1
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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, 1994
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:
28,413,958 common shares, $.10 par value, were outstanding as of October 31,
1994
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CASH AMERICA INTERNATIONAL, INC.
INDEX TO 10-Q
PART I. FINANCIAL STATEMENTS
Page
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 1994
and 1993 and December 31, 1993................................... 1
Consolidated Income Statements - Three Months and
Nine Months Ended September 30, 1994 and 1993.................... 2
Consolidated Statements of Stockholders' Equity -
Nine Months Ended September 30, 1994 and 1993.................... 3
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993.................... 4
Notes to Consolidated Financial Statements....................... 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations........... 8
PART II. OTHER INFORMATION........................................... 18
SIGNATURE............................................................. 19
3
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) (UNAUDITED)
==========================================================================================
September 30 Dec 31
1994 1993 1993
---------- ---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $2,998 $1,690 $2,245
Service charges receivable 19,057 13,111 12,740
Loans 79,742 51,053 49,089
Inventory, net 78,004 65,969 62,817
Prepaid expenses and other 4,409 4,202 4,986
---------- ---------- ----------
Total current assets 184,210 136,025 131,877
Property and equipment, net 60,350 49,365 49,867
Intangible assets, net 66,002 61,195 60,490
Other assets 5,527 2,963 2,860
---------- ---------- ----------
Total assets $316,089 $249,548 $245,094
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $10,462 $7,588 $8,990
Customer layaway deposits 3,795 3,419 2,753
Income taxes currently payable 2,367 2,024 2,407
---------- ---------- ----------
Total current liabilities 16,624 13,031 14,150
Long-term debt:
Bank debt 91,728 43,900 34,000
Notes payable - TIAA 30,000 30,000 30,000
Deferred income taxes 294 222
---------- ---------- ----------
Total long-term liabilities 121,728 74,194 64,222
Stockholders' equity:
Common stock, $.10 par value per
share, 80,000,000 shares authorized 3,024 3,024 3,024
Paid in surplus 121,094 120,946 120,955
Retained earnings 65,136 51,530 56,004
Foreign currency translation adjustment (3,362) (4,908) (5,308)
---------- ---------- ----------
185,892 170,592 174,675
Less - shares held in treasury, at cost (8,155) (8,269) (7,953)
---------- ---------- ----------
Total stockholders' equity 177,737 162,323 166,722
---------- ---------- ----------
Total liabilities and stockholders' equity $316,089 $249,548 $245,094
========== ========== ==========
==========================================================================================
See notes to consolidated financial statements.
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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, except per share) (UNAUDITED)
==========================================================================================
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- ---------------------
1994 1993 1994 1993
REVENUES
Sales $34,198 $32,755 $100,691 $96,353
Pawn service charges 29,063 22,314 75,087 63,072
--------- ---------- ---------- ----------
Total revenues 63,261 55,069 175,778 159,425
COST OF SALES 28,405 26,792 81,682 79,740
--------- ---------- ---------- ----------
Revenues net of cost of sales 34,856 28,277 94,096 79,685
--------- ---------- ---------- ----------
OPERATING EXPENSES:
Operations 19,650 15,687 54,711 46,863
Administration 3,554 2,999 10,081 9,241
Amortization 892 847 2,626 2,388
Depreciation 2,293 1,765 6,215 4,816
--------- ---------- ---------- ----------
Total operating expenses 26,389 21,298 73,633 63,308
--------- ---------- ---------- ----------
Income from operations 8,467 6,979 20,463 16,377
Interest expense, net 1,757 1,083 3,920 2,480
Other income/(expense) 64 (38) (74) 72
--------- ---------- ---------- ----------
Income before income taxes 6,774 5,858 16,469 13,969
Provision for income taxes 2,563 2,185 6,271 4,958
--------- ---------- ---------- ----------
NET INCOME $4,211 $3,673 $10,198 $9,011
========= ========== ========== ==========
==========================================================================================
Earnings per share:
Primary $0.15 $0.13 $0.35 $0.31
Fully diluted $0.15 $0.13 $0.35 $0.31
Weighted average shares ( in thousands ):
Primary 28,869 28,908 28,933 28,911
Fully diluted 28,869 28,908 28,933 28,911
==========================================================================================
See notes to consolidated financial statements.
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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1994 and 1993
(Dollars in thousands, except shares) (UNAUDITED)
==================================================================================================================
Foreign
Common Stock Treasury Stock Currency
--------------------- Paid In Retained -------------------- Translation
Shares Amount Surplus Earnings Shares Amount Adjustment Total
------------ -------- ---------- ---------- ---------- --------- ----------- ---------
Balance at
December 31, 1993 30,235,164 $3,024 $120,955 $56,004 1,832,137 ($7,953) ($5,308) $166,722
Treasury shares acquired 68,500 (552) (552)
Treasury shares reissued 64 (76,431) 350 414
Tax benefit from exercise
of stock options 75 75
Dividends declared (1,066) (1,066)
Foreign currency
translation adjustment 1,946 1,946
Net income 10,198 10,198
------------ -------- ---------- ---------- ---------- --------- ----------- ---------
Balance at
September 30, 1994 30,235,164 $3,024 $121,094 $65,136 1,824,206 ($8,155) ($3,362) $177,737
------------ -------- ---------- ---------- ---------- --------- ----------- ---------
==================================================================================================================
Balance at
December 31, 1992 30,235,164 $3,024 $120,822 $43,578 2,037,724 ($8,798) ($4,680) $153,946
Treasury shares reissued (36) (122,543) 529 493
Tax benefit from exercise
of stock options 160 160
Dividends declared (1,059) (1,059)
Foreign currency
translation adjustment (228) (228)
Net income 9,011 9,011
------------ -------- ---------- ---------- ---------- --------- ----------- ---------
Balance at
September 30, 1993 30,235,164 $3,024 $120,946 $51,530 1,915,181 ($8,269) ($4,908) $162,323
------------ -------- ---------- ---------- ---------- --------- ----------- ---------
==================================================================================================================
See notes to consolidated financial statements.
