================================================================================
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, 2001
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:
24,662,334 common shares, $.10 par value, were outstanding as of November 7,
2001.
================================================================================
CASH AMERICA INTERNATIONAL, INC.
INDEX TO 10-Q
<Table>
PART I. FINANCIAL STATEMENTS
Page
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- September 30, 2001
and 2000 and December 31, 2000...................................................... 1
Consolidated Statements of Operations -- Three Months and
Nine Months Ended September 30, 2001 and 2000....................................... 2
Consolidated Statements of Stockholders' Equity --
Nine Months Ended September 30, 2001 and 2000....................................... 3
Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 2001 and 2000....................................... 4
Notes to Consolidated Financial Statements.......................................... 5
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition................................ 12
PART II. OTHER INFORMATION................................................................ 31
SIGNATURE.................................................................................. 32
</Table>
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<Table>
<Caption>
(UNAUDITED)
September 30, December 31,
2001 2000 2000
--------- --------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 6,291 $ 6,350 $ 4,339
Loans 119,537 122,549 117,982
Merchandise held for disposition, net 64,024 61,633 58,817
Finance and service charges receivable 19,265 19,493 19,918
Other receivables and prepaid expenses 7,280 16,986 8,120
Income taxes recoverable 2,125 5,314 2,992
Deferred tax assets 8,233 5,839 5,455
Net current assets of discontinued operations 4,072 5,354 4,825
--------- --------- ---------
Total current assets 230,827 243,518 222,448
Property and equipment, net 62,581 47,797 49,597
Intangible assets, net 77,439 80,861 80,074
Other assets 9,986 6,669 6,348
Net non-current assets of discontinued operations 5,814 19,456 19,766
--------- --------- ---------
Total assets $ 386,647 $ 398,301 $ 378,233
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 20,133 $ 20,872 $ 21,974
Customer deposits 4,558 4,434 3,931
Reserve for disposal of discontinued operations 8,422 -- --
Income taxes currently payable 1,052 344 379
Current portion of long-term debt 10,055 5,825 5,853
--------- --------- ---------
Total current liabilities 44,220 31,475 32,137
Deferred tax liabilities 1,620 2,275 3,027
Long-term debt 177,322 185,095 164,611
--------- --------- ---------
Stockholders' equity:
Common stock, $.10 par value per
share, 80,000,000 shares authorized 3,024 3,024 3,024
Paid in surplus 127,821 127,835 127,820
Retained earnings 89,551 99,385 102,326
Accumulated other comprehensive loss (10,597) (9,357) (8,487)
Notes receivable--stockholders (5,890) (5,698) (5,755)
--------- --------- ---------
203,909 215,189 218,928
Less--shares held in treasury, at cost (40,424) (35,733) (40,470)
--------- --------- ---------
Total stockholders' equity 163,485 179,456 178,458
--------- --------- ---------
Total liabilities and stockholders' equity $ 386,647 $ 398,301 $ 378,233
========= ========= =========
</Table>
See notes to consolidated financial statements.
Page 1
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<Table>
<Caption>
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
REVENUE
Finance and service charges $ 28,685 $ 28,974 $ 85,092 $ 85,741
Proceeds from disposition of merchandise 51,405 49,697 165,265 162,686
Other lending fees and royalties 1,485 440 3,015 565
Check cashing operations 1,029 894 3,214 2,978
--------- --------- --------- ---------
TOTAL REVENUE 82,604 80,005 256,586 251,970
--------- --------- --------- ---------
COSTS OF REVENUE
Disposed merchandise 33,392 32,948 108,094 109,010
--------- --------- --------- ---------
NET REVENUE 49,212 47,057 148,492 142,960
========= ========= ========= =========
OPERATING EXPENSES
Lending operations 32,580 31,004 96,361 91,922
Check cashing operations 425 231 1,017 965
Administration 6,399 5,666 19,062 17,876
Depreciation 3,109 3,025 9,544 9,325
Amortization 980 980 2,961 2,993
--------- --------- --------- ---------
Total operating expenses 43,493 40,906 128,945 123,081
--------- --------- --------- ---------
INCOME FROM OPERATIONS 5,719 6,151 19,547 19,879
Interest expense, net 2,444 3,604 7,860 10,094
(Gain) loss from derivative valuation fluctuations 269 -- 635 --
(Gain) loss from insurance claim settlement -- (9,729) -- (9,729)
Equity in loss of unconsolidated subsidiary -- -- -- 15,589
(Gain) loss from issuance of subsidiary's stock -- -- -- (136)
--------- --------- --------- ---------
Income from continuing operations before income taxes 3,006 12,276 11,052 4,061
Provision for income taxes 1,031 4,589 4,276 7,484
--------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS 1,975 7,687 6,776 (3,423)
Loss from discontinued operations (17,393) (496) (18,631) (1,565)
--------- --------- --------- ---------
NET INCOME (LOSS) $ (15,418) $ 7,191 $ (11,855) $ (4,988)
========= ========= ========= =========
Net income (loss) per share:
Basic--
Income (loss) from continuing operations $ .08 $ .30 $ .27 $ (.13)
Loss from discontinued operations (.71) (.02) (.76) (.06)
Net income (loss) $ (.63) $ .28 $ (.48) $ (.19)
Diluted--
Income (loss) from continuing operations $ .08 $ .30 $ .27 $ (.13)
Loss from discontinued operations (.71) (.02) (.76) (.06)
Net income (loss) $ (.63) $ .28 $ (.48) $ (.19)
--------- --------- --------- ---------
Weighted average common shares outstanding:
Basic 24,658 25,712 24,655 25,585
Diluted 24,658 25,929 24,655 25,585
========= ========= ========= =========
</Table>
See notes to consolidated financial statements.
Page 2
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(In thousands, except share data)
<Table>
<Caption>
(UNAUDITED)
ACCUMULATED NOTES
COMMON STOCK OTHER RECEIVABLE TREASURY STOCK
-------------------- PAID IN RETAINED COMPREHENSIVE COMPREHENSIVE -- STOCK- --------------------
SHARES AMOUNT SURPLUS EARNINGS INCOME (LOSS) INCOME (LOSS) HOLDERS SHARES AMOUNT
---------- ------- --------- --------- ------------- ------------- ---------- --------- ---------
Balance at
December 31, 2000 30,235,164 $ 3,024 $ 127,820 $ 102,326 $ (8,487) $ (5,755) 5,577,318 $ (40,470)
Comprehensive loss:
Net loss (11,855) $ (11,855)
Other comprehensive
loss--Foreign
currency
translation
adjustments (2,110) (2,110)
---------
Comprehensive
loss $ (13,965)
---------
Dividends declared--
$.0375 per share (920)
Treasury shares
purchased 24,060 (109)
Treasury shares
reissued (7) (21,500) 155
Tax benefit from
exercise of option
shares 8
Change in notes
receivable--
stockholders (135)
---------- ------- --------- --------- --------- --------- -------- --------- ---------
Balance at
September 30, 2001 30,235,164 $ 3,024 $ 127,821 $ 89,551 $ (10,597) $ (5,890) 5,579,878 $ (40,424)
========== ======= ========= ========= ========= ========= ======== ========= =========
Balance at
December 31, 1999 30,235,164 $ 3,024 $ 127,350 $ 105,331 $ (3,989) $ (5,820) 5,055,170 $ (38,956)
Comprehensive loss:
Net loss (4,988) $ (4,988)
Other comprehensive
loss--Foreign
currency
translation
adjustments (5,368) (5,368)
---------
Comprehensive
loss $ (10,356)
---------
Dividends declared--
$.0375 per share (958)
Treasury shares
purchased 188,733 (1,370)
Treasury shares
reissued (740) (598,825) 4,593
Tax benefit from
exercise of option
shares 1,225
Change in notes
receivable--
stockholders 122
---------- ------- --------- --------- --------- --------- -------- --------- ---------
Balance at
September 30, 2000 30,235,164 $ 3,024 $ 127,835 $ 99,385 $ (9,357) $ (5,698) 4,645,078 $ (35,733)
========== ======= ========= ========= ========= ========= ======== ========= =========
</Table>
See notes to consolidated financial statements.
