ------ ------
<S> <C> <C> <C>
CHECK CASHING OPERATIONS (a):
REVENUE
Check cashing machine sales $ 82 $1,503 (95)%
Check cashing royalties and fees 372 2,275 (84)%
------ ------ ------
TOTAL REVENUE 454 3,778 (88)%
------ ------ ------
COSTS OF REVENUE
Cost of check cashing machines sold 38 1,401 (97)%
------ ------ ------
NET REVENUE $ 416 $2,377 (82)%
====== ====== ======
RENTAL OPERATIONS:
REVENUE
Tire and wheel rentals $3,396 1,530 122%
Management fees 2,438 629 288%
Tire and wheel sales 589 57 933%
Lease income and other 629 62 915%
------ ------ ------
TOTAL REVENUE 7,052 2,278 210%
------ ------ ------
COSTS OF REVENUE
Tire and wheel rentals 1,330 586 127%
Tire and wheel sales 437 44 893%
------ ------ ------
NET REVENUE $5,285 $1,648 221%
====== ====== ======
OTHER DATA
Owned rental locations--
Average locations in operation for the period (b) 9 4 125%
Managed rental locations--
Average locations in operation for the period (b) 14 6 133%
====== ====== ======
</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 27
<PAGE> 30
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 28
<PAGE> 31
PART II
Item 1. LEGAL PROCEEDINGS
See Note 9 of Notes to Consolidated Financial Statements
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Second Supplement (September 29, 1999) to
Note Agreement between the Company and the
various Purchasers named therein dated as of
December 1, 1997.
10.2 Fifth Supplement (September 29, 1999) to
Note Agreement between the Company and
Teachers Insurance and Annuity Association
of America dated as of July 7, 1995.
10.3 Eighth Supplement (September 29, 1999) to
Note Agreement between the Company and
Teachers Insurance and Annuity Association
of America dated as of May 6, 1993.
10.4 Fifth Amendment (September 15, 1999) to
Senior Revolving Credit Facility Agreement
among the Company and the various Banks
named therein dated June 19, 1996.
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: November 12, 1999
Page 30
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Second Supplement (September 29, 1999) to Note Agreement between the
Company and the various Purchasers named therein dated as of December
1, 1997.
10.2 Fifth Supplement (September 29, 1999) to Note Agreement between the
Company and Teachers Insurance and Annuity Association of America
dated as of July 7, 1995.
10.3 Eighth Supplement (September 29, 1999) to Note Agreement between the
Company and Teachers Insurance and Annuity Association of America
dated as of May 6, 1993.
10.4 Fifth Amendment (September 15, 1999) to Senior Revolving Credit
Facility Agreement among the Company and the various Banks named
therein dated June 19, 1996.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
SECOND SUPPLEMENT TO 1997 NOTE AGREEMENT
This Second Supplement to 1997 Note Agreement (the "Second Supplement") is
made and entered into as of the 29th day of September, 1999, by and between
Cash America International, Inc. (the "Company") and each of the institutions
which is a signatory to this Second Supplement (collectively, the
"Noteholders").
RECITALS
WHEREAS, the parties hereto have entered into a Note Agreement dated as of
December 1, 1997, pursuant to which the Company issued and the Noteholders
purchased $30,000,000 aggregate principal amount of the Company's 7.10% Senior
Notes Due January 2, 2008, and the parties have amended said Note Agreement by
entering into a First Supplement to 1997 Note Agreement dated as of December
31, 1998 (said Note Agreement, as amended, being referred to hereafter as the
"Note Agreement"); and
WHEREAS, the Company and The Noteholders desire to amend certain
provisions of the Note Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and The Noteholders hereby agree as follows:
1. Amendment to Section 2.01 of the Note Agreement. Section 2.01 of the
Note Agreement is hereby amended by adding in alphabetical order the following
new definitions:
"innoVentry" means innoVentry Corp., a Delaware corporation and
successor in interest to Mr. Payroll.
