<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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:
25,798,851 common shares, $.10 par value, were outstanding as of July 31, 2000
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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 - June 30, 2000
and 1999 and December 31, 1999............................................ 1
Consolidated Statements of Income - Three Months and
Six Months Ended June 30, 2000 and 1999................................... 2
Consolidated Statements of Stockholders' Equity -
Three Months and Six Months Ended June 30, 2000 and 1999.................. 3
Consolidated Statements of Cash Flows -
Three Months and Six Months Ended June 30, 2000 and 1999.................. 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...................................................... 27
SIGNATURE........................................................................ 29
</TABLE>
<PAGE> 3
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,825 $ 3,133 $ 6,186
Loans 124,117 132,127 125,349
Merchandise held for disposition, net 55,262 64,770 64,419
Inventory 3,952 2,096 2,801
Finance and service charges receivable 19,406 20,476 21,052
Other receivables and prepaid expenses 13,527 9,391 6,279
Income taxes recoverable 6,874 7,843 8,824
Deferred tax assets 5,411 7,504 5,548
------------ ------------ ------------
Total current assets 232,374 247,340 240,458
Property and equipment, net 58,234 62,231 60,961
Intangible assets, net 88,416 90,818 90,901
Other assets 8,515 4,340 9,911
Investment in and advances
to unconsolidated subsidiary -- 16,524 15,392
------------ ------------ ------------
Total assets $ 387,539 $ 421,253 $ 417,623
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 15,270 $ 14,635 $ 20,931
Customer deposits 4,410 4,602 4,131
Income taxes currently payable 1,353 2,923 1,587
Current portion of long-term debt 5,478 4,699 5,390
------------ ------------ ------------
Total current liabilities 26,511 26,859 32,039
Deferred tax liabilities 1,598 1,249 1,668
Long-term debt 183,337 199,936 196,976
------------ ------------ ------------
Stockholders' equity:
Common stock, $.10 par value per
share, 80,000,000 shares authorized 3,024 3,024 3,024
Paid in surplus 127,851 127,352 127,350
Retained earnings 92,516 108,813 105,331
Accumulated other comprehensive loss (7,058) (4,865) (3,989)
Notes receivable - stockholders (5,649) (5,417) (5,820)
------------ ------------ ------------
210,684 228,907 225,896
Less -- shares held in treasury, at cost (34,591) (35,698) (38,956)
------------ ------------ ------------
Total stockholders' equity 176,093 193,209 186,940
------------ ------------ ------------
Total liabilities and stockholders' equity $ 387,539 $ 421,253 $ 417,623
============ ============ ============
</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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
Finance and service charges $ 27,241 $ 30,033 $ 56,767 $ 61,528
Proceeds from disposition of merchandise 50,470 52,833 112,989 114,043
Lending franchise fees and royalties 46 28 125 39
Rental operations 4,051 2,468 7,792 3,918
Check cashing royalties and fees 953 973 2,084 2,455
----------- ----------- ----------- -----------
TOTAL REVENUE 82,761 86,335 179,757 181,983
----------- ----------- ----------- -----------
COSTS OF REVENUE
Disposed merchandise 33,586 35,076 76,062 75,492
Rental operations 1,265 565 2,447 888
----------- ----------- ----------- -----------
NET REVENUE 47,910 50,694 101,248 105,603
----------- ----------- ----------- -----------
OPERATING EXPENSES
Lending operations 29,532 29,513 60,918 59,220
Rental operations 2,686 967 5,194 1,478
Check cashing operations 367 228 734 2,374
Administration 6,587 6,299 13,274 13,659
Depreciation 3,323 3,815 6,851 7,728
Amortization 1,075 1,197 2,180 2,385
----------- ----------- ----------- -----------
Total operating expenses 43,570 42,019 89,151 86,844
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 4,340 8,675 12,097 18,759
Interest expense, net 3,191 3,226 6,490 6,557
Equity in loss of unconsolidated subsidiary 8,248 2,346 15,589 2,933
(Gain) loss from issuance of subsidiary's stock (136) 302 (136) (4,513)
----------- ----------- ----------- -----------
Income (loss) before income taxes (6,963) 2,801 (9,846) 13,782
Provision for income taxes 579 877 2,333 7,058
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (7,542) $ 1,924 $ (12,179) $ 6,724
----------- ----------- ----------- -----------
Net income (loss) per share:
Basic $ (.29) $ .08 $ (.48) $ .27
Diluted (.29) .07 (.48) .25
----------- ----------- ----------- -----------
Weighted average shares:
Basic 25,759 25,416 25,520 25,304
Diluted 25,759 26,552 25,520 26,484
----------- ----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
Page 2
<PAGE> 5
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 2000 And 1999
(In thousands, except share data) (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
---------------------------- Paid In Retained Comprehensive
Shares Amount Surplus Earnings Income (Loss)
------------ --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1999 30,235,164 $ 3,024 $ 127,350 $ 105,331
Comprehensive loss:
Net loss (12,179) $ (12,179)
Other comprehensive
loss - Foreign
currency translation
adjustments (3,069)
---------
Comprehensive loss $ (15,248)
---------
Dividends declared--
$.025 per share (636)
Treasury shares acquired
Treasury shares reissued (720)
Tax benefit from exercise
of option shares 1,221
Change in notes
receivable - stockholders
------------ ------- --------- ---------
Balance at
June 30, 2000 30,235,164 $ 3,024 $ 127,851 $ 92,516
------------ ------- --------- ---------
Balance at
December 31, 1998 30,235,164 $ 3,024 $ 126,615 $ 102,722
Comprehensive income:
Net income 6,724 $ 6,724
Other comprehensive
loss - Foreign
currency translation
adjustments (2,451)
---------
Comprehensive income $ 4,273
---------
Dividends declared--
$.025 per share (633)
Treasury shares acquired
Treasury shares reissued (159)
Tax benefit from exercise
of option shares 896
Change in notes
receivable - stockholders
------------ ------- --------- ---------
Balance at
June 30, 1999 30,235,164 $ 3,024 $ 127,352 $ 108,813
------------ ------- --------- ---------
<CAPTION>
Accumulated Notes
Other Receivable- Treasury Stock
Comprehensive Stock- ----------------------
Income (Loss) holders Shares Amount
------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at
December 31, 1999 $ (3,989) $ (5,820) 5,055,170 $ (38,956)
Comprehensive loss:
Net loss
Other comprehensive
loss - Foreign
currency translation
adjustments (3,069)
Comprehensive loss
Dividends declared--
$.025 per share
Treasury shares acquired 17,893 (156)
Treasury shares reissued (589,450) 4,521
Tax benefit from exercise
of option shares
Change in notes
receivable - stockholders 171
-------- -------- --------- ---------
Balance at
June 30, 2000 $ (7,058) $ (5,649) 4,483,613 $ (34,591)
--------- -------- --------- ---------
Balance at
December 31, 1998 $ (2,414) $ (3,263) 5,114,218 $ (39,240)
Comprehensive income:
Net income
Other comprehensive
loss - Foreign
currency translation
adjustments (2,451)
Comprehensive income
Dividends declared--
$.025 per share
Treasury shares acquired 3,851 (58)
Treasury shares reissued (471,520) 3,600
Tax benefit from exercise
of option shares
Change in notes
receivable - stockholders (2,154)
-------- -------- --------- ---------
Balance at
June 30, 1999 $ (4,865) $ (5,417) 4,646,549 $ (35,698)
-------- -------- --------- ---------
</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>
Six Months Ended
June 30,
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (12,179) $ 6,724
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 6,851 7,728
Amortization 2,180 2,385
Equity in loss of unconsolidated subsidiary 15,589 2,933
Gain from issuance of subsidiary's stock (136) (4,513)
Changes in operating assets and liabilities-