Page 3
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<Table>
<Caption>
(UNAUDITED)
Nine Months Ended
September 30,
-------------------------
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (11,855) $ (4,988)
Less: Loss from discontinued operations (18,631) (1,565)
--------- ---------
Income (loss) from continuing operations 6,776 (3,423)
Adjustments to reconcile income (loss)
from continuing operations to net cash
provided by continuing operating activities:
Depreciation 9,544 9,325
Amortization 2,961 2,993
Loss from derivative valuation fluctuations 635 --
Gain from insurance claim settlement (9,729)
Equity in loss of unconsolidated subsidiary -- 15,589
Gain from issuance of subsidiary's stock -- (136)
Changes in operating assets and liabilities--
Merchandise held for disposition (5,039) 2,470
Finance and service charges receivable 417 846
Other receivables and prepaid expenses (871) (1,980)
Accounts payable and accrued expenses 6,652 (3,047)
Customer deposits, net 622 303
Current income taxes 1,543 3,650
Deferred taxes, net (7,985) 1,929
--------- ---------
Net cash provided by operating activities of continuing operations 15,255 18,790
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans forfeited and transferred to merchandise held for disposition 100,374 98,724
Loans repaid or renewed 200,578 211,046
Loans made, including loans renewed (304,590) (312,044)
--------- ---------
Net increase in loans (3,638) (2,274)
--------- ---------
Acquisitions, net of cash acquired (1,249) --
Purchases of property and equipment (22,693) (11,483)
Proceeds from property insurance claim 790 10,508
--------- ---------
Net cash used by investing activities of continuing operations (26,790) (3,249)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) under bank lines of credit 23,732 (5,629)
Proceeds from capital lease obligations -- 2,115
Payments on notes payable and capital lease obligations (5,538) (5,141)
Change in notes receivable - stockholders 240 840
Net proceeds from reissuance of treasury shares 120 3,434
Treasury shares purchased (109) (1,370)
Dividends paid (920) (958)
--------- ---------
Net cash provided (used) by financing activities of continuing operations 17,525 (6,709)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (69) (124)
--------- ---------
CASH PROVIDED BY CONTINUING OPERATIONS 5,921 8,708
CASH USED BY DISCONTINUED OPERATIONS (3,969) (8,576)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,339 6,218
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,291 $ 6,350
========= =========
</Table>
See notes to consolidated financial statements.
Page 4
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").
During 1999, the Company disposed of a majority interest in innoVentry Corp.
("innoVentry") and began using the equity method of accounting for its
investment and its share of the results of innoVentry's operations. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
In February 2001, innoVentry sold additional voting preferred stock,
reducing the Company's ownership and voting interest to 19.3%. Thereafter, the
Company began using the cost method of accounting for its investment in
innoVentry. See Note 6.
The financial statements as of September 30, 2001 and 2000, 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.
These financial statements and related notes should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 2000 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 charges 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.
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.
The Company offers small consumer cash advances ("payday loans") in
selected lending locations and on behalf of a third party financial institution
(the "Bank") in other locations. The Company accrues payday loan fees and
interest revenue on each loan on a constant yield basis over its term, which is
typically less than 17 days. A loan loss reserve is
Page 5
provided for loans, fees and interest deemed to be uncollectible. The loan loss
reserve is increased by charges to operating expenses and decreased by charge
offs (net of recoveries), as required. The Bank pays the Company an
administrative fee for services provided on its behalf. Fees for administrative
services provided to the Bank are recorded in revenue when earned.
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.
3. DISCONTINUED OPERATIONS
In September 2001, the Company announced plans to exit the rent-to-own business
in order to focus on its core business of lending activities. The Company's
subsidiary, Rent-A-Tire, Inc. ("Rent-A-Tire") provides new tires and wheels
under a rent-to-own format to customers seeking this alternative to a direct
purchase. The Company initiated the plan to close 21 Rent-A-Tire operating
locations and sell the remaining 22 units. It expects the plan to be completed
before September 2002.
Pursuant to Accounting Principles Board Opinion No. 30 "Reporting the
Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" ("APB 30"), the consolidated financial statements of the Company
have been reclassified to reflect the planned disposal of the rental business
segment. Accordingly, the revenues, costs and expenses, assets, and cash flows
of Rent-A-Tire have been segregated in the Consolidated Balance Sheets,
Consolidated Statements of Operations and Consolidated Statements of Cash Flows.
The net operating results, net assets and net cash flows of this business
segment have been reported as "Discontinued Operations" in the accompanying
consolidated financial statements.
Summarized financial information for the discontinued operations is as
follows (dollars in thousands):
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenues $ 3,220 $ 4,842 $ 13,665 $ 12,634
Loss before income taxes (14,757) (750) (16,648) (2,381)
Benefit for income taxes (4,917) (254) (5,570) (816)
-------- -------- -------- --------
Loss from operations of discontinued rental business (9,840) (496) (11,078) (1,565)
Loss on disposal of rental business
(less applicable income tax benefit of $ 3,408) (7,553) -- (7,553) --
-------- -------- -------- --------
Loss from discontinued operations $(17,393) $ (496) $(18,631) $ (1,565)
-------- -------- -------- --------
Diluted loss per share from discontinued operations $ (.71) $ (.02) $ (.76) $ (.06)
======== ======== ======== ========
</Table>
Page 6
Continuing losses associated with the rental business segment triggered
an evaluation of Rent-A-Tire's long-lived asset recoverability during the third
quarter of 2001. As a result, a non-cash charge of $13,716,000 ($9,153,000 after
income tax benefit) to write down the carrying value of a portion of
Rent-A-Tire's goodwill and property and equipment to estimated fair value, based
upon discounted future cash flows, is included in loss before income taxes
reflected in the table above for the three months and nine months ended
September 30, 2001.
Loss on disposal of the rental business segment recorded in the three
months and nine months ended September 30, 2001, includes a provision of
$4,472,000 for operating losses subsequent to September 1, 2001, the effective
date of the plan of disposition, and a provision of $6,489,000 for the estimated
loss on the sale of remaining assets. The components of the combined pre-tax
charge of $10,961,000 ($7,553,000 after income tax benefit) and the reserve
activity during the three months ended September 30, 2001, were as follows:
<Table>
<Caption>
Reserve At Cash Non-cash Reserve At
Inception Expenditures Write downs September 30, 2001
--------- ------------ ----------- ------------------
Inventory reserve $ 712,000 $ -- $ (217,000) $ 495,000
============ =========== ============ ============
Long-lived asset
write downs $ 1,590,000 $ -- $ (1,590,000) $ --
Other closure/exit costs 2,194,000 -- -- 2,194,000
Workforce reduction 134,000 (35,000) -- 99,000
Additional operating
(income) during
phase-out period (158,000) (154,000) (48,000) (360,000)
Loss on sale of assets 6,489,000 -- -- 6,489,000
------------ ----------- ------------ ------------
Disposal reserve $ 10,249,000 $ (189,000) $ (1,638,000) $ 8,422,000
============ =========== ============ ============
</Table>
The adoption of the plan to close the 21 operating units resulted in
the write down of merchandise on rent, property and equipment, and goodwill.
Other closure/exit costs primarily includes non-cancelable operating lease
obligations.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" that
is required to be adopted by the Company for business combinations initiated
after June 30, 2001. SFAS No. 141 requires that all business combinations be
accounted for under the purchase method. Use of the pooling-of-interests method
is prohibited. It also establishes criteria for the separate recognition of
intangible assets acquired in a business combination. The Company will implement
the provisions of SFAS No. 141 as required and its adoption is not expected to
have a material effect on the Company's consolidated financial position or
results of operations.
Page 7
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." Goodwill and other intangible assets having an indefinite
useful life acquired in business combinations completed after June 30, 2001, are
no longer subject to amortization to earnings. Effective January 1, 2002, all
goodwill and other intangible assets having an indefinite useful life become
subject to periodic testing for impairment and are no longer amortized to
earnings. The useful lives of other intangible assets must be reassessed and the
remaining amortization periods adjusted accordingly. The Company is in the
process of estimating the effect that the adoption of SFAS 142 will have on its
consolidated financial position and results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The statement supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and related
literature and establishes a single accounting model, based on the framework
established in SFAS No. 121, for long-lived assets to be disposed of by sale.
The Company is required to adopt SFAS No. 144 as of January 1, 2002. The Company
will implement the provisions of SFAS No. 144 as required and its adoption is
not expected to have a material effect on the Company's consolidated financial
position or results of operations.