"innoVentry Investment" means the Investment by the Company in
innoVentry on or after October 1, 1999 in an amount not to exceed
$10,000,000, such Investment to be made concurrently with an investment by
Wells Fargo in innoVentry in the amount of $10,000,000.
2. Amendment to Section 9.11 of the Note Agreement. Section 9.11 of the
Note Agreement is hereby amended as follows:
(a) the paragraph heading of (l) is changed to "(n)," the paragraph
heading of (m) is changed to "(o)," and new paragraphs (l) and
(m) are added to read in their entirety as follows:
(l) loans to officers of the Company and Subsidiaries in an
aggregate amount not exceeding $5,000,000 at any one time
outstanding;
(m) the innoVentry Investment;
(b) paragraph (o) is amended and restated to read in its entirety as
follows:
<PAGE> 2
(o) other Investments made after the date hereof and not
otherwise permitted by this Section 9.11, provided that neither
the Company nor any Subsidiary shall make any Investment under
this clause (o) if a Default shall be in existence immediately
before or after such Investment or if the amount of such
Investment, when aggregated with the total amount of all other
Investments then outstanding under this clause (o), exceeds 7.5%
of Consolidated Tangible Net Worth as of the date of such
Investment. Notwithstanding this Section 9.11(o), the Company
shall not make any Investments in innoVentry after March 31, 1999
other than the innoVentry Investment.
3. Definitions. All capitalized terms used herein and not otherwise
specifically defined shall have the respective meanings set forth in the Note
Agreement.
4. Payment of the Noteholders Counsel Fees and Expenses. The Company
agrees to pay upon demand, the reasonable fees and expenses of Chapman and
Cutler, counsel to the Noteholders, in connection with the negotiation,
preparation, approval, execution and delivery of this Second Supplement.
5. Ratification of Note Agreement. Except as specified hereinabove, all
other terms of the Note Agreement shall remain unchanged and are hereby
ratified and confirmed. All references to "this Agreement" or "the Agreement"
appearing in the Note Agreement, and all references to the Note Agreement
appearing in any other instrument or document, shall be deemed to refer to the
Note Agreement as supplemented and amended by this Second Supplement.
6. Counterparts. This Second Supplement may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
By signing below where indicated, the undersigned, 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., CASH
AMERICA PAWN L.P., 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., CASH AMERICA, INC. OF UTAH, CASH
AMERICA FRANCHISING, INC., CASH AMERICA, INC. OF ILLINOIS, UPTOWN CITY PAWNERS,
INC., DOC HOLLIDAY'S PAWNBROKERS & JEWELERS, INC., LONGHORN PAWN & GUN, INC.,
BRONCO PAWN & GUN, INC., GAMECOCK PAWN & GUN, INC., HORNET PAWN & GUN, INC.,
TIGER PAWN & GUN, INC., RENT-A-TIRE, INC., and MR. PAYROLL CORPORATION, a
Delaware corporation, as Guarantors, do each acknowledge and approve the Note
Agreement, as amended by this Second Supplement, and the other Loan Documents,
and the terms thereof, and specifically agree to comply with all provisions
therein and herein which refer to or affect such Guarantors.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Second Supplement
to 1997 Note Agreement as of the date first written above.
CASH AMERICA INTERNATIONAL, INC.
By: /s/ David J. Clay
----------------------------------------
David J. Clay, Vice President and Treasurer
ACCEPTED AND AGREED TO:
THE TRAVELERS INSURANCE COMPANY
By: /s/A. William Carnduff
----------------------------------------
Its: Second Vice President
THE TRAVELERS LIFE AND ANNUITY
COMPANY
By: /s/ A. William Carnduff
----------------------------------------
Its: Second Vice President
PRIMERICA LIFE INSURANCE COMPANY
By: /s/ A William Carnduff
----------------------------------------
Its: Second Vice President
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Mark W. Poeppelman
----------------------------------------
Its: InvestmentOfficer
3
<PAGE> 4
EMPLOYERS LIFE INSUANCE COMPANY
OF WAUSAU
By: /s/ Mark W. Poeppelman
----------------------------------------
Its: Investment Officer
OHIO NATIONAL LIFE ASSURANCE
CORPORATION
By: /s/ B. Douglas Hundley
----------------------------------------
Its: Investment Officer
MINNESOTA LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Guy De Lambert
----------------------------------------
Its: Second Vice President
4
<PAGE> 5
GUARANTORS
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.