Merchandise held for disposition and inventory 7,865 212
Finance and service charges receivable 1,252 (1,083)
Other receivables and prepaid expenses (835) (3,060)
Accounts payable and accrued expenses (5,551) (2,238)
Customer deposits, net 279 450
Current income taxes 3,023 (341)
Deferred taxes, net (254) 3,770
----------- -----------
Net cash provided by operating activities 18,084 12,967
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans forfeited and transferred to merchandise held for disposition 62,244 67,736
Loans repaid or renewed 142,820 149,770
Loans made, including loans renewed (206,343) (222,121)
----------- -----------
Net increase in loans (1,279) (4,615)
----------- -----------
Acquisitions, net of cash acquired (425) (6,106)
Effect on cash of de-consolidation of subsidiary -- (4,795)
Advance to unconsolidated subsidiary -- (500)
Purchases of property and equipment (10,961) (10,578)
Proceeds from property insurance claim 1,008 --
----------- -----------
Net cash used by investing activities (11,657) (26,594)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments) borrowings under bank lines of credit (8,224) 16,300
Proceeds from capital lease obligations 843 --
Payments on notes payable and capital lease obligations (4,821) (4,502)
Change in notes receivable - stockholders 840 --
Net proceeds from reissuance of treasury shares 3,431 1,287
Treasury shares purchased (156) (58)
Dividends paid (636) (633)
----------- -----------
Net cash (used) provided by financing activities (8,723) 12,394
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (65) (51)
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS (2,361) (1,284)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,186 4,417
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,825 $ 3,133
=========== ===========
SUPPLEMENTAL DISCLOSURES
NONCASH INVESTING AND FINANCING ACTIVITIES:
Loans to stockholders for exercise of stock options $ 370 $ 2,154
=========== ===========
</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").
Through March 9, 1999, the assets and liabilities of the Company's automated
check cashing machine operations, now known as innoVentry Corp. ("innoVentry"),
and the results of its operations were included in the consolidated financial
statements. The Company disposed of a majority interest in innoVentry on March
9, 1999, and began accounting for its investment and its proportionate share of
the results of innoVentry's operations by the equity method of accounting. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The financial statements as of June 30, 2000 and 1999, and for the
three month and six month periods then ended are unaudited but, in management's
opinion, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such interim
periods. Operating results for the three month and six month periods are not
necessarily indicative of the results that may be expected for the full fiscal
year.
Certain amounts in the consolidated financial statements for the three
month and six month periods ended June 30, 1999, have been reclassified to
conform to the presentation format adopted in 2000. 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 1999 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.
Rental Operations o Tire and wheel rentals are paid on a weekly basis in advance
and revenue is recognized in the period earned. Rental payments received prior
to the period due are recorded as deferred revenue. Customers may return the
rented tires and wheels at any time and have no obligation to complete the
rental agreement. 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
compensation for its efforts in constructing and opening each store that it
manages for a third party.
3. PROPERTY AND EQUIPMENT
On March 28, 2000, a tornado severely damaged the Company's corporate
headquarters in Fort Worth, Texas. Headquarters operations have been relocated
to temporary facilities and the Company's operating locations were not affected.
The Company owns the building and management is evaluating all of its
alternatives relating to its restoration. The Company's insurance coverage
provides proceeds for the loss of the building; replacement of furniture,
improvements, and equipment; recovery of losses resulting from business
interruption; and recovery of other general expenses that will be incurred. At
June 30, 2000, $7.0 million of tornado-related amounts are included in other
receivables and prepaid expenses in the accompanying consolidated balance sheet.
The amounts include the net book value of $6.3 million of property and equipment
damaged or destroyed and $.7 million of tornado recovery expenditures net of an
initial insurance claim advance. Based upon current assessments of the insurance
coverage, management does not believe that there will be a significant adverse
effect on the Company's consolidated financial position or results of
operations. However, there can be no assurance that the Company will not
ultimately incur an extraordinary loss, net of insurance recovery and applicable
income taxes.
Page 6
<PAGE> 9
4. LONG-TERM DEBT
The Company's long-term debt instruments and balances outstanding as of June 30
are as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
U.S. Line of Credit up to $150 million
due June 30, 2003 $ 95,450 $109,225
U.K. Line of Credit up to(pound)10 million
due April 30, 2002 11,683 9,622
Swedish Lines of Credit up to SEK 215 million 13,167 16,299
8.33% senior unsecured notes due 2003 12,857 17,143
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 5,158 1,846
6.25% subordinated unsecured notes due 2004 500 500
-------- --------
188,815 204,635
Less current portion 5,478 4,699
-------- --------
Total long-term debt $183,337 $199,936
======== ========
</TABLE>
5. WEIGHTED AVERAGE SHARES
The reconciliation of basic and diluted weighted average common shares
outstanding for the three month and six month periods ended June 30, follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average shares - Basic 25,759 25,416 25,520 25,304
Effect of shares applicable to stock option plans -- 1,095 -- 1,142
Effect of shares applicable to nonqualified savings plan -- 41 -- 38
----------- ----------- ----------- -----------
Weighted average shares - Diluted 25,759 26,552 25,520 26,484
=========== =========== =========== ===========
</TABLE>
Diluted weighted average shares for the three month and six month
periods ended June 30, 2000, exclude approximately 453,000 shares and 597,000
shares, respectively, applicable to stock option plans and 45,000 shares and
46,000 shares, respectively, applicable to the nonqualified savings plan. These
shares are excluded due to their antidilutive effects as a result of the
Company's net losses during the three month and six month periods ended June 30,
2000.
Page 7
<PAGE> 10
6. UNCONSOLIDATED SUBSIDIARY
Summarized unaudited results of operations for innoVentry for the three month
and six month periods ended June 30, follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total net revenue $ 4,346 $ 2,384 $ 7,704 $ 3,243
Expenses including net interest expense (29,807) (9,058) (53,516) (13,736)
Income tax benefit -- 2,353 -- 2,560
----------- ----------- ----------- -----------
Net loss $ (25,461) $ (4,321) $ (45,812) $ (7,933)
=========== =========== =========== ===========
</TABLE>
The Company recorded $2.5 million of net loss from innoVentry's
operations in 1999 prior to de-consolidation on March 9, 1999. Thereafter, the
Company recorded its proportionate share of innoVentry's net loss by the equity
method. As of June 30, 2000, the Company's proportionate share of the losses of
innoVentry exceeded the carrying amount of its investment in and advances to
innoVentry. The Company has no obligation to provide financial support to
innoVentry. Accordingly, it has suspended the recording of its equity in the
losses of innoVentry. The Company owns a 37.9% voting interest in innoVentry as
of June 30, 2000.