5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company adopted SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities", as amended, on January 1, 2001. SFAS No. 133 requires an
entity to recognize each derivative instrument as either an asset or liability
on the balance sheet, measure it at fair value, and recognize the changes in its
fair value immediately in earnings unless it qualifies as a hedge. The Company's
only derivative instruments are interest rate cap agreements that it designates
and uses as cash flow hedges to protect against the risks associated with market
fluctuations in interest rates on a portion of its variable interest rate
borrowings. The Company performs prospective assessments of each agreement's
hedge effectiveness, as defined by SFAS No. 133, at the beginning of each
quarter. The final determination of hedge effectiveness is completed following
the end of each quarter.
The accompanying Consolidated Statements of Operations include losses
from derivative valuation fluctuations of $269,000 and $635,000 during the three
months and nine months ended September 30, 2001, respectively. The loss during
the nine month period resulted from two adjustments. As of January 1, 2001, the
Company adjusted the carrying value of each of its interest rate cap agreements
to fair value and recorded a loss of $259 thousand (before applicable income tax
benefit of $87 thousand), which represented the cumulative effect of adopting
the new standard. The Company also recorded an additional loss of $376 thousand
during the nine month period due to the determination that the interest rate cap
agreements were ineffective as hedges (as defined by SFAS No. 133) during the
period, and due to the decreases in the fair values of the agreements resulting
from the prevailing interest rate environment. The fair values of the interest
rate cap agreements as of September 30, 2001, total $95 thousand and are
included in "Other receivables and prepaid expenses" in the accompanying
Consolidated Balance Sheet.
Page 8
6. INVESTMENT IN INNOVENTRY
innoVentry sold $115.7 million of newly issued shares of senior convertible
Series C voting preferred stock in a private placement completed as of February
2, 2001. The Company participated in the placement by canceling its $2.9 million
note receivable from innoVentry plus accrued interest of $.4 million in exchange
for 2,269,066 shares of the Series C preferred stock. Upon completion of the
transactions, the Company owned 19.3% of the ownership and voting interest in
innoVentry and began using the cost method of accounting for its investment.
In September 2001, innoVentry announced a plan to cease business
operations, sell all of its assets, and pay the proceeds received to
innoVentry's creditors. The Company anticipates that no proceeds will be
available for payment to innoVentry's shareholders. The Company's investment in
and advances to innoVentry were written down to zero during fiscal 2000.
innoVentry's decision to cease operations will have no effect on the Company's
consolidated financial position or results of operations.
7. LONG-TERM DEBT
The Company's long-term debt instruments and balances outstanding at September
30, 2001 and 2000 were as follows (in thousands):
<Table>
<Caption>
2001 2000
--------- ---------
U.S. Line of Credit up to $150 million
due June 30, 2003 $ 110,400 $ 100,900
U.K. Line of Credit up to L.15 million
due April 30, 2003 5,011 9,771
Swedish Lines of Credit up to SEK 215 million 8,467 10,782
8.33% senior unsecured notes due 2003 8,571 12,857
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 4,528 6,110
6.25% subordinated unsecured notes due 2004 400 500
--------- ---------
187,377 190,920
Less current portion 10,055 5,825
--------- ---------
Total long-term debt $ 177,322 $ 185,095
========= =========
</Table>
Page 9
8. WEIGHTED AVERAGE SHARES
The reconciliation of basic and diluted weighted average common shares
outstanding for the periods ended September 30, follows (in thousands):
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2001 2000 2001 2000
------ ------ ------ ------
Weighted average shares--Basic 24,658 25,712 24,655 25,585
Effect of shares applicable to stock option plans 430 168 217 463
Effect of shares applicable to nonqualified savings plan 64 49 64 47
Antidilutive effect resulting from net loss (494) -- (281) (510)
------ ------ ------ ------
Weighted average shares--Diluted 24,658 25,929 24,655 25,585
====== ====== ====== ======
</Table>
9. OPERATING SEGMENT INFORMATION
The Company has two reportable operating segments in the lending industry and
one in the check cashing industry. While the United States and foreign lending
segments offer the same services, each is managed separately due to the
different operational strategies required. The check cashing operation offers
different services and products, thus requiring its own technical, marketing and
operational strategy.
As described in Note 3, the Company has reclassified the results of
operations of Rent-A-Tire as discontinued operations. This business was
previously reported as a separate operating segment. The segment data included
below has been restated to exclude amounts related to Rent-A-Tire.
Page 10
Information concerning the segments is set forth below (in thousands):
<Table>
<Caption>
Lending
------------------------------------------
United Check
States Foreign Total Cashing Consolidated
-------- -------- -------- ------- ------------
Three Months Ended
September 30, 2001:
Total revenue $ 74,030 $ 7,753 $ 81,783 $ 821 $ 82,604
Income (loss) from
operations 3,575 2,149 5,724 (5) 5,719
Total assets at end of
period 290,323 75,085 365,408 11,353 376,761
-------- -------- -------- -------- --------
Three Months Ended
September 30, 2000:
Total revenue 71,908 7,379 79,287 718 80,005
Income from
operations 3,963 2,043 6,006 145 6,151
Total assets at end of
period 284,234 77,216 361,450 12,041 373,491
======== ======== ======== ======== ========
Nine Months Ended
September 30, 2001:
Total revenue 230,979 22,978 253,957 2,629 256,586
Income from
operations 12,864 6,271 19,135 412 19,547
-------- -------- -------- -------- --------
Nine Months Ended
September 30, 2000:
Total revenue 225,511 24,008 249,519 2,451 251,970
Income from
operations 13,221 6,321 19,542 337 19,879
-------- -------- -------- -------- --------
</Table>
10. LITIGATION
In December 2000, the Alabama Supreme Court upheld a trial court verdict
awarding $300,000 in damages plus interest to a former employee who claimed that
the Company did not pay him certain incentive compensation he believed he had
earned. Of the total award, $225,000 consisted of punitive damages. The Company
petitioned the United States Supreme Court to hear the case and rule on the
propriety of awarding punitive damages in this particular case. In October 2001,
the United States Supreme Court concluded the proceeding when it refused to
grant the Company's petition to hear the case. As of September 30, 2001, all
amounts due the plaintiff had been paid.
The Company is party to a number of other lawsuits arising in the
normal course of 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 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SUMMARY CONSOLIDATED FINANCIAL DATA
THIRD QUARTER ENDED SEPTEMBER 30, 2001 vs.
THIRD QUARTER ENDED SEPTEMBER 30, 2000
(Dollars in thousands)
The following table sets forth selected consolidated financial data with
respect to the Company and its lending operations as of September 30, 2001 and
2000, and for the three months then ended.
<Table>
<Caption>
2001 2000 Change
-------- -------- ------
REVENUE
Finance and service charges $ 28,685 $ 28,974 (1)%
Proceeds from disposition of merchandise 51,405 49,697 3%
Other lending fees and royalties 1,485 440 238%
Check cashing operations 1,029 894 15%
-------- -------- -------
TOTAL REVENUE 82,604 80,005 3%
-------- -------- -------
COSTS OF REVENUE
Disposed merchandise 33,392 32,948 1%
-------- -------- -------
NET REVENUE $ 49,212 $ 47,057 5%
======== ======== =======
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source--
Finance and service charges and other fees 61.3% 62.5% (2)%
Margin on disposition of merchandise 36.6% 35.6% 3%
Check cashing operations 2.1% 1.9% 11%
Expenses as a percentage of net revenue--
Operations and administration 80.1% 78.4% 2%
Depreciation and amortization 8.3% 8.5% (2)%
Interest, net 5.0% 7.7% (35)%
Income from operations as a percentage of total revenue 6.9% 7.7% (10)%
-------- -------- -------
LENDING OPERATIONS:
Annualized yield on pawn loans 95% 93% 2%
Average pawn loan balance per average location in operation $ 261 $ 269 (3)%
Average pawn loan amount at end of period (not in thousands) $ 96 $ 98 (2)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 35.0% 33.7% 4%
Average annualized merchandise turnover 2.2X 2.2x --
Average merchandise held for disposition
per average location $ 128 $ 126 2%
Owned locations in operation--
Beginning of period 458 463
Acquired 4 --
Start-ups -- --
Combined or closed (1) --
End of period 461 463 --
Additional franchise locations at end of period 15 16 (6)%
Total locations at end of period 476 479 (1)%
Average number of owned locations in operation(a) 460 463 (1)%
</Table>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 12
NINE MONTHS ENDED SEPTEMBER 30, 2001 vs.