CASH AMERICA, INC. OF UTAH
CASH AMERICA FRANCHISING, INC.
CASH AMERICA, INC. OF ILLINOIS
UPTOWN CITY PAWNERS, INC.
DOC HOLLIDAY'S PAWNBROKERS & JEWELERS, INC.
LONGHORN PAWN & GUN, INC.
BRONCO PAWN & GUN, INC.
GAMECOCK PAWN & GUN, INC.
HORNET PAWN & GUN, INC.
TIGER PAWN & GUN, INC.
RENT-A-TIRE, INC.
MR. PAYROLL CORPORATION, a Delaware corporation
By: /s/ David J. Clay
----------------------------------------
David J. Clay, Treasurer for All
5
<PAGE> 1
EXHIBIT 10.2
FIFTH SUPPLEMENT TO 1995 NOTE AGREEMENT
This Fifth Supplement to 1995 Note Agreement (the "Fifth Supplement") is
made and entered into as of the 29th day of September, 1999, by and between Cash
America International, Inc. (the "Company") and Teachers Insurance and Annuity
Association of America ("Teachers").
RECITALS
WHEREAS, the parties hereto have entered into a Note Agreement dated as of
July 7, 1995, pursuant to which the Company issued and Teachers purchased
$20,000,000 aggregate principal amount of the Company's 8.14% Senior Notes Due
July 7, 2007, and the parties have amended said Note Agreement by entering into
a First Supplement to 1995 Note Agreement dated as of November 10, 1995, a
Second Supplement to 1995 Note Agreement dated as of December 30, 1996, a Third
Supplement to 1995 Note Agreement dated as of December 30, 1997, and a Fourth
Supplement to 1995 Note Agreement dated as of December 31, 1998 (said Note
Agreement, as amended, being referred to hereafter as the "Note Agreement"); and
WHEREAS, the Company and Teachers desire to amend certain provisions of the
Note Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Teachers hereby agree as follows:
1. Amendment to Section 2.01 of the Note Agreement. Section 2.01 of the
Note Agreement is hereby amended by adding in alphabetical order the
following new definitions:
"innoVentry" means innoVentry Corp., a Delaware corporation and
successor in interest to Mr. Payroll.
"innoVentry Investment" means the Investment by the Company in
innoVentry on or after October 1, 1999 in an amount not to exceed
$10,000,000, such Investment to be made concurrently with an investment by
Wells Fargo in innoVentry in the amount of $10,000,000.
2. Amendment to Section 9.11 of the Note Agreement. Section 9.11 of the
Note Agreement is hereby amended as follows:
(a) the paragraph heading of (m) is changed to "(n)," the
paragraph heading of (n) is change to "(o)," and a new
paragraph (m) is added to read in its entirety as follows:
(m) the innoVentry Investment;
(b) paragraph (o) is amended and restated to read in its
entirety as follows:
<PAGE> 2
(o) other Investments made after the date hereof and not
otherwise permitted by this Section 9.11, provided that
neither the Company nor any Subsidiary shall make any
Investment under this clause (o) if a Default shall be in
existence immediately before or after such Investment or
if the amount of such Investment, when aggregated with the
total amount of all other Investments then outstanding
under this clause (o), exceeds 7.5% of Consolidated
Tangible Net Worth as of the date of such Investment.
Notwithstanding this Section 9.11(o), the Company shall
not make any Investments in innoVentry after March 31,
1999 other than the innoVentry Investment.
3. Definitions. All capitalized terms used herein and not otherwise
specifically defined shall have the respective meanings set forth in the Note
Agreement.