7. OPERATING SEGMENT INFORMATION
The Company has two reportable operating segments in the lending industry and
one each in the check cashing and rental industries. While the United States and
foreign lending segments offer the same services, each is managed separately due
to the different operational strategies required. The rental operation offers
different services and products thus requiring its own technical, marketing and
operational strategy. The same is true with respect to the check cashing
operations. However, the Company has not controlled the operations of innoVentry
since March 9, 1999.
Page 8
<PAGE> 11
Information concerning the segments is set forth below (in thousands):
<TABLE>
<CAPTION>
Lending
------------------------------------------
United Check
States Foreign Total Rental Cashing Consolidated
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended
June 30, 2000:
Total revenue $ 70,114 $ 7,826 $ 77,940 $ 4,051 $ 770 $ 82,761
Income (loss)
from operations 3,268 1,956 5,224 (820) (64) 4,340
Total assets at end of
period 269,232 83,608 352,840 23,362 11,337 387,539
------------ ------------ ------------ ------------ ------------ ------------
Three Months Ended
June 30, 1999:
Total revenue 75,464 7,625 83,089 2,468 778 86,335
Income (loss)
from operations 5,556 2,920 8,476 237 (38) 8,675
Total assets at end of
period 299,141 81,951 381,092 14,835 25,326(A) 421,253
============ ============ ============ ============ ============ ============
Six Months Ended
June 30, 2000:
Total revenue 153,603 16,629 170,232 7,792 1,733 179,757
Income (loss)
from operations 9,258 4,278 13,536 (1,631) 192 12,097
------------ ------------ ------------ ------------ ------------ ------------
Six Months Ended
June 30, 1999:
Total revenue 160,912 15,070 175,982 3,918 2,083 (B) 181,983
Income (loss)
from operations 15,011 5,904 20,915 215 (2,371)(B) 18,759
============ ============ ============ ============ ============ ============
</TABLE>
(A) Includes investment in and advances to innoVentry of $16,524.
(B) Includes innoVentry operations through March 9, 1999.
8. LITIGATION
The Company is a defendant in certain lawsuits encountered in the ordinary
course of its business. In the opinion of management, the resolution of these
matters will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.
Page 9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SUMMARY CONSOLIDATED FINANCIAL DATA
SECOND QUARTER ENDED JUNE 30, 2000 vs.
SECOND QUARTER ENDED JUNE 30, 1999
(Dollars in thousands)
The following table sets forth selected consolidated financial data with
respect to the Company and its lending operations as of June 30, 2000 and 1999,
and for the three months then ended.
<TABLE>
<CAPTION>
2000 1999 Change
--------- --------- ---------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 27,241 $ 30,033 (9)%
Proceeds from disposition of merchandise 50,470 52,833 (4)%
Lending franchise fees and royalties 46 28 64%
Rental operations 4,051 2,468 64%
Check cashing royalties and fees 953 973 (2)%
--------- --------- ---------
TOTAL REVENUE 82,761 86,335 (4)%
--------- --------- ---------
COSTS OF REVENUE
Disposed merchandise 33,586 35,076 (4)%
Rental operations 1,265 565 124%
--------- --------- ---------
NET REVENUE $ 47,910 $ 50,694 (5)%
========= ========= =========
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source--
Finance and service charges 56.9% 59.2% (4)%
Margin on disposition of merchandise 35.3% 35.1% 1%
Rental operations 5.8% 3.8% 53%
Check cashing operations 2.0% 1.9% 5%
Expenses as a percentage of net revenue--
Operations and administration 81.8% 73.0% 12%
Depreciation and amortization 9.2% 9.9% (7)%
Interest, net 6.7% 6.4% 5%
Income from operations before depreciation
and amortization as a percentage of total revenue 10.6% 15.9% (33)%
Income from operations as a percentage of total revenue 5.2% 10.0% (48)%
--------- --------- ---------
LENDING OPERATIONS:
Annualized yield on pawn loans 92% 95% (3)%
Average pawn loan balance per average location in operation $ 258 $ 272 (5)%
Average pawn loan amount at end of period (not in thousands) $ 101 $ 100 1%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 33.5% 33.7% (1)%
Average annualized merchandise turnover 2.4x 2.2x 9%
Average merchandise held for disposition
per average location $ 120 $ 137 (12)%
Lending locations in operation--
Beginning of period 464 461
Acquired -- 3
Start-ups -- 2
Combined or closed (1) --
End of period 463 466 (1)%
Additional franchise locations at end of period 15 6 150%
Total locations at end of period 478 472 1%
Average number of owned locations (a) 464 464 --
========= ========= =========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 10
<PAGE> 13
SIX MONTHS ENDED JUNE 30, 2000 vs.
SIX MONTHS ENDED JUNE 30, 1999
(Dollars in thousands)
The following table sets forth selected consolidated financial data with
respect to the Company and its lending operations as of June 30, 2000 and 1999,
and for the six months then ended.
<TABLE>
<CAPTION>
2000 1999 Change
---------- ---------- ----------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 56,767 $ 61,528 (8)%
Proceeds from disposition of merchandise 112,989 114,043 (1)%
Lending franchise fees and royalties 125 39 221%
Rental operations 7,792 3,918 99%
Check cashing royalties and fees 2,084 2,455 (15)%
---------- ---------- ----------
TOTAL REVENUE 179,757 181,983 (1)%
---------- ---------- ----------
COSTS OF REVENUE
Disposed merchandise 76,062 75,492 1%
Rental operations 2,447 888 176%
---------- ---------- ----------
NET REVENUE $ 101,248 $ 105,603 (4)%
========== ========== ==========
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source--
Finance and service charges 56.1% 58.3% (4)%
Margin on disposition of merchandise 36.6% 36.5% --
Rental operations 5.2% 2.9% 79%
Check cashing operations 2.1% 2.3% (9)%
Expenses as a percentage of net revenue--
Operations and administration 79.1% 72.7% 9%
Depreciation and amortization 8.9% 9.6% (7)%
Interest, net 6.4% 6.2% 3%
Income from operations before depreciation
and amortization as a percentage of total revenue 11.8% 15.9% (26)%
Income from operations as a percentage of total revenue 6.7% 10.3% (35)%
---------- ---------- ----------
LENDING OPERATIONS:
Annualized yield on pawn loans 95% 98% (3)%
Average pawn loan balance per average location in operation $ 259 $ 272 (5)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 32.8% 33.8% (3)%
Average annualized merchandise turnover 2.6X 2.4x 8%
Average merchandise held for disposition
per average location $ 126 $ 139 (9)%
Lending locations in operation--
Beginning of period 466 464
Acquired -- 3
Start-ups 1 2
Combined, closed or sold (4) (3)
End of period 463 466 (1)%
Additional franchise locations at end of period 15 6 150%
Total locations at end of period 478 472 1%
Average number of owned locations in operation (a) 464 464 --
========== ========== ==========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 11
<PAGE> 14
GENERAL
The Company is a diversified provider of specialty financial services
to individuals in the United States, United Kingdom and Sweden. The Company
offers secured non-recourse loans, commonly referred to as pawn loans, to
individuals through its lending operations. 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 rental of
tires and wheels through its subsidiary, Rent-A-Tire, Inc. ("Rent-A-Tire") and
check cashing services through its franchised and company owned Mr. Payroll(R)
manned check cashing centers.