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Dollars in thousands)
The following table sets forth selected consolidated financial data with
respect to the Company and its lending operations as of September 30, 2001 and
2000, and for the nine months then ended.
<Table>
<Caption>
2001 2000 Change
--------- --------- ------
REVENUE
Finance and service charges $ 85,092 $ 85,741 (1)%
Proceeds from disposition of merchandise 165,265 162,686 2%
Other lending fees and royalties 3,015 565 434%
Check cashing operations 3,214 2,978 8%
--------- --------- ------
TOTAL REVENUE 256,586 251,970 2%
--------- --------- ------
COSTS OF REVENUE
Disposed merchandise 108,094 109,010 (1)%
--------- --------- ------
NET REVENUE $ 148,492 $ 142,960 4%
========= ========= ======
OTHER DATA
CONSOLIDATED OPERATIONS:
Net revenue contribution by source--
Finance and service charges and other fees 59.3% 60.4% (2)%
Margin on disposition of merchandise 38.5% 37.5% 3%
Check cashing operations 2.2% 2.1% 5%
Expenses as a percentage of net revenue--
Operations and administration 78.4% 77.5% 1%
Depreciation and amortization 8.4% 8.6% (2)%
Interest, net 5.3% 7.1% (25)%
Income from operations as a percentage of total revenue 7.6% 7.9% (4)%
--------- --------- ------
LENDING OPERATIONS:
Annualized yield on pawn loans 98% 94% 4%
Average pawn loan balance per average location in operation $ 253 $ 262 (3)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 34.6% 33.0% 5%
Average annualized merchandise turnover 2.6x 2.5x 4%
Average merchandise held for disposition
per average location $ 123 $ 127 (3)%
Owned locations in operation--
Beginning of period 463 466
Acquired 5 --
Start-ups 1 1
Combined, closed or sold (8) (4)
End of period 461 463 --
Additional franchise locations at end of period 15 16 (6)%
Total locations at end of period 476 479 (1)%
Average number of owned locations in operation (a) 460 464 (1)%
</Table>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 13
GENERAL
The Company is a diversified provider of specialty financial services to
individuals in the United States, United Kingdom and Sweden. The Company offers
secured non-recourse loans, commonly referred to as pawn loans, to individuals
through its lending operations. The pawn loan portfolio generates finance and
service charges revenue. A related but secondary source of revenue is the
disposition of merchandise, primarily collateral from unredeemed pawn loans. The
Company also provides check cashing services through its franchised and company
owned Mr. Payroll(R) manned check cashing centers.
The number of lending locations declined by one during the 21 months
ended September 30, 2001. The Company established 2 locations, acquired 5
locations and combined or closed 12 locations. In addition, 5 franchise units
were opened and one was closed. As of September 30, 2001, the Company's lending
operations consisted of 476 lending units--405 owned units and 15 franchised
units in 18 states in the United States, 45 jewelry-only units in the United
Kingdom, and 11 loan-only and primarily jewelry-only units in Sweden.
As of September 30, 2001, Mr. Payroll operated 131 franchised and 7
company owned manned check cashing centers in 20 states. During 1999, the
Company disposed of a majority interest in innoVentry Corp. ("innoVentry") and
began accounting for its investment by the equity method of accounting.
innoVentry issued additional voting preferred stock in private placements in
October 1999 and February 2001. The Company began accounting for its investment
by the cost method following the February 2001 private placement. As of
September 30, 2001, the Company's ownership and voting interest was 19.3%.
However, innoVentry ceased business operations in September due to its inability
to raise additional financing. innoVentry's decision to cease operations will
have no effect on the Company's consolidated financial position or results of
operations.
DISCONTINUED OPERATIONS
In September 2001, the Company announced plans to exit the rent-to-own business
in order to focus on its core business of lending activities. The Company
provides new tires and wheels under a rent-to-own format to customers seeking
this alternative to a direct purchase through its subsidiary, Rent-A-Tire, Inc.
("Rent-A-Tire"). The Company initiated the plan to close 21 Rent-A-Tire
operating locations and sell the remaining 22 units. It expects the plan to be
completed before September 2002.
Pursuant to Accounting Principles Board Opinion No. 30 "Reporting the
Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" ("APB 30"), the consolidated financial statements of the Company
have been reclassified to reflect the planned disposal of the rental business
segment. Accordingly, the revenues, costs and expenses, assets, and cash flows
of Rent-A-Tire have been segregated in the Consolidated Balance Sheets,
Consolidated Statements of Operations and Consolidated Statements of Cash Flows.
The net operating results, net assets and net cash flows of this business
segment have been reported as "Discontinued Operations" in the Company's
consolidated financial statements. However, the loss from
Page 14
discontinued operations does not include any interest expense since no debt will
be assumed by the buyer.
The Company recorded a $17.4 million loss from discontinued operations
(net of a tax benefit of $8.3 million) during the third quarter ended September
30, 2001 and an $18.6 million loss (net of a tax benefit of $9.0 million) during
the nine months ended September 30, 2001. The net loss for the third quarter
ended September 30, 2001, includes $9.8 million of net loss from discontinued
operations for the period prior to September 1, 2001 (the effective date of the
exit plan), $3.0 million of estimated net operating losses during the phase-out
period, and a $4.6 million estimated net loss on the sale of remaining assets.
The estimated net losses during the phase-out period reflect various costs
associated with the closure of 21 Rent-A-Tire locations as well as the estimated
net earnings of the rental business segment prior to the sale of its remaining
units.
RESULTS OF CONTINUING OPERATIONS
THIRD QUARTER ENDED SEPTEMBER 30, 2001, COMPARED TO THE
THIRD QUARTER ENDED SEPTEMBER 30, 2000
FOREIGN CURRENCY TRANSLATION. The strength of the United States dollar against
the two currencies utilized in the Company's foreign operations negatively
impacted the results of operations during the third quarter ended September 30,
2001 (the "current quarter"), when compared to the results during the third
quarter ended September 30, 2000 (the "prior year quarter"). The weighted
average exchange rates used for translating earnings into United States dollars
for the British pound sterling and Swedish kronor were 1.7% and 13.7% lower,
respectively, during the current quarter compared to the prior year quarter. The
exchange rate used for translating assets and liabilities into United States
dollars at September 30, 2001 for the kronor was 10.8% lower than the rate used
at September 30, 2000, while the rate for the pound sterling was equivalent to
the prior period rate. Management anticipates that the unfavorable currency
translation adjustment for the kronor will continue during the remainder of
fiscal 2001. When the effects of these declines on the quarterly comparisons are
significant, they will be analyzed separately from the operational effects on
the quarterly comparisons. The separated operational effects will be referred to
as "pro forma."
NET REVENUE: CONSOLIDATED. Consolidated net revenue increased 4.6%, or $2.2
million, to $49.2 million during the current quarter, from $47.0 million during
the prior year quarter. Net revenue from lending activities and check cashing
operations increased $2.1 million and $.1 million, respectively.
NET REVENUE: LENDING ACTIVITIES. Lending operations net revenue increased $2.1
million to $48.4 million during the current quarter from $46.3 million during
the prior year quarter. The principal components of lending operations net
revenue are finance and service charges, which decreased $.3 million; net
revenue from the disposition of merchandise, which increased $1.3 million; other
domestic lending fees and franchise royalties, which increased $1.1 million; and
foreign check cashing operations, which was the same in both quarters.
Page 15
The decreased finance and service charges revenue of $.3 million
resulted from a combination of the effects of translation of foreign currency
amounts into United States dollars ($.4 million decrease), changes in the
average balance of pawn loans outstanding ($.2 million increase), and changes in
the annualized yield of the pawn loan portfolio ($.1 million decrease).
The decline in the currency translation rates during the current
quarter compared to the prior year quarter caused a $.4 million decrease in
finance and service charges revenue from foreign sources. The decline in revenue
was caused by a lower average balance of pawn loans outstanding in foreign
operations. The translation rate declines exaggerated the actual reductions in
average balances of pawn loans outstanding that occurred in both the United
Kingdom and in Sweden. The combined average foreign loan balances were 12.5%
lower and the domestic average balance was 1.9% higher, resulting in a
company-wide average balance that was 3.4% lower during the current quarter than
during the prior year quarter. However, excluding the effects on translation of
exchange rate declines, the company-wide average balance for the current quarter
only decreased 0.9% compared to the prior year quarter because the pro forma
combined foreign average balance was only 5.8% lower.