4. Payment of Teachers'Counsel Fees and Expenses. The Company agrees to pay
upon demand, the reasonable fees and expenses of Chapman and Cutler, counsel to
Teachers, in connection with the negotiation, preparation, approval, execution
and delivery of this Fifth Supplement.
5. Ratification of Note Agreement. Except as specified hereinabove, all
other terms of the Note Agreement shall remain unchanged and are hereby ratified
and confirmed. All references to "this Agreement" or "the Agreement" appearing
in the Note Agreement, and all references to the Note Agreement appearing in any
other instrument or document, shall be deemed to refer to the Note Agreement as
supplemented and amended by this Fifth Supplement.
6. Counterparts. This Fifth Supplement may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
By signing below where indicated, the undersigned, 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., CASH
AMERICA PAWN L.P., 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., CASH AMERICA, INC. OF UTAH, CASH AMERICA
FRANCHISING, INC., CASH AMERICA, INC. OF ILLINOIS, UPTOWN CITY PAWNERS, INC.,
DOC HOLLIDAY'S PAWNBROKERS & JEWELERS, INC., LONGHORN PAWN & GUN, INC., BRONCO
PAWN & GUN, INC., GAMECOCK PAWN & GUN, INC., HORNET PAWN & GUN, INC., TIGER PAWN
& GUN, INC., RENT-A-TIRE, INC., and MR. PAYROLL CORPORATION, a Delaware
corporation, as Guarantors, do each acknowledge and approve the Note Agreement,
as amended by this Fifth Supplement, and the other Loan Documents, and the terms
thereof, and specifically agree to comply with all provisions therein and herein
which refer to or affect such Guarantors.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Fifth Supplement to
1995 Note Agreement as of the date first written above.
CASH AMERICA INTERNATIONAL, INC.
By: /s/ David J. Clay
-----------------------------------------------
David J. Clay, Vice President and Treasurer
ACCEPTED AND AGREED TO:
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Diane Hom
-----------------------------------------------
Name: Diane Hom
Title: Director-Private Placements
3
<PAGE> 4
GUARANTORS
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.
CASH AMERICA, INC. OF UTAH
CASH AMERICA FRANCHISING, INC.
CASH AMERICA, INC. OF ILLINOIS
UPTOWN CITY PAWNERS, INC.
DOC HOLLIDAY'S PAWNBROKERS & JEWELERS, INC.
LONGHORN PAWN & GUN, INC.
BRONCO PAWN & GUN, INC.
GAMECOCK PAWN & GUN, INC.
HORNET PAWN & GUN, INC.
TIGER PAWN & GUN, INC.
RENT-A-TIRE, INC.
MR. PAYROLL CORPORATION, a Delaware corporation
By: /s/ David J. Clay
-----------------------------------------------
David J. Clay, Treasurer for All
4
<PAGE> 1
EXHIBIT 10.3
EIGHTH SUPPLEMENT TO 1993 NOTE AGREEMENT
This Eighth Supplement to 1993 Note Agreement (the "Eighth Supplement") is
made and entered into as of the 29th day of September, 1999, by and between Cash
America International, Inc. (the "Company") and Teachers Insurance and Annuity
Association of America ("Teachers").
RECITALS
WHEREAS, the parties hereto have entered into a Note Agreement dated as of
May 6, 1993, pursuant to which the Company issued and Teachers purchased
$30,000,000 aggregate principal amount of the Company's 8.33% Senior Notes Due
May 1, 2003, and the parties have amended said Note Agreement by entering into a
First Supplement to Note Agreement dated as of September 20, 1994, a Second
Supplement to Note Agreement dated as of May 12, 1995, a Third Supplement to
Note Agreement dated as of July 7, 1995, a Fourth Supplement to 1993 Note
Agreement dated as of November 10, 1995, a Fifth Supplement to 1993 Note
Agreement dated as of December 30, 1996, a Sixth Supplement to 1993 Note
Agreement dated as of December 30, 1997, and a Seventh Supplement to 1993 Note
Agreement dated as of December 31, 1998 (said Note Agreement, as amended, being
referred to hereafter as the "Note Agreement"); and
WHEREAS, the Company and Teachers desire to amend certain provisions of the
Note Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Teachers hereby agree as follows:
1. Amendment to Section 2.01 of the Note Agreement. Section 2.01 of the
Note Agreement is hereby amended by adding in alphabetical order the
following new definitions:
"innoVentry" means innoVentry Corp., a Delaware corporation and
successor in interest to Mr. Payroll.