The Company expanded its lending operations during the eighteen month
period ended June 30, 2000, by adding a net 9 locations. It acquired 5 operating
units, established 5 locations, and combined or closed 8 locations. In addition,
10 franchise units were opened, including 3 company-owned locations that were
sold to a franchisee. As of June 30, 2000, the Company's lending operations
consisted of 478 lending units--410 owned units and 15 franchised units in 17
states in the United States, 42 jewelry-only units in the United Kingdom, and 11
loan-only and primarily jewelry-only units in Sweden.
During the eighteen month period ended June 30, 2000, Rent-A-Tire
acquired 14 tire and wheel rental stores that it previously managed and
established 11 stores. As of June 30, 2000, Rent-A-Tire owned and operated 29
stores and also managed 14 additional stores for a third party that were added
during 1999.
During the first quarter of 1999, the Company restructured its check
cashing operations in a series of transactions designed to isolate and
accelerate the development and deployment of its automated check cashing machine
("CCM"). In January 1999, the Company transferred its manned check cashing
operations into a new wholly owned consolidated subsidiary ("Mr. Payroll"). As
of June 30, 2000, Mr. Payroll operated 130 franchised and 7 company owned manned
check cashing centers in 20 states. On March 9, 1999, Wells Fargo Cash Centers,
Inc. ("Cash Centers"), a wholly owned subsidiary of Wells Fargo Bank, N.A.,
contributed approximately $27.0 million of cash and assets to the Company's CCM
subsidiary (now known as "innoVentry") and received newly issued shares of
innoVentry's senior convertible Series A preferred stock representing 45% of
innoVentry's voting interest. Additionally, certain members of the newly
constituted management of innoVentry subscribed for newly issued shares of
common stock of innoVentry, representing 10% of its voting interest. The Company
also assigned 10% of its senior convertible Series A preferred stock to the
former owners of innoVentry's predecessor in consideration for the termination
of an option issued in conjunction with the Company's original acquisition of
innoVentry's predecessor. Upon completion of the transactions, the Company's
residual ownership interest in innoVentry was 40.5%. As a result, the Company no
longer controlled innoVentry, it was de-consolidated and the Company began
accounting for its investment and its share of the results of innoVentry's
operations after March 9, 1999, by the equity method of accounting whereby the
Company records its proportionate share of innoVentry's earnings or losses in
its consolidated financial statements. In October 1999, the Company, Cash
Centers, and a third party each purchased $10.0 million of innoVentry's newly
issued senior
Page 12
<PAGE> 15
convertible Series B voting preferred stock. The Company's voting interest as of
June 30, 2000, is 37.9%.
RESULTS OF OPERATIONS
SECOND QUARTER ENDED JUNE 30, 2000, COMPARED TO THE
SECOND QUARTER ENDED JUNE 30, 1999
Net Revenue: Consolidated. Consolidated net revenue decreased 5%, or
$2.8 million, to $47.9 million during the second quarter ended June 30, 2000
(the "current quarter"), from $50.7 million during the second quarter ended June
30, 1999 (the "prior year quarter"). Net revenue from lending activities
declined $3.7 million. Rental operations net revenue increased $.9 million and
check cashing operations net revenue remained constant.
Net Revenue: Lending Activities. Net revenue from lending operations
decreased $3.7 million to $44.3 million during the current quarter from $48.0
million during the prior year quarter. Same units (those in operation for more
than one year) accounted for $3.1 million of the decrease and an additional
decrease of $.6 million resulted from a net reduction of 3 lending units since
June 30, 1999. The principal components of lending operations net revenue are
finance and service charges, which declined $2.7 million, net revenue from the
disposition of merchandise, which declined $1.0 million, and domestic
franchising activities and foreign check cashing operations, which were both the
same in both quarters.
Finance and service charges decreased $2.7 million, or 9%, in the
current quarter compared to the prior year quarter. Fluctuations in finance and
service charges are caused by changes in both the average balance outstanding of
pawn loans and the annualized yield of the pawn loan portfolio. Of the $2.7
million decline, $1.6 million was the result of a 5% decrease in the average
pawn loan balance that was caused by a 5% decrease in the average number of
loans outstanding. This decline is primarily attributable to a decrease in loan
demand in the United States and Sweden that began during the third quarter of
1999. Lower average loan balances tend to result in lower amounts of finance and
service charges and net revenue. Management believes this trend in lower average
loan balances may reverse during the third quarter due to the normal seasonal
increase in loan demand resulting in more favorable comparisons to prior period
amounts. However, net revenue will not return to historical levels until loan
demand or customer count increases. The average outstanding loan was the same in
both periods. The remaining $1.1 million decline was caused by a 3% decrease in
the consolidated annualized loan yield.
The consolidated annualized loan yield, which represents the blended
result derived from the distinctive loan yields realized in the three countries
in which the Company operates, was 92% in the current quarter compared to 95% in
the prior year quarter. The decrease in the yield was primarily the result of a
lower blended yield on foreign loans as the domestic annualized loan yield was
122% for both the current quarter and the prior year quarter. The blended yield
on average foreign pawn loans outstanding was 46% for the current quarter
compared to 52% in the prior year quarter. The decrease in the blended foreign
loan yield resulted primarily from a decline in loan yield in the United Kingdom
to 46% from 56%. Average pawn loan balances in the United Kingdom during the
current
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<PAGE> 16
quarter were 7% higher than the prior year quarter due to an increase in the
number of loans written and an increase in the average amount per loan. The
higher amounts loaned may have contributed to lower redemption rates and lower
returns on the disposition of unredeemed collateral that contributed to the
decline in loan yield observed in the current quarter.
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 $2.4 million, or 4%, lower than the prior year quarter
primarily due to a $3.2 million decline from domestic activities, including a
$2.6 million decline from same units, that was partially offset by an $.8
million increase from the United Kingdom lending units, including a $.3 million
increase from same units. The margin on disposition of merchandise declined
slightly to 33.5% in the current quarter from 33.6% during the prior year
quarter. Excluding the effect of the disposition of scrap jewelry, the margin on
disposition of merchandise was 35.9% for both the current quarter and the prior
year quarter. The margin on disposition of scrap jewelry was negligible in both
the current quarter and the prior year quarter. The combination of lower
proceeds and an unchanged margin resulted in a $.9 million, or 5%, decline in
net revenue from the disposition of merchandise. As a result of management's
decision to emphasize disposition of merchandise, the ratio of pawn loan
balances to merchandise balances increased. In addition, the merchandise
turnover rate increased to 2.4 times in the current quarter compared to 2.2
times in the prior year quarter and the balance of merchandise available for
disposition at June 30, 2000, was 14.7% less than at June 30, 1999.