Higher average balances outstanding generally result in higher amounts
of finance and service charges revenue. As a result of the higher average
domestic balances, domestic finance and service charges revenue increased $.5
million. Excluding the effects on translation of the exchange rate declines, a
decrease in pro forma combined foreign finance and service charges revenue of
$.3 million partially offset the domestic increase, resulting in a net increase
of $.2 million from changes in the average balance of pawn loans outstanding.
The increase in the average balance of domestic pawn loans outstanding was
driven by a 1.4% growth in the average number of pawn loans outstanding during
the current quarter coupled with a 0.5% increase in the average amount per loan.
While the increase in average number of domestic pawn loans outstanding is the
third consecutive quarter-over-quarter increase, the Internal Revenue Service's
advance tax refunds may have tempered the growth in loan demand during the
current quarter. The average balance of pawn loans outstanding decreased 6.7%
and 4.3% in the United Kingdom and Sweden denominated in their local currencies,
respectively. Foreign loan demand continues to be weaker as exemplified by a
4.7% and 6.1% decrease in the average number of pawn loans outstanding in the
United Kingdom and Sweden, respectively. Average amounts per loan were 2.2%
lower in the United Kingdom and 1.9% higher in Sweden.
Excluding the negative effects of foreign currency exchange rate
declines, the consolidated annualized loan yield, which represents the blended
result derived from the distinctive loan yields realized from operations in the
three countries, was 93.4% in the current quarter compared to 92.7% in the prior
year quarter. The domestic annualized loan yield decreased to 115.3% for the
current quarter, compared to 119.2% for the prior year quarter, resulting in a
$.7 million decrease in finance and service charges revenue. An increase in the
pro forma blended yield on foreign loans to 52.6% in the current quarter
compared to 47.0% in the prior year quarter caused a combined $.6 million of
growth in pro forma finance and service charges revenue. Increased pro forma
revenue in the United Kingdom due to improvement in loan redemption rates and
higher returns on the disposition of unredeemed collateral at auction in both
countries were the primary reasons for the improvement in the blended yield.
Page 16
Net revenue from the disposition of merchandise represents the proceeds
received from the disposition of merchandise in excess of the cost of
merchandise disposed. The effects of declines in foreign currency exchange rates
were negligible since 95.7% of proceeds and 96.6% of net margins were generated
by domestic activities. Proceeds from the disposition of merchandise in the
current quarter increased $1.7 million, or 3.4%, over the prior year quarter.
Increased proceeds of $1.3 million, or 2.8%, occurred in the Company's domestic
lending units. The domestic increase may have been bolstered by the Internal
Revenue Service's advance tax refunds. Management believes that many customers
may have used a portion of their refund to purchase merchandise. The margin on
disposition of merchandise increased to 35.0% in the current quarter from 33.7%
in the prior year quarter. Excluding the effect of the disposition of scrap
jewelry, the margin on disposition of merchandise increased to 36.4% in the
current quarter from 36.0% in the prior year quarter due to a lower average cost
of merchandise disposed. The margin on disposition of scrap jewelry improved to
17.3% in the current quarter compared to 2.9% in the prior year quarter due to a
lower average cost per ounce for domestic dispositions. Overall, the combination
of increased proceeds and a higher margin resulted in a $1.3 million, or 7.6%,
increase in net revenue from the disposition of merchandise. The merchandise
turnover rate of 2.2 times during the current quarter was consistent with the
prior year quarter. The Company has continued to concentrate on lowering the
average cost of merchandise held for disposition. As a result, management
believes that the margin on disposition should continue to trend slightly higher
during the fourth quarter of 2001.
Other domestic lending fees and franchising royalties increased $1.1
million in the current quarter as compared to the prior year quarter. The
increase resulted from the initiation of a small consumer cash advance product
during 2000 that is available in 352 domestic lending units at the end of the
current quarter, including 281 units that offer the product on behalf of a third
party financial institution (the "Bank"), which pays the Company a fee for its
administrative services. The product offered by the Company in 71 locations
provides customers with cash in exchange for a promissory note or other
repayment agreement supported by that customer's check for the amount of the
cash advanced plus a service fee. The Company holds the check for a short
period, typically less than 17 days. To repay the advance, customers may redeem
their checks by paying cash or they may allow the checks to be processed for
collection. (Although these cash advance transactions may take the form of loans
or deferred check deposit transactions, the transactions are referred to
throughout this discussion as "payday loans" for convenience.)
Payday loans written increased $10.9 million to $13.6 million during
the current quarter from $2.7 million during the prior year quarter. The average
amount per loan increased to $269 from $179. The combined payday loan portfolio
generated $2.2 million in revenue during the current quarter compared to $.4
million in the prior year quarter. Included in the current quarter's results in
"Other lending fees and royalties" is $1.4 million in revenue from the Company's
portfolio and fees for administrative services performed for the Bank. As of
September 30, 2001, $4.2 million of gross payday loans were outstanding,
including $1.6 million that is included in the Company's Consolidated Balance
Sheet. A loan loss reserve of $481 thousand, representing 29.5% of the Company's
gross payday loans outstanding, has been provided in the consolidated financial
statements. The Company plans to offer payday loans in approximately 34 more
domestic lending locations during the remainder of 2001.
Page 17
NET REVENUE: CHECK CASHING OPERATIONS. Mr. Payroll's net revenue increased $.1
million primarily from new franchise fees.
OPERATIONS AND ADMINISTRATION EXPENSES. Consolidated operations and
administration expenses as a percentage of net revenue were 80.0% in the current
quarter compared to 78.4% in the prior year quarter. The expenses increased $2.5
million, or 6.8%, in the current quarter compared to the prior year quarter.
Domestic lending expenses increased $2.0 million, primarily as a result of
higher personnel costs, expenses associated with the advertising and promotion
of payday loans, and a higher provision for loan losses for the larger payday
loan portfolio. Foreign lending operations expenses increased $.3 million
primarily due to higher personnel expense and an increase in the number of
locations in the United Kingdom. Mr. Payroll's expenses increased $.2 million in
the current quarter compared to the prior year quarter, primarily as a result of
the closure or relocation of several kiosks and slightly higher losses on
returned checks.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses as a
percentage of net revenue were 8.3% in the current quarter compared to 8.5% in
the prior year quarter. Total depreciation and amortization expenses increased
$.1 million, or 2.1%. Depreciation of additional equipment and kiosks for Mr.
Payroll and the increase in the number of operating locations in the United
Kingdom accounted for the increase.
INTEREST EXPENSE. Net interest expense as a percentage of net revenue declined
to 5.0% in the current quarter from 7.7% in the prior year quarter. The amount
decreased a net $1.2 million, or 32.2%, due to a 27.6% reduction of the
effective blended borrowing cost to 5.3% in the current quarter from 7.3% in the
prior year quarter, and a 6.5% reduction in the Company's average debt balance.
The average amount of debt outstanding decreased during the current quarter to
$183.4 million from $196.2 million during the prior year quarter. A lower
average merchandise balance during the year and improved operating performance
in the United Kingdom were factors contributing to the reduction.
OTHER ITEMS. Effective January 1, 2001, the Company implemented Statement of
Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities." The adjustments to fair values of interest
rate cap agreements (the Company's only derivative instruments) at June 30,
2001, and September 30, 2001, resulted in a loss of $.3 million that is recorded
in "(Gain) loss from derivative valuation fluctuations" in the Company's
Consolidated Statements of Operations in the current quarter. See Note 5 of
Notes to Consolidated Financial Statements.
During the prior year quarter, the Company recorded a $9.7 million gain
from the settlement of the insurance claim resulting from the severe damage to
its corporate headquarters in Fort Worth, Texas by a tornado in March 2000.
Income tax expense of $3.4 million related to the gain is included in the
provision for income taxes.
INCOME TAXES. The Company's effective tax rate for the current quarter is 34.3%
compared to 37.4% for the prior year quarter. The Company's consolidated
effective tax rate in the current quarter was impacted by an adjustment to the
estimate of U.S. income tax on foreign earnings.
Page 18
DILUTED INCOME FROM CONTINUING OPERATIONS. Diluted income from continuing
operations per share was $.08 in the current quarter compared to $.30 in the
prior year quarter. After excluding various non-operating unusual items,
adjusted diluted income from continuing operations per share increased to $.09
in the current quarter from $.05 in the prior year quarter.