"innoVentry Investment" means the Investment by the Company in
innoVentry on or after October 1, 1999 in an amount not to exceed
$10,000,000, such Investment to be made concurrently with an investment by
Wells Fargo in innoVentry in the amount of $10,000,000.
2. Amendment to Section 9.11 of the Note Agreement. Section 9.11 of the
Note Agreement is hereby amended as follows:
(a) the paragraph heading of (m) is changed to "(n)," the
paragraph heading of (n) is change to "(o)," and a new
paragraph (m) is added to read in its entirety as follows:
(m) the innoVentry Investment;
(b) paragraph (o) is amended and restated to read in its
entirety as follows:
<PAGE> 2
(o) other Investments made after the date hereof and
not otherwise permitted by this Section 9.11,
provided that neither the Company nor any Subsidiary
shall make any Investment under this clause (o) if a
Default shall be in existence immediately before or
after such Investment or if the amount of such
Investment, when aggregated with the total amount of
all other Investments then outstanding under this
clause (o), exceeds 7.5% of Consolidated Tangible Net
Worth as of the date of such Investment.
Notwithstanding this Section 9.11(o), the Company
shall not make any Investments in innoVentry after
March 31, 1999 other than the innoVentry Investment.
3. Definitions. All capitalized terms used herein and not otherwise
specifically defined shall have the respective meanings set forth in the Note
Agreement.
4. Payment of Teachers'Counsel Fees and Expenses. The Company agrees to pay
upon demand, the reasonable fees and expenses of Chapman and Cutler, counsel to
Teachers, in connection with the negotiation, preparation, approval, execution
and delivery of this Eighth Supplement.
5. Ratification of Note Agreement. Except as specified hereinabove, all
other terms of the Note Agreement shall remain unchanged and are hereby ratified
and confirmed. All references to "this Agreement" or "the Agreement" appearing
in the Note Agreement, and all references to the Note Agreement appearing in any
other instrument or document, shall be deemed to refer to the Note Agreement as
supplemented and amended by this Eighth Supplement.
6. Counterparts. This Eighth Supplement may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
By signing below where indicated, the undersigned, 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., CASH
AMERICA PAWN L.P., 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., CASH AMERICA, INC. OF UTAH, CASH AMERICA
FRANCHISING, INC., CASH AMERICA, INC. OF ILLINOIS, UPTOWN CITY PAWNERS, INC.,
DOC HOLLIDAY'S PAWNBROKERS & JEWELERS, INC., LONGHORN PAWN & GUN, INC., BRONCO
PAWN & GUN, INC., GAMECOCK PAWN & GUN, INC., HORNET PAWN & GUN, INC., TIGER PAWN
& GUN, INC., RENT-A-TIRE, INC., and MR. PAYROLL CORPORATION, a Delaware
corporation, as Guarantors, do each acknowledge and approve the Note Agreement,
as amended by this Eighth Supplement, and the other Loan Documents, and the
terms thereof, and specifically agree to comply with all provisions therein and
herein which refer to or affect such Guarantors.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Eighth Supplement to
1993 Note Agreement as of the date first written above.
CASH AMERICA INTERNATIONAL, INC.
By: /s/ David J. Clay
-------------------------------------------
David J. Clay, Vice President and Treasurer
ACCEPTED AND AGREED TO:
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Diane Hom
----------------------------------
Name: Diane Hom
--------------------------------
Title: Director-Private Placements
-------------------------------
3
<PAGE> 4
GUARANTORS
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.
CASH AMERICA, INC. OF UTAH
CASH AMERICA FRANCHISING, INC.