Net Revenue: Other Activities. Net revenue of Rent-A-Tire increased to
$2.8 million in the current quarter from $1.9 million in the prior year quarter.
Tire and wheel rentals and sales net revenue increased $1.1 million as a result
of an average of 19 more stores in operation in the current quarter compared to
the prior year quarter. The level of activity in managed stores and the addition
of new managed stores drive management fees and related revenue. Management fee
revenue increased $.2 million as a result of an 87% increase in the number of
tires and wheels on rental agreements in the managed stores. Rent-A-Tire did not
begin managing any new stores in the current quarter compared to the addition of
5 managed stores in the prior year quarter. As a result, other related revenue
decreased $.4 million.
Manned check cashing operations net revenue was constant for the
current quarter compared to the prior year quarter. The average number of
franchised and owned check cashing centers in operation was the same in both
quarters.
Operations and Administration Expenses. Due in part to the 5% decrease
in consolidated net revenue, consolidated operations and administration expenses
as a percentage of net revenue were 81.8% in the current quarter compared to
73.0% for the prior year quarter. Total operations and administration expenses
increased a net amount of $2.2 million, or 6%, in the current quarter as
compared to the prior year quarter. Domestic lending operations expenses
increased $.1 million primarily as a result of higher personnel benefits and
occupancy expenses that were partially offset by declines in selling and office
expenses. Foreign lending operations contributed $.3 million of the increase and
Rent-A-Tire accounted for $1.8 million of the increase due to an average of 19
more stores during the current quarter.
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<PAGE> 17
Check cashing operations expenses were constant for the current quarter compared
to the prior year quarter.
Depreciation and Amortization. Depreciation and amortization expenses
as a percentage of net revenue decreased to 9.2% in the current quarter from
9.9% in the prior year quarter. Depreciation and amortization expenses decreased
12.3% primarily as a result of a moderation in the Company's unit expansion of
its lending operations.
Interest Expense. Net interest expense as a percentage of net revenue
increased to 6.7% in the current quarter from 6.4% in the prior year quarter.
Average debt outstanding decreased 6.2% to $181.8 million during the current
quarter from $193.9 million during the prior year quarter. The effective blended
borrowing cost was 7.1% in the current quarter and 6.7% in the prior year
quarter. As a result, interest expense was approximately the same in both
quarters.
Other Items. Equity in loss of unconsolidated subsidiary, representing
the Company's share of innoVentry's net losses following de-consolidation in
March 1999, was $8.2 million in the current quarter compared to $2.3 million in
the prior year quarter. The Company expects innoVentry's losses to continue as
its operations continue to expand. However, as of June 30, 2000, the Company's
proportionate share of innoVentry's losses exceeded the carrying amount of its
investment in and advances to innoVentry. Since the Company has no obligation to
provide financial support to innoVentry, it has suspended the recording of its
equity in innoVentry's losses.
The Company recorded a pre-tax gain of $.1 million from the issuance of
innoVentry's common stock in the current quarter compared to a pre-tax loss of
$.3 million in the prior year quarter.
Income Taxes. The Company's consolidated effective tax rate is impacted
in the current quarter by the effect of the valuation allowance provided against
the deferred tax assets arising from the Company's equity in the losses of
innoVentry. The Company recognized no net deferred tax benefits in the current
quarter from the equity losses arising from its investment in innoVentry.
Excluding the effects of the equity in innoVentry's losses after
de-consolidation and the gain from issuance of innoVentry's stock and their
related tax effects, the Company's consolidated effective income tax rate for
the current quarter is 46.2% compared to 37.2% in the prior year quarter. The
effective tax rate increased as a result of a higher ratio of domestic
non-deductible intangible asset amortization and other miscellaneous items to
pre-tax income in the current quarter as compared to the prior year quarter. The
effective tax rate of the foreign lending operations was 32.3% in the current
quarter and 31.5% in the prior year quarter.
Page 15
<PAGE> 18
SIX MONTHS ENDED JUNE 30, 2000, COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 1999
Net Revenue: Consolidated. Consolidated net revenue decreased 4%, or
$4.4 million, to $101.2 million during the six months ended June 30, 2000 (the
"current period"), from $105.6 million during the six months ended June 30, 1999
(the "prior year period"). Net revenue from lending activities declined $6.4
million. Rental operations net revenue increased $2.3 million and check cashing
operations net revenue decreased $.3 million.
Net Revenue: Lending Activities. Net revenue from lending operations
decreased $6.4 million to $94.1 million during the current period from $100.5
million during the prior year period. Same units accounted for $5.2 million of
the decrease. Finance and service charges declined $4.7 million, net revenue
from the disposition of merchandise declined $1.7 million, and domestic
franchising activities and foreign check cashing operations were both the same
in both periods.
Finance and service charges decreased $4.7 million, or 8%, in the
current period compared to the prior year period. Of the $4.7 million, $2.9
million was the result of a 5% decrease in the average pawn loan balance that
was caused by a 5% decrease in the average number of loans outstanding. The
decrease is primarily attributable to a drop in loan demand in the United States
and Sweden. The decrease was partially offset by a 1% increase in the average
amount per loan. The remaining $1.8 million decline was caused by a 3% decrease
in the consolidated annualized loan yield.
The consolidated yield was 95% in the current period compared to 98% in
the prior year period. The decrease in the yield was primarily the result of a
lower blended yield on foreign loans as the domestic yield was slightly higher
at 126% for the current period compared to 125% for the prior year period. The
blended yield on average foreign pawn loans outstanding was 49% for the current
period compared to 53% in the prior year period. The decrease in the blended
foreign loan yield resulted primarily from a decline in loan yield in the United
Kingdom to 50% from 58%. Average pawn loan balances in the United Kingdom during
the current period were 12% higher than the prior year period. However, lower
redemption rates and lower returns on the disposition of unredeemed collateral
contributed to the decline in loan yield.
Proceeds from the disposition of merchandise in the current period were
$1.1 million, or 1%, lower than the prior year period primarily due to a $3.3
million decline from domestic activities, including a $2.9 million decline from
same units, that was partially offset by a $2.2 million increase from the United
Kingdom lending units, including a $.9 million increase from same units. The
margin on disposition of merchandise declined to 32.7% in the current period
from 33.8% during the prior year 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 35.6% for the prior year period. The margin on
disposition of scrap jewelry was negligible in both the current period and the
prior year period. The combination of lower proceeds and a lower margin resulted
in a $1.7 million, or 4%, decline in net revenue from the disposition of
merchandise. The merchandise turnover rate increased to 2.6 times in the current
period
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<PAGE> 19
compared to 2.4 times in the prior year period. During the last four quarters,
management has concentrated on price discounting and has reduced merchandise to
more desirable levels. As a result, management believes that the margin on the
disposition of merchandise should improve throughout the remainder of the year.
Net Revenue: Other Activities. Net revenue of Rent-A-Tire increased to
$5.3 million in the current period from $3.0 million in the prior year period.