Supplemental information regarding the effects of the unusual items on
the current quarter and the prior year quarter is as follows (in thousands):
<Table>
<Caption>
Current Prior Year
Quarter Quarter
-------- ---------
Income from continuing operations before income taxes $ 3,006 $ 12,276
Less unusual items --
Loss from derivative valuation fluctuations 269 --
Gain from insurance claim settlement -- (9,729)
-------- --------
Income from continuing operations before
unusual items and income taxes 3,275 2,547
-------- --------
Income from continuing operations after tax
excluding unusual items $ 2,152 $ 1,363
======== ========
Income from continuing operations after tax
excluding unusual items per share -- Diluted $ .09 $ .05
======== ========
</Table>
NINE MONTHS ENDED SEPTEMBER 30, 2001, COMPARED TO THE
NINE MONTHS ENDED SEPTEMBER 30, 2000
FOREIGN CURRENCY TRANSLATION. The strength of the United States dollar against
the two currencies utilized in the Company's foreign operations negatively
impacted the results of operations during the nine months ended September 30,
2001 (the "current period"), when compared to the results during the nine months
ended September 30, 2000 (the "prior year period"). The weighted average
exchange rates used for translating earnings into United States dollars for the
British pound sterling and Swedish kronor were 6.6% and 15.2% lower,
respectively, during the current period compared to the prior year period. The
effects of these declines on the nine month period comparisons, when
significant, will be analyzed separately from the operational effects.
Management anticipates that the unfavorable currency translation adjustment for
the kronor will continue during the remainder of fiscal 2001.
NET REVENUE: CONSOLIDATED. Consolidated net revenue increased 3.9%, or $5.5
million, to $148.5 million during the current period, from $143.0 million during
the prior year period. Net revenue from lending activities and check cashing
operations increased $5.3 million and $.2 million, respectively.
NET REVENUE: LENDING ACTIVITIES. Lending operations net revenue increased $5.3
million to $145.8 million during the current period from $140.5 million during
the prior year period. Finance and service charges revenue decreased $.7
million, net revenue from the disposition of
Page 19
merchandise increased $3.5 million, other domestic lending fees and franchise
royalties increased $2.4 million, and foreign check cashing operations increased
$.1 million.
The finance and service charges revenue decline of $.7 million resulted
from a combination of the effects of translation of foreign currency amounts
into United States dollars ($1.6 million decrease), changes in the average
balance of pawn loans outstanding ($.6 million increase), and changes in the
annualized yield of the pawn loan portfolio ($.3 million increase).
The decline in the translation rates during the current period compared
to the prior year period caused a $1.6 million decrease in finance and service
charges revenue from foreign sources. The effects of the translation rate
declines on the average balance of pawn loans outstanding in foreign operations
accounted for $1.5 million of the decrease and the effects on the annualized
pawn loan yield from foreign operations caused the remaining $.1 million
decrease. The translation rate declines exaggerated the actual declines in
average balances of pawn loans outstanding that occurred in both the United
Kingdom and in Sweden. The combined foreign balances were 15.3% lower and the
domestic average balance was 2.6% higher, resulting in a reported company-wide
average balance that was 4.4% lower during the current period than during the
prior year period. However, excluding the effects on translation of exchange
rate declines, the company-wide average balance for the current period was only
1.2% lower than for the prior year period because the pro forma combined foreign
average balance was only 7.0% lower.
Domestic finance and service charges revenue increased $1.7 million due
to the effects of changes in the average balance of pawn loans outstanding.
Excluding the effects on translation of the exchange rate declines, a decrease
in pro forma combined foreign finance and service charges revenue of $1.1
million partially offset the domestic increase resulting in a net increase of
$.6 million from changes in the average balance of pawn loans outstanding. The
increase in the average balance of domestic pawn loans outstanding was driven by
a 1.7% growth in the average number of pawn loans outstanding during the current
period coupled with a 0.9% increase in the average amount per loan. The average
balance of pawn loans outstanding decreased 9.3% and 3.5% in the United Kingdom
and Sweden denominated in their local currencies, respectively. Foreign loan
demand continues to be weaker as the average number of pawn loans outstanding in
both the United Kingdom and Sweden declined 6.1% and 6.5%, respectively. Average
amounts per loan were 3.5% lower in the United Kingdom and 3.2% higher in
Sweden.
Excluding the negative effects of foreign currency exchange rate
declines, the consolidated annualized loan yield was 96.4% in the current period
compared to 94.2% in the prior year period. The increase resulted in a $.3
million increase in finance and service charges revenue. The domestic annualized
loan yield decreased slightly to 122.0% for the current period compared to
123.7% for the prior year period causing a $1.0 million decrease in finance and
service charges revenue. An increase in the pro forma blended yield on foreign
loans to 52.6% in the current period compared to 48.5% in the prior year period
resulted in a combined $1.3 million of growth in pro forma finance and service
charges revenue. Increased pro forma revenue in the United Kingdom due to
improvement in loan redemption rates and higher returns on the disposition of
unredeemed collateral at auction offset slightly lower pro forma revenue in
Page 20
Sweden caused by slightly lower redemption rates and lower returns on the
disposition of unredeemed collateral at auction.
The effects on net revenue from the disposition of merchandise from
declines in foreign currency exchange rates were negligible since 96.1% of
proceeds and 97.5% of net margins were generated domestically. Proceeds from the
disposition of merchandise in the current period increased $2.6 million, or
1.6%, over the prior year period. The majority of the increased proceeds
occurred in the Company's domestic lending units. The margin on disposition of
merchandise increased to 34.6% in the current period from 33.0% in the prior
year period. Excluding the effect of the disposition of scrap jewelry, the
margin on disposition of merchandise improved to 36.3% in the current period
from 35.2% in the prior year period due to a lower average cost of merchandise
disposed. The margin on disposition of scrap jewelry increased to 10.3% in the
current period compared to 1.7% in the prior year period due to a lower average
cost per ounce for domestic dispositions. The combination of increased proceeds
and a higher margin resulted in a $3.5 million, or 6.5%, increase in net revenue
from the disposition of merchandise. The merchandise turnover rate increased to
2.6 times during the current period from 2.5 times during the prior year period.
Other domestic lending fees and franchising royalties increased $2.4
million in the current period as compared to the prior year period. The increase
resulted from the initiation and expansion of the Company's payday loan program.
The combined payday loan portfolio of the Company and the Bank generated $4.3
million in revenue during the current year compared to $.6 million during the
prior year period. Included in the current year's results in "Other lending fees
and royalties" is $2.9 million in revenue from the Company's portfolio and fees
for administrative services performed for the Bank. Payday loans written
increased $22.7 million to $27.6 million during the current period from $4.9
million during the prior year quarter. Included in these amounts are $19.4
million extended to customers by the Bank during the current period compared to
$7 thousand extended by the Bank during the prior year period. The average
amount per loan increased to $248 from $189.
NET REVENUE: CHECK CASHING OPERATIONS. Mr. Payroll's net revenue increased by
$.2 million, or 7.3%, during the current period as compared to the prior year
period primarily due to higher franchise royalties resulting from an increase in
checks cashed.
OPERATIONS AND ADMINISTRATION EXPENSES. Consolidated operations and
administration expenses as a percentage of net revenue were 78.4% in the current
period compared to 77.5% in the prior year period. The expenses increased $5.7
million, or 5.1%, in the current period as compared to the prior year period.
Domestic lending expenses increased $5.9 million, primarily as a result of
higher personnel costs, expenses associated with the advertising and promotion
of payday loans, a higher provision for loan losses for the larger payday loan
portfolio, and higher legal expenses. Foreign lending operations expenses
decreased $.2 million due to a $.9 million beneficial effect on expenses of the
decline in foreign currency exchange rates that was partially offset by higher
personnel expenses and an increase in the number of locations in the United
Kingdom. Mr. Payroll's expenses were the same in both periods.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses as a
percentage of net revenue were 8.4% in the current period compared to 8.6% in
the prior year period. Total
Page 21
depreciation and amortization expenses increased $.2 million, or 1.5%.
Depreciation of additional equipment and kiosks for Mr. Payroll accounts for the
majority of the consolidated increase. The remainder of the increase is from
depreciation of additional equipment and software necessary to provide payday
loans in 352 domestic lending locations.