CASH AMERICA, INC. OF ILLINOIS
UPTOWN CITY PAWNERS, INC.
DOC HOLLIDAY'S PAWNBROKERS & JEWELERS, INC.
LONGHORN PAWN & GUN, INC.
BRONCO PAWN & GUN, INC.
GAMECOCK PAWN & GUN, INC.
HORNET PAWN & GUN, INC.
TIGER PAWN & GUN, INC.
RENT-A-TIRE, INC.
MR. PAYROLL CORPORATION, a Delaware corporation
By: /s/ David J. Clay
---------------------------------------
David J. Clay, Treasurer for All
4
<PAGE> 1
EXHIBIT 10.4
FIFTH AMENDMENT TO AMENDED AND RESTATED
SENIOR REVOLVING CREDIT FACILITY AGREEMENT
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED SENIOR REVOLVING CREDIT
FACILITY AGREEMENT (this "Fifth Amendment"), dated as of September 15, 1999, is
entered into among CASH AMERICA INTERNATIONAL, INC., a Texas corporation (the
"Borrower"), the lenders listed on the signature pages hereof (the "Lenders"),
BANK OF AMERICA, N.A., formerly known as Bank of America National Trust and
Savings Association, successor by merger to Bank of America, N.A., formerly
known as NationsBank, N.A., successor by merger to NationsBank of Texas, N.A.,
as Administrative Agent (in said capacity, the "Administrative Agent").
BACKGROUND
A. Borrower, 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, that certain Second Amendment to Amended and Restated Senior
Revolving Credit Facility Agreement, dated as of June 24, 1998, that certain
Third Amendment to Amended and Restated Senior Revolving Credit Facility
Agreement, dated as of December 11, 1998, and that certain Fourth Amendment to
Amended and Restated Senior Revolving Credit Facility Agreement, dated as of
February 17, 1999 (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.
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) Section 5.14(f) of the Credit Agreement is hereby amended to
read as follows:
"(f) Consolidated Funded Debt to Consolidated EBITDA. The
Borrower shall not permit the ratio of (i)(A) Consolidated Funded Debt
as of the end of each fiscal quarter other than the fiscal quarter
ending on September 30, 2000 to (B) Consolidated EBITDA for the most
recent four (4) fiscal quarters of the Borrower ending at the end of
each such fiscal quarter to be greater than 3.50 to 1 and (ii)(A)
Consolidated Funded Debt as of the fiscal
<PAGE> 2
quarter ending September 30, 2000 to (B) Consolidated EBITDA for the
most recent four (4) fiscal quarters of the Borrower ending at the end
of such fiscal quarter to be greater than 3.85 to 1."
(b) Section 6.3 of the Credit Agreement is hereby amended by (i)
deleting "and" at the end of clause (ix) thereof, (ii) renumbering clause (x)
thereof as clause (xi), and (iii) adding a new clause (x) thereto to read as
follows:
"(x) Investments in innoVentry Corp., a Delaware corporation
("innoVentry") made after March 31, 1999 not to exceed $10,000,000 in
aggregate amount; and"
(c) Section 6.3 of the Credit Agreement is further amended by amending
new clause (xi) thereof to read as follows:
"(xi) any other Investments (excluding any Investments in
innoVentry made after March 31, 1999) which other Investments shall
not exceed on any date an aggregate amount equal to the product
obtained by multiplying (A) Consolidated Tangible Net Worth times (B)
.075 on such date."
(d) Exhibit F to the Credit Agreement is hereby amended to be in the
form of Exhibit F to this Fifth Amendment.