Tire and wheel rentals and sales net revenue accounted for the full $2.3 million
increase as a result of an average of 20 more stores in operation in the current
period compared to the prior year period. Management fee revenue and other
related revenue were the same in both periods.
The restructuring of the Company's check cashing operations and
de-consolidation of innoVentry resulted in a $.3 million decrease in other net
revenue in the current year period compared to the prior year period. 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." See "Other Items" below.
Operations and Administration Expenses. Due in part to the 4% decrease
in consolidated net revenue, consolidated operations and administration expenses
as a percentage of net revenue were 79.1% in the current period compared to
72.7% for the prior year period. Total operations and administration expenses
increased a net amount of $3.4 million, or 4%, in the current period as compared
to the prior year period. Domestic lending operations expenses increased $1.5
million primarily as a result of higher personnel benefits and occupancy
expenses. Foreign lending operations contributed $.9 million of the increase and
Rent-A-Tire accounted for $3.8 million of the increase due to an average of 20
more stores during the current period. Check cashing operations expenses
decreased $2.8 million as a result of the de-consolidation of innoVentry in
March 1999.
Depreciation and Amortization. Depreciation and amortization expenses
as a percentage of net revenue decreased to 8.9% in the current period from 9.4%
in the prior year period. Depreciation and amortization expenses decreased 9.2%
primarily as a result of a moderation in the Company's unit expansion of its
lending operations.
Interest Expense. Net interest expense as a percentage of net revenue
increased to 6.4% in the current period from 6.2% in the prior year period.
Average debt outstanding decreased 3.8% to $188.1 million during the current
period from $195.6 million during the prior year period. The effective blended
borrowing cost was 6.9% in the current period and 6.8% in the prior year period.
As a result, interest expense was approximately the same in both periods.
Other Items. Equity in loss of unconsolidated subsidiary was $15.6
million in the current period compared to $2.9 million in the prior year period.
The Company recorded a pre-tax gain of $.1 million from the issuance of
innoVentry's common stock in the current period compared to a pre-tax gain of
$4.5 million from the issuance of innoVentry's senior convertible Series A
preferred stock and common stock in the prior year period.
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<PAGE> 20
Income Taxes. The Company's consolidated effective tax rate is impacted
in the current period by the effect of the valuation allowance provided against
the deferred tax assets arising from the Company's equity in the losses of
innoVentry and in the prior year period by the effects of income taxes provided
upon the de-consolidation of innoVentry on March 9, 1999. The Company recognized
no net deferred tax benefits in the current period from the equity losses
arising from its investment in innoVentry. Excluding the effects of the equity
in innoVentry's losses after de-consolidation and the gain from issuance of
innoVentry's stock and their related tax effects, the Company's consolidated
effective income tax rate for the current period is 40.8% compared to 38.7% in
the prior year period. The effective tax rate increased as a result of a higher
ratio of domestic non-deductible intangible asset amortization and other
miscellaneous items to pre-tax income in the current period as compared to the
prior year period. The effective tax rate of the foreign lending operations was
31.8% in the current period and 31.4% in the prior year period.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $18.1 million during the
current period. The Company invested $11.0 million in purchases of property and
equipment during the current period including $6.8 million for property
improvements, remodeling selected operating units, and additions to computer
systems of the lending operations and $.7 million for the replacement of
property destroyed by the tornado discussed below. The remaining $3.5 million
was for the purchase of equipment and the continued development of a
point-of-sale software system for Rent-A-Tire. The Company also received a $1.0
million advance payment on the property insurance claim resulting from the
tornado damage. The Company also invested $.4 million for the acquisition of one
tire rental store. The Company paid $8.2 million to reduce its net borrowings
under its bank lines of credit, repaid $4.8 million of notes payable and debt
obligations in connection with capital leases, increased pawn loan balances by
$1.3 million, purchased $.2 million of treasury shares in connection with the
open market share purchase program and the Company's Nonqualified Savings Plan,
and paid $.6 million in dividends. These activities were funded from the cash
flow generated by operating activities, $3.4 million from the issuance of common
shares pursuant to the Company's stock option plans, $.8 million from the
issuance of capital lease obligations, and $.8 million of collections of
stockholder notes.
On March 28, 2000, a tornado severely damaged the Company's corporate
headquarters in Fort Worth, Texas. Headquarters operations have been relocated
to temporary facilities and the Company's operating locations were not affected.
The Company owns the building and management is evaluating all of its
alternatives relating to its restoration. The Company's insurance coverage
provides proceeds for the loss of the building; replacement of furniture,
improvements, and equipment; recovery of losses resulting from business
interruption; and recovery of other general expenses that will be incurred.
Based upon current assessments of the insurance coverage, management believes
that there will be no significant adverse effect on the Company's consolidated
financial position, results of operations, or liquidity.
As of June 30, 2000, the Company's voting interest in innoVentry is
37.9%. In the event innoVentry requires additional capital in the future, the
Company has the opportunity to
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<PAGE> 21
make additional investments. The Company currently does not plan to participate
in future capital fundings of innoVentry. Therefore, its ownership interest in
innoVentry will be diluted. Management believes that innoVentry intends to
continue to develop and market the CCM, now known as the RPM(TM) Cash Management
Machine, as a financial services machine. The Company anticipates that
innoVentry will incur future losses and require additional capital until
sufficient revenues are generated from its sales and operations.
The Company plans to add a nominal number of new lending units during
the remainder of 2000. These additions will likely occur through a combination
of new openings and acquisitions of existing locations. Rent-A-Tire plans to add
approximately 6 additional rental stores during the remainder of 2000 through
the acquisition of existing stores or the opening of new stores.
On October 19, 1999, the Company announced that its Board of Directors
had authorized management to purchase up to one million shares of its common
stock in the open market. During the current period, the Company purchased
17,000 shares for an aggregate amount of $153 thousand under the program.
Purchases may be made from time to time in the open market and it is expected
that funding of the program will come from operating cash flow and existing bank
facilities.
Management believes that borrowings available under its revolving
credit facilities, cash generated from operations and current working capital of
$205.9 million should be sufficient to meet the Company's anticipated future
capital requirements.
IMPACT OF FOREIGN CURRENCY EXCHANGE RATES
The Company is subject to the risk of unexpected changes in foreign
currency rates by virtue of its operations in the United Kingdom and Sweden. The
Company's foreign assets, liabilities, and earnings are converted into U.S.
dollars for consolidation into the Company's financial statements. At June 30,
2000, the Company had recorded a cumulative other comprehensive loss of $7.1
million as a result of fluctuations in foreign currency exchange rates. Future
earnings and comparisons with prior periods reported by the Company may
fluctuate depending on applicable currency exchange rates in effect during the
periods.
Page 19
<PAGE> 22
DOMESTIC LENDING OPERATIONS
(Dollars in thousands)
The following table sets forth selected financial data for the
Company's domestic lending operations as of June 30, 2000 and 1999, and for the
three months then ended.