INTEREST EXPENSE. Net interest expense as a percentage of net revenue declined
to 5.3% in the current period from 7.1% in the prior year period. The amount
decreased a net $2.2 million, or 22.1%, due to the effect of a 9.8% reduction in
the Company's average debt balance and a 13.6% reduction in the blended
borrowing costs. The average amount of debt outstanding decreased during the
current period to $172.2 million from $190.8 million during the prior year
period. The lower average amount was primarily due to the combined effects of a
lower average balance of pawn loans outstanding, a lower average merchandise
balance, and the receipt of insurance proceeds in the last six months of 2000
from claims resulting from tornado damage to the corporate headquarters in March
2000, that were partially offset by increased capital expenditures resulting
from ongoing reconstruction of the corporate headquarters. The effective blended
borrowing costs were 6.1% in the current period compared to 7.1% in the prior
year period.
OTHER ITEMS. Pursuant to SFAS No. 133, the Company was required to adjust the
carrying values of its interest rate cap agreements to their fair values as of
January 1, 2001 and as of each subsequent quarter-end date. The adjustments
resulted in a net charge of $.6 million that is recorded in "(Gain) loss from
derivative valuation fluctuations" in the Company's Consolidated Statements of
Operations in the current period. See Note 5 of Notes to Consolidated Financial
Statements.
During the prior year period, the Company recorded a $9.7 million gain
from the settlement of the insurance claim resulting from the severe damage to
its corporate headquarters in Fort Worth, Texas by a tornado in March 2000.
Income tax expense of $3.4 million related to the gain is included in the
provision for income taxes.
In the prior year period, the Company's share of innoVentry's net
losses was $15.6 million and the Company's gain resulting from innoVentry's
issuance of its own common stock was $.1 million. No additional gains or losses
have been recorded since June 30, 2000. The Company has accounted for its 19.3%
voting interest in innoVentry that has a carrying value of zero by the cost
method since February 2001. See Note 6 of Notes to Consolidated Financial
Statements.
INCOME TAXES. The Company's effective tax rate for the current period is 38.7%.
The Company's consolidated effective tax rate in the prior year period was
impacted by the effect of the valuation allowance provided for the deferred tax
assets arising from the Company's equity in the losses of innoVentry. Including
the effect of the valuation allowance provided, the Company recognized no net
deferred tax benefits in the prior year period from its equity in the losses of
innoVentry. Excluding the effects of the equity in innoVentry's losses and their
related tax effects, the Company's consolidated effective tax rate was 38.9% for
the prior year period.
DILUTED INCOME (LOSS) FROM CONTINUING OPERATIONS. Diluted income from continuing
operations per share was $.27 in the current period compared to a loss of $.13
in the prior year period. After excluding various non-operating unusual items,
adjusted diluted income from
Page 22
continuing operations per share increased to $.29 in the current period from
$.22 in the prior year period.
Supplemental information regarding the effects of the unusual items on
the current period and the prior year period is as follows (in thousands):
<Table>
<Caption>
Current Prior Year
Period Period
-------- ----------
Income from continuing operations before income taxes $ 11,052 $ 4,061
Less unusual items --
Loss from derivative valuation fluctuations 635 --
Gain from insurance claim settlement -- (9,729)
Equity in loss of unconsolidated subsidiary -- 15,589
Gain from issuance of subsidiary's stock -- (136)
-------- --------
Income from continuing operations before
unusual items and income taxes 11,687 9,785
-------- --------
Income from continuing operations after tax
excluding unusual items $ 7,191 $ 5,706
======== ========
Income from continuing operations after tax
excluding unusual items per share -- Diluted $ .29 $ .22
======== ========
</Table>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities of continuing operations was $15.3
million for the nine months ended September 30, 2001 (the "current period"). Net
borrowings under the Company's bank lines of credit provided an additional $23.7
million and the collection of notes receivable from stockholders and net
proceeds received from the issuance of treasury shares to employees pursuant to
the exercise of stock options provided $.3 million. The Company also received
the final payment of $.8 million of insurance proceeds due from the March 2000
tornado damage claim.
The Company utilized $3.6 million of cash to increase its pawn loan
balances. An investment of $22.7 million in purchases of property and equipment
was made during the current period, including $6.6 million for property
improvements, the remodeling of selected operating units and additions to
computer systems for lending operations, $16.0 million for the reconstruction of
corporate headquarters property destroyed by the March 2000 tornado and $.1
million in various fixtures and additions to Mr. Payroll's point-of-sale
software system. The Company acquired 5 lending locations for $1.3 million.
Discontinued operations utilized $4.0 million of cash during the current period,
primarily for the acquisition of tire rental stores earlier in the year. During
the current period, the Company also used cash to make scheduled payments of
$5.5 million on debt obligations in connection with unsecured notes and capital
leases, pay $.9 million in dividends, and purchase $.1 million of treasury
shares. The effect of exchange rate declines further reduced cash by $.1
million.
Page 23
The Company plans to add up to 5 new lending locations during the
remainder of 2001. These additions will likely occur through a combination of
the opening of new locations and the acquisition of existing locations. The
Company also plans to complete the reconstruction of its corporate headquarters
during 2001.
On October 26, 2000, the Company announced that its Board of Directors
authorized management to purchase up to one million shares of its common stock
in the open market and terminated the open market purchase authorization
established in 1999. The Company did not purchase any shares under the
authorization during the current period. Purchases may be made from time to time
in the open market and it is expected that funding will come from operating cash
flow and existing credit facilities.
At September 30, 2001, $110.4 million was outstanding on the Company's
$150 million U.S. revolving line of credit. In addition, the Company's Pound
Sterling 15 million (approximately $22.1 million) line of credit in the United
Kingdom had a balance outstanding of Pound Sterling 3.4 million (approximately
$5.0 million) and the Company's Swedish lines of credit totaling SEK 215 million
(approximately $20.1 million) had a combined balance outstanding of SEK 90.5
million (approximately $8.6 million). Management believes that borrowings
available under these revolving credit facilities, cash generated from
operations and current working capital of $186.6 million should be sufficient to
meet the Company's anticipated future capital requirements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to the Company's operations result primarily from changes
in interest rates, foreign exchange rates, and gold prices. The Company does not
engage in speculative or leveraged transactions, nor does it hold or issue
financial instruments for trading purposes. There have been no material changes
to the Company's exposure to market risks since December 31, 2000.
Page 24
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, 2001 and 2000, and for the three
months then ended.
<Table>
<Caption>
2001 2000 Change
-------- -------- ------
REVENUE
Finance and service charges $ 23,334 $ 23,583 (1)%
Proceeds from disposition of merchandise 49,211 47,885 3%
Other lending fees and royalties 1,485 440 238%
-------- -------- ------
TOTAL REVENUE 74,030 71,908 3%
-------- -------- ------
COSTS OF REVENUE
Disposed merchandise 31,813 31,348 1%
-------- -------- ------
NET REVENUE $ 42,217 $ 40,560 4%
======== ======== ======
OTHER DATA
Net revenue contribution by source--
Finance and service charges 55.3% 58.1% (5)%
Margin on disposition of merchandise 41.2% 40.8% 1%
Other lending fees and royalties 3.5% 1.1% 218%
Expenses as a percentage of net revenue--
Operations and administration 83.7% 82.0% 2%
Depreciation and amortization 7.9% 8.2% (4)%
Interest, net 3.0% 4.4% (33)%
Income from operations as a percentage of total revenue 4.8% 5.5% (13)%
Annualized yield on pawn loans 115% 119% (3)%
Average pawn loan balance per average location in operation $ 198 $ 192 3%
Average pawn loan amount at end of period (not in thousands) $ 80 $ 80 --
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 35.4% 34.5% 2%
Average annualized merchandise turnover 2.2x 2.3x (4)%
Average merchandise held for disposition
per average location $ 139 $ 135 3%
Owned locations in operation--
Beginning of period 405 410
Acquired 1 --
Start-ups -- --
Combined or closed (1) --
End of period 405 410 (1)%
Additional franchise locations at end of period 15 16 (6)%
Total locations at end of period 420 426 (1)%
Average number of owned locations in operation(a) 405 410 (1)%
</Table>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
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, 2001 and 2000, and for the nine
months then ended.