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 amendments
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 Fifth Amendment, and this Fifth Amendment and the Credit Agreement, as
amended hereby, 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 Fifth
Amendment 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
- 2 -
<PAGE> 3
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 (including the
Board of Directors of the Borrower), is required for the execution, delivery or
performance by the Borrower of this Fifth Amendment or the acknowledgment of
this Fifth Amendment by each Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This Fifth Amendment shall be
effective as of September 15, 1999, subject to the following:
(a) the Administrative Agent shall have received counterparts of this
Fifth Amendment executed by the Determining Lenders;
(b) the Administrative Agent shall have received counterparts of this
Fifth Amendment executed by the Borrower and acknowledged by each Guarantor;
(c) the representations and warranties set forth in Section 2 of this
Fifth Amendment shall be true and correct; and
(d) 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 Fifth Amendment, (b) agrees that its
obligations in respect of its Guaranty Agreement are not released, modified,
impaired or affected in any manner by this Fifth Amendment or any of the
provisions contemplated herein and (c) acknowledges that it has no claims or
offsets against, or defenses or counterclaims to, its Guaranty Agreement.
5. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Fifth 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 Fifth Amendment.
(b) The Credit Agreement, as amended by this Fifth Amendment, and all
other Loan Papers shall remain in full force and effect and are hereby ratified
and confirmed.
6. 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 Fifth Amendment
and the other instruments and documents to be
- 3 -
<PAGE> 4
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 Fifth Amendment).
7. EXECUTION IN COUNTERPARTS. This Fifth 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 when taken together shall constitute
but one and the same instrument.
8. GOVERNING LAW; BINDING EFFECT. This Fifth 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.
9. HEADINGS. Section headings in this Fifth Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Fifth Amendment for any other purpose.
10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS
FIFTH 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
===============================================================================
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Fifth
Amendment as of the date first above written.
CASH AMERICA INTERNATIONAL, INC.
By: /s/ David J. Clay
----------------------------------
David J. Clay
Vice President and Treasurer
BANK OF AMERICA, N.A., as
Administrative Agent and as a Lender
By: /s/ Shelly K. Harper
----------------------------------
Name: Shelly K. Harper
Title: Vice President
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, as
Documentation Agent and as a Lender
By: /s/ Susan B. Sheffield
----------------------------------
Name: Susan B. Sheffield
Title: Vice President
BANK ONE, TEXAS, N.A.
By: /s/ David E. Williams
----------------------------------
Name: David E. Williams
Title: Senior Vice President
- 5 -
<PAGE> 6
THE BANK OF TOKYO-MITSUBISHI,
LTD.
By: /s/ J. Mearns
----------------------------------
Name: J. Mearns
Title: Vice President and Manager
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ B. B. Wuthrich
----------------------------------
Name: B. B. Wuthrich
Title: Vice President
COMERICA BANK-TEXAS
By: /s/ Ty Maxfield
----------------------------------
Name: Ty Maxfield
Title: Vice President
- 6 -
<PAGE> 7
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.
CASH AMERICA, INC. OF UTAH
CASH AMERICA FRANCHISING, INC.
CASH AMERICA, INC. OF ILLINOIS
UPTOWN CITY PAWNERS, INC.
DOC HOLLIDAY'S PAWN BROKERS & JEWELERS, INC.
LONGHORN PAWN & GUN, INC.
BRONCO PAWN & GUN, INC.
HORNET PAWN & GUN, INC.
TIGER PAWN & GUN, INC.
RENT-A-TIRE, INC.
MR. PAYROLL CORPORATION
By: /s/ David J. Clay
----------------------------------
David J. Clay
Treasurer
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,020
<SECURITIES> 0
<RECEIVABLES> 155,821
<ALLOWANCES> 0
<INVENTORY> 75,209
<CURRENT-ASSETS> 257,304
<PP&E> 133,398
<DEPRECIATION> 74,017
<TOTAL-ASSETS> 427,433
<CURRENT-LIABILITIES> 29,572
<BONDS> 203,317
0
0
<COMMON> 3,024
<OTHER-SE> 190,222
<TOTAL-LIABILITY-AND-EQUITY> 427,433
<SALES> 164,988
<TOTAL-REVENUES> 267,589
<CGS> 112,071
<TOTAL-COSTS> 207,313
<OTHER-EXPENSES> 34,767
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,990
<INCOME-PRETAX> 11,407
<INCOME-TAX> 4,261
<INCOME-CONTINUING> 7,146
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,146
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.27
</TABLE>