<TABLE>
<CAPTION>
2000 1999 Change
---------- ---------- ----------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 21,678 $ 23,848 (9)%
Proceeds from disposition of merchandise 48,390 51,588 (6)%
Lending franchise fees and royalties 46 28 64%
---------- ---------- ----------
TOTAL REVENUE 70,114 75,464 (7)%
---------- ---------- ----------
COSTS OF REVENUE
Disposed merchandise 31,618 34,001 (7)%
---------- ---------- ----------
NET REVENUE $ 38,496 $ 41,463 (7)%
========== ========== ==========
OTHER DATA
Net revenue contribution by source--
Finance and service charges 56.3% 57.5% (2)%
Margin on disposition of merchandise 43.6% 42.4% 3%
Lending franchise fees and royalties .1% .1% --
Expenses as a percentage of net revenue--
Operations and administration 82.8% 76.6% 8%
Depreciation and amortization 8.7% 10.0% (13)%
Interest, net 4.0% 5.3% (25)%
Income from operations before depreciation
and amortization as a percentage of total revenue 9.4% 12.8% (27)%
Income from operations as a percentage of total revenue 4.7% 7.4% (36)%
Annualized yield on pawn loans 122% 122% --
Average pawn loan balance per average location in operation $ 173 $ 191 (9)%
Average pawn 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 34.7% 34.1% 2%
Average annualized merchandise turnover 2.4X 2.2x 9%
Average merchandise held for disposition
per average location $ 127 $ 149 (15)%
Lending locations in operation--
Beginning of period 411 411
Acquired -- 1
Start-ups -- 2
Combined or closed (1) --
End of period 410 414 (1)%
Additional franchise locations at end of period 15 6 150%
Total locations at end of period 425 420 1%
Average number of owned locations (a) 411 413 --
========== ========== ==========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
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<PAGE> 23
DOMESTIC LENDING OPERATIONS
(Dollars in thousands)
The following table sets forth selected financial data for the
Company's domestic lending operations as of June 30, 2000 and 1999, and for the
six months then ended.
<TABLE>
<CAPTION>
2000 1999 Change
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 44,823 $ 48,967 (8)%
Proceeds from disposition of merchandise 108,655 111,906 (3)%
Lending franchise fees and royalties 125 39 221%
----------- ----------- -----------
TOTAL REVENUE 153,603 160,912 (5)%
----------- ----------- -----------
COSTS OF REVENUE
Disposed merchandise 71,910 73,629 (2)%
----------- ----------- -----------
NET REVENUE $ 81,693 $ 87,283 (6)%
=========== =========== ===========
OTHER DATA
Net revenue contribution by source--
Finance and service charges 54.9% 56.1% (2)%
Margin on disposition of merchandise 45.0% 43.9% 3%
Lending franchise fees and royalties .1% -- --
Expenses as a percentage of net revenue--
Operations and administration 80.2% 73.3% 9%
Depreciation and amortization 8.5% 9.5% (11)%
Interest, net 4.0% 5.2% (23)%
Income from operations before depreciation
and amortization as a percentage of total revenue 10.5% 14.5% (28)%
Income from operations as a percentage of total revenue 6.0% 9.3% (35)%
Annualized yield on pawn loans 126% 125% 1%
Average pawn loan balance per average location in operation $ 174 $ 191 (9)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 33.8% 34.2% (1)%
Average annualized merchandise turnover 2.6X 2.4x 8%
Average merchandise held for disposition
per average location $ 134 $ 151 (11)%
Lending locations in operation--
Beginning of period 413 414
Acquired -- 1
Start-ups 1 2
Combined, closed or sold (4) (3)
End of period 410 414 (1)%
Additional franchise locations at end of period 15 6 150%
Total locations at end of period 425 420 1%
Average number of owned locations in operation (a) 411 413 --
=========== =========== ===========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
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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 June 30,
2000 and 1999, and for the three months then ended, using the following currency
exchange rates:
<TABLE>
<CAPTION>
2000 1999 Change
----------- ----------- -----------
<S> <C> <C> <C>
Harvey & Thompson, Ltd. (U.K. pound sterling per U.S. dollar)--
Balance sheet data - end of period rate .6591 .6340 (4)%
Income statement data - three months average rate .6495 .6222 (4)%
Svensk Pantbelaning (Swedish Kronor per U.S. dollar)--
Balance sheet data - end of period rate 8.7898 8.4443 (4)%
Income statement data - three months average rate 8.8652 8.4154 (5)%
----------- ----------- -----------
<CAPTION>
2000 1999 Change
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 5,563 $ 6,185 (10)%
Proceeds from disposition of merchandise 2,080 1,245 67%
Check cashing fees 183 195 (6)%
----------- ----------- -----------
TOTAL REVENUE 7,826 7,625 3%
----------- ----------- -----------
COSTS OF REVENUE
Disposed merchandise 1,968 1,075 83%
----------- ----------- -----------
NET REVENUE $ 5,858 $ 6,550 (11)%
=========== =========== ===========
OTHER DATA
Net revenue contribution by source--
Finance and service charges 95.0% 94.4% 1%
Margin on disposition of merchandise 1.9% 2.6% (27)%
Check cashing fees 3.1% 3.0% 3%
Expenses as a percentage of net revenue--
Operations and administration 57.6% 47.3% 22%
Depreciation and amortization 9.0% 8.1% 11%
Interest, net 6.6% 5.0% 32%
Income from operations before depreciation
and amortization as a percentage of total revenue 31.8% 45.3% (30)%
Income from operations as a percentage of total revenue 25.0% 38.3% (35)%
Annualized yield on loans 46% 52% (12)%
Average loan balance per average location in operation $ 913 $ 935 (2)%
Average loan amount at end of period (not in thousands) $ 178 $ 180 (1)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 5.4% 13.7% (61)%
Average annualized merchandise turnover 2.3X 2.1x 10%
Average merchandise held for disposition
per average location $ 65 $ 41 59%
Lending locations in operation--
Beginning of period 53 50
Acquired -- 2
Start-ups -- --
Combined or closed -- --
End of period 53 52 2%
Average number of owned locations (a) 53 51 4%
=========== =========== ===========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 22
<PAGE> 25
FOREIGN LENDING OPERATIONS
(Dollars in thousands)
The following table sets forth selected consolidated financial data in
U.S. dollars for Harvey & Thompson, Ltd. and Svensk Pantbelaning as of June 30,
2000 and 1999, and for the six months then ended, using the following currency
exchange rates:
<TABLE>
<CAPTION>
2000 1999 Change
----------- ----------- -----------
<S> <C> <C> <C>
Harvey & Thompson, Ltd. (U.K. pound sterling per U.S. dollar)--
Income statement data - six months average rate .6314 .6174 (2)%
Svensk Pantbelaning (Swedish Kronor per U.S. dollar)--
Income statement data - six months average rate 8.7259 8.2017 (6)%
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
2000 1999 Change
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE
Finance and service charges $ 11,944 $ 12,561 (5)%
Proceeds from disposition of merchandise 4,334 2,137 103%
Check cashing fees 351 372 (6)%
----------- ----------- -----------
TOTAL REVENUE 16,629 15,070 10%
----------- ----------- -----------
COSTS OF REVENUE
Disposed merchandise 4,152 1,863 123%
----------- ----------- -----------
NET REVENUE $ 12,477 $ 13,207 (6)%
=========== =========== ===========
OTHER DATA
Net revenue contribution by source--
Finance and service charges 95.7% 95.1% 1%
Margin on disposition of merchandise 1.5% 2.1% (29)%
Check cashing fees 2.8% 2.8% --
Expenses as a percentage of net revenue--
Operations and administration 57.3% 47.5% 21%
Depreciation and amortization 8.4% 7.8% 8%
Interest, net 6.3% 5.1% 24%
Income from operations before depreciation
and amortization as a percentage of total revenue 32.1% 46.0% (30)%
Income from operations as a percentage of total revenue 25.7% 39.2% (34)%
Annualized yield on pawn loans 49% 53% (8)%
Average pawn loan balance per average location in operation $ 924 $ 931 (1)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 4.2% 12.8% (67)%
Average annualized merchandise turnover 2.4X 2.1x 14%
Average merchandise held for disposition
per average location $ 66 $ 35 89%
Lending locations in operation--
Beginning of period 53 50
Acquired -- 2
Start-ups -- --
Combined, closed or sold -- --
End of period 53 52 2%
Average number of owned locations in operation (a) 53 51 4%
=========== =========== ===========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 23
<PAGE> 26
OTHER OPERATIONS
(Dollars in thousands)
The following table sets forth selected financial data with respect to
the Company's other domestic operations as of June 30, 2000 and 1999, and for
the three months then ended.