<Table>
<Caption>
2001 2000 Change
-------- -------- ------
REVENUE
Finance and service charges $ 69,149 $ 68,406 1%
Proceeds from disposition of merchandise 158,815 156,540 1%
Other lending fees and royalties 3,015 565 434%
--------- --------- ------
TOTAL REVENUE 230,979 225,511 2%
--------- --------- ------
COSTS OF REVENUE
Disposed merchandise 103,076 103,258 --
--------- --------- ------
NET REVENUE $ 127,903 $ 122,253 5%
========= ========= ======
OTHER DATA
Net revenue contribution by source--
Finance and service charges 54.1% 56.0% (3)%
Margin on disposition of merchandise 43.6% 43.6% --
Other lending fees and royalties 2.3% .4% 475%
Expenses as a percentage of net revenue--
Operations and administration 81.9% 80.8% 1%
Depreciation and amortization 8.1% 8.4% (4)%
Interest, net 2.9% 4.1% (28)%
Income from operations as a percentage of total revenue 5.6% 5.9% (5)%
Annualized yield on pawn loans 122% 124% (2)%
Average pawn loan balance per average location in operation $ 187 $ 180 4%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 35.1% 34.0% 3%
Average annualized merchandise turnover 2.6x 2.5x 4%
Average merchandise held for disposition
per average location $ 133 $ 135 (1)%
Owned locations in operation--
Beginning of period 410 413
Acquired 2 --
Start-ups 1 1
Combined, closed or sold (8) (4)
End of period 405 410 (1)%
Additional franchise locations at end of period 15 16 (6)%
Total locations at end of period 420 426 (1)%
Average number of owned locations in operation (a) 406 411 (1)%
</Table>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 26
SMALL CONSUMER CASH ADVANCES ("PAYDAY LOANS")--
(Dollars in thousands)
The following table sets forth selected financial data for the payday loan
product offered by the Company's domestic lending operations as of September 30,
2001 and 2000, and for the three months then ended.
<Table>
<Caption>
2001 2000 Change
------------- ------------- -------------
Activity during the three months ended September 30,-- (A)
Total amount of loans written $ 13,605 $ 2,700 404%
Number of loans written 50,635 15,083 236%
Average loan amount written (not in thousands) $ 269 $ 179 50%
Average number of locations offering payday loans 352 114 209%
Balances As of September 30,--
Combined company-owned and third-party
owned payday loans outstanding $ 4,196 $ 844 397%
============= =============
Company-owned amounts: (B)
Payday loans outstanding $ 1,630 $ 838
Less: Loan loss reserve (481) (213)
------------- -------------
Net payday loans outstanding $ 1,149 $ 625 84%
============= =============
</Table>
The following table sets forth selected financial data for the payday loan
product offered by the Company's domestic lending operations for the nine months
ended September 30, 2001 and 2000.
<Table>
<Caption>
2001 2000 Change
------------- ------------- -------------
Activity during the nine months ended September 30,-- (A)
Total amount of loans written $ 27,611 $ 4,959 457%
Number of loans written 111,196 26,224 324%
Average loan amount written (not in thousands) $ 248 $ 189 31%
Average number of locations offering payday loans 347 63 451%
============= ============= =============
</Table>
(A) Includes amounts written by the Company and a third-party financial
institution.
(B) Amounts recorded in the company's consolidated financial statements.
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,
2001 and 2000, and for the three months then ended, using the following currency
exchange rates:
<Table>
<Caption>
2001 2000 Change
------------ ------------ ------------
Harvey & Thompson, Ltd. (British pound sterling per U.S. dollar)--
Balance sheet data - end of period rate .6785 .6781 --
Statements of operations data - average rate for the period .6954 .6832 (2)%
Svensk Pantbelaning (Swedish kronor per U.S. dollar)--
Balance sheet data - end of period rate 10.6887 9.6450 (11)%
Statements of operations data - average rate for the period 10.5571 9.2863 (14)%
============ ============ ============
REVENUE
Finance and service charges $ 5,351 $ 5,391 (1)%
Proceeds from disposition of merchandise 2,194 1,812 21%
Check cashing fees 208 176 18%
------------ ------------ ------------
TOTAL REVENUE 7,753 7,379 5%
------------ ------------ ------------
COSTS OF REVENUE
Disposed merchandise 1,579 1,600 (1)%
------------ ------------ ------------
NET REVENUE $ 6,174 $ 5,779 7%
------------ ------------ ------------
OTHER DATA
Net revenue contribution by source--
Finance and service charges 86.7% 93.3% (7)%
Margin on disposition of merchandise 10.0% 3.7% 170%
Check cashing fees 3.3% 3.0% 11%
Expenses as a percentage of net revenue--
Operations and administration 56.5% 55.9% 1%
Depreciation and amortization 8.7% 8.8% (1)%
Interest, net 2.8% 5.4% (48)%
Income from operations as a percentage of total revenue 27.7% 27.7% --
Annualized yield on loans 53% 47% 13%
Average loan balance per average location in operation $ 727 $ 862 (16)%
Average loan amount at end of period (not in thousands) $ 155 $ 165 (6)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 28.0% 11.7% 140%
Average annualized merchandise turnover 2.2x 2.1x 5%
Average merchandise held for disposition
per average location $ 51 $ 57 (11)%
Lending locations in operation--
Beginning of period 53 53
Acquired 3 --
Start-ups -- --
Combined or closed -- --
End of period 56 53 6%
Average number of locations in operation (a) 55 53 4%
</Table>
(a) Averages based on accumulation of month-end balances and dividing
aggregate total by total months in the period.
Page 28
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,
2001 and 2000, and for the nine months then ended, using the following currency
exchange rates:
<Table>
<Caption>
2001 2000 Change
----------- ----------- -----------
Harvey & Thompson, Ltd. (British pound sterling per U.S. dollar)--
Statements of operations data - average rate for the period .6957 .6497 (7)%
Svensk Pantbelaning (Swedish kronor per U.S. dollar)--
Statements of operations data - average rate for the period 10.2596 8.9046 (15)%
=========== =========== ===========
REVENUE
Finance and service charges $ 15,943 $ 17,335 (8)%
Proceeds from disposition of merchandise 6,450 6,146 5%
Check cashing fees 585 527 11%
----------- ----------- -----------
TOTAL REVENUE 22,978 24,008 (4)%
----------- ----------- -----------
COSTS OF REVENUE
Disposed merchandise 5,018 5,752 (13)%
----------- ----------- -----------
NET REVENUE $ 17,960 $ 18,256 (2)%
----------- ----------- -----------
OTHER DATA
Net revenue contribution by source--
Finance and service charges 88.8% 95.0% (7)%
Margin on disposition of merchandise 8.0% 2.2% 264%
Check cashing fees 3.2% 2.8% 14%
Expenses as a percentage of net revenue--
Operations and administration 56.5% 56.8% (1)%
Depreciation and amortization 8.6% 8.6% --
Interest, net 3.3% 6.0% (45)%
Income from operations as a percentage of total revenue 27.3% 26.3% 4%
Annualized yield on pawn loans 53% 48% 10%
Average pawn loan balance per average location in operation $ 750 $ 902 (17)%
Margin on disposition of merchandise as a percentage
of proceeds from disposition of merchandise 22.2% 6.4% 247%
Average annualized merchandise turnover 2.4x 2.3x 4%
Average merchandise held for disposition
per average location $ 51 $ 63 (19)%
Lending locations in operation--
Beginning of period 53 53
Acquired 3 --
Start-ups -- --
Combined, closed or sold -- --
End of period 56 53 6%
Average number of locations in operation (a) 54 53 2%
</Table>
(a) Averages based on accumulation of month-end balances and dividing
aggregate total by total months in the period.
Page 29
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
RESULTS
This quarterly report, including management's discussion and analysis, contains
statements that are forward-looking, as that term is defined by the Private
Securities Litigation Reform Act of 1995 or by the Securities and Exchange
Commission in its rules. The Company intends that all forward-looking statements
be subject to the safe harbors created by these laws and rules. When used in
this quarterly 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. All
forward-looking statements are based on current expectations regarding important
risk factors. 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 expressed in the forward-looking statements. Accordingly, actual
results may differ materially from those expressed in the forward-looking
statements, and the making of such statements should not be regarded as a
representation by the Company or any other person that the results expressed in
the statements will be achieved. Important risk factors include, but are not
limited to, the following: 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.
Page 30
PART II
Item 1. LEGAL PROCEEDINGS
See Note 10 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 -- None
(b) Reports on Form 8-K -- None
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: November 14, 2001
Page 32