<TABLE>
<CAPTION>
2000 1999 Change
----------- ----------- -----------
<S> <C> <C> <C>
RENTAL OPERATIONS:
REVENUE
Tire and wheel rentals $ 2,859 $ 1,158 147%
Management fees 580 896 (35)%
Tire and wheel sales 337 200 69%
Lease income and other 275 214 29%
----------- ----------- -----------
TOTAL REVENUE 4,051 2,468 64%
----------- ----------- -----------
COSTS OF REVENUE
Tire and wheel rentals 1,032 417 147%
Tire and wheel sales 233 148 57%
----------- ----------- -----------
NET REVENUE $ 2,786 $ 1,903 46%
=========== =========== ===========
OTHER DATA
Owned rental locations--
Rental agreements outstanding at end of period $ 9,364 $ 4,911 91%
Average balance per rental agreement
at end of period (not in thousands) $ 1,045 $ 943 11%
Locations in operation at end of period 29 13 123%
Average locations in operation for the period (a) 28 10 180%
Managed rental locations--
Locations in operation at end of period 14 13 8%
Average locations in operation for the period (a) 14 13 8%
=========== =========== ===========
=========== =========== ===========
CHECK CASHING OPERATIONS:
REVENUE
Check cashing royalties and fees (b) $ 770 $ 778 (1)%
----------- ----------- -----------
TOTAL REVENUE 770 778 (1)%
----------- ----------- -----------
NET REVENUE $ 770 $ 778 (1)%
=========== =========== ===========
OTHER DATA
Franchised and owned check cashing centers--
Centers in operation at end of period 137 137 --
Average centers in operation for the period (a) 136 136 --
=========== =========== ===========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
(b) Excludes CCM operations that were de-consolidated at the close of business,
March 9, 1999.
Page 24
<PAGE> 27
OTHER OPERATIONS
(Dollars in thousands)
The following table sets forth selected financial data with respect to the
Company's other domestic operations as of June 30, 2000 and 1999, and for the
six months then ended.
<TABLE>
<CAPTION>
2000 1999 Change
----------- ----------- -----------
<S> <C> <C> <C>
RENTAL OPERATIONS:
REVENUE
Tire and wheel rentals $ 5,270 1,849 185%
Management fees 1,183 1,378 (14)%
Tire and wheel sales 769 301 155%
Lease income and other 570 390 46%
----------- ----------- -----------
TOTAL REVENUE 7,792 3,918 99%
----------- ----------- -----------
COSTS OF REVENUE
Tire and wheel rentals 1,917 665 188%
Tire and wheel sales 530 223 138%
----------- ----------- -----------
NET REVENUE $ 5,345 $ 3,030 76%
=========== =========== ===========
OTHER DATA
Owned rental locations--
Average locations in operation for the period (a) 27 7 286%
Managed rental locations--
Average locations in operation for the period (a) 14 14 --
=========== =========== ===========
=========== =========== ===========
CHECK CASHING OPERATIONS:
REVENUE
Check cashing royalties and fees (b) $ 1,733 $ 1,667 4%
----------- ----------- -----------
TOTAL REVENUE 1,733 1,667 4%
----------- ----------- -----------
NET REVENUE $ 1,733 $ 1,667 4%
=========== =========== ===========
OTHER DATA
Franchised and owned check cashing centers--
Average centers in operation for the period (a) 136 136 --
=========== =========== ===========
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
(b) Excludes CCM operations that were de-consolidated at the close of business,
March 9, 1999.
Page 25
<PAGE> 28
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, factors affecting innoVentry's business, and other risks indicated in
the Company's filings with the Securities and Exchange Commission. These risks
and uncertainties are beyond the ability of the Company to control, and, in many
cases, the Company cannot predict all of the risks and uncertainties that could
cause its actual results to differ materially from those indicated by the
forward-looking statements. When used in this report, the words "believes,"
"estimates," "plans," "expects," "anticipates" and similar expressions as they
relate to the Company or its management are intended to identify forward-looking
statements.
Page 26
<PAGE> 29
PART II
Item 1. LEGAL PROCEEDINGS
See Note 8 of Notes to Consolidated Financial Statements
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 26, 2000, the Company's Annual Meeting of Shareholders was
held. All of the nominees for director identified in the Company's Proxy
Statement, filed pursuant to Regulation 14A under the Securities Exchange Act of
1934, were elected at the meeting to hold office until the next Annual Meeting
or until their successors are duly elected and qualified. The shareholders
ratified the Company's selection of independent auditors. There was no other
business brought before the meeting that required shareholder approval. Votes
were cast in the matters described below as follows (there were no broker
non-votes or abstentions other than those listed below):
(a) Election of directors
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Jack R. Daugherty 22,924,193 224,738
A. R. Dike 22,934,884 214,047
Daniel R. Feehan 22,924,627 224,304
James H. Graves 22,934,884 214,047
B. D. Hunter 22,932,584 216,347
Timothy J. McKibben 22,934,284 214,647
Alfred J. Micallef 22,934,884 214,047
Clifton H. Morris, Jr. 22,926,784 222,147
Carl P. Motheral 22,926,784 222,147
Samuel W. Rizzo 22,922,467 226,464
Rosalin Rogers 22,934,784 214,147
</TABLE>
Page 27
<PAGE> 30
(b) Ratification of Independent Auditors
For - 22,992,663
Against - 46,215
Abstain - 10,053
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
Page 28
<PAGE> 31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASH AMERICA INTERNATIONAL, INC.
--------------------------------
(Registrant)
BY: /s/ Thomas A. Bessant, Jr.
--------------------------------
Thomas A. Bessant, Jr.
Executive Vice President and
Chief Financial Officer
Date: August 11, 2000
Page 29
<PAGE> 32
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