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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) (UNAUDITED)
==========================================================================================
Nine Months Ended
September 30
---------------------
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Cash
Provided By Operating Activities:
Net income $10,198 $9,011
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization 2,626 2,388
Depreciation 6,215 4,816
Increase in service charge receivable (3,860) (329)
Increase in inventory (13,362) (9,220)
Increase (decrease) in prepaid expenses and other 385 (392)
Decrease in accounts payable and accrued expenses (122) (3,298)
Increase in layaway deposits, net 978 653
Decrease in income taxes payable (423) (90)
Decrease in deferred taxes (795) (70)
Cumulative effect of accounting change (265)
---------- ----------
Net cash provided by operating activities 1,840 3,204
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans forfeited and transferred to inventory 50,613 48,325
Loans repaid or renewed 139,881 117,759
Loans made, including loans renewed (202,878) (167,356)
---------- ----------
Net increase in loans (12,384) (1,272)
Acquisitions (11,693) (8,636)
Investment in and advances to affiliate (2,200)
Purchases of property and equipment (17,182) (14,136)
Proceeds from sales of property and equipment 1,230
---------- ----------
Net cash used by investing activities (42,229) (24,044)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) under bank lines of credit 46,600 (6,100)
Proceeds from issuance of long-term debt 30,000
Payment of notes payable assumed (4,404) (5,076)
Proceeds from issuance of stock, net 414 493
Treasury stock acquired (552)
Dividends paid (1,066) (1,059)
---------- ----------
Net cash provided by financing activities 40,992 18,258
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 150 39
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 753 (2,543)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,245 4,233
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,998 $1,690
========== ==========
==========================================================================================
See notes to consolidated financial statements.
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CASH AMERICA INTERNATIONAL, INC. and Subsidiaries
Notes to Consolidated Financial Statements (UNAUDITED)
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NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Cash America International, Inc. and its wholly-owned subsidiaries
(the "Company"). All significant intercompany accounts and transactions have
been eliminated in consolidation. At September 30, 1994, the Company had a 49%
ownership interest in Mr. Payroll Corporation ("Mr. Payroll") (see Note 5).
The investment is being accounted for using the equity method of accounting,
whereby the Company records its 49% share of earnings or losses of Mr. Payroll
in its consolidated financial statements.
The financial statements as of September 30, 1994 and 1993 and for the
three months and nine months then ended are unaudited but, in management's
opinion, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such interim
periods. Operating results for the three months are not necessarily indicative
of the results that may be expected for the full fiscal year.
Certain amounts in the consolidated statements of income for the three
months and nine months ended September 30, 1993 have been reclassified to
conform with the presentation form adopted in 1994. 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 1993 Annual Report to Stockholders.
NOTE 2 - ACCOUNTING CHANGE
Effective January 1, 1993 the Company changed its method of accounting
for income taxes from the deferred method to the liability method required by
FASB Statement No. 109 "Accounting for Income Taxes." As permitted under the
new rules, prior years' financial statements have not been restated. The
cumulative effect of adopting Statement 109 was to increase net income by
$265,000, or $.01 per share, through a reduction in the provision for income
taxes during the first quarter of 1993.
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NOTE 3 - ACQUISITION
On September 22, 1994, the Company acquired all of the outstanding
stock of Svensk Pantbelaning, a company operating a chain of ten pawnshops in
Sweden. The Company paid $5.4 million and assumed liabilities of $17 million,
consisting primarily of bank debt. The Company received $18 million of
tangible assets, consisting primarily of $16 million in pawn loans outstanding.
On June 30, 1993, the Company purchased all of the outstanding stock
of Express Cash International Corporation ("Express Cash") for $6.2 million in
cash. The Company received $6.0 million of tangible assets and assumed $8.7
million of Express Cash liabilities. Express Cash operates 18 pawnshops
located in San Antonio, Houston and Laredo, Texas.
NOTE 4 - LONG-TERM DEBT
On September 21, 1994, in conjunction with the acquisition of Svensk
Pantbelaning, the Company's wholly-owned subsidiary, CAII Pantbelaning AB,
established a 193,750,000 Swedish kronor ("SEK") term loan (approximately
$26,000,000). The term loan matures three years from the date of inception and
there is no scheduled amortization of the principal balance prior to maturity.
Interest is payable at Stockholm InterBank Offered Rate (STIBOR) plus 1%. As
of September 30, 1994 SEK 75,000,000 (approximately $10,000,000) was
outstanding under the term loan.
On May 12, 1993 the Company issued $30,000,000 of "8.33% Senior
Notes", due May 1, 2003. Interest is payable on May 1 and November 1 of each
year, commencing on November 1, 1993. Mandatory annual payments of $4,285,714
commence May, 1997. On May 28, 1993, the Company entered into two swap
agreements for $10,000,000 each, under which the Company receives a fixed rate
of 4.87% and pays the bank a variable rate (currently 5.00%) repriced every six
months to the prevailing 6 month BBA average LIBOR rate. The effective
interest rate on the Senior Notes for the period June 2, 1994 to December 2,
1994 is 8.45% after taking into account the two swap transactions.
On June 7, 1994 the Company extended the maturity date and made
certain modifications to its $125,000,000 unsecured bank line of credit
originally entered into on June 29, 1993. The agreement was modified to extend
the maturity of $100,000,000 of the line of credit to April 30, 1997 with the
remaining $25,000,000
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portion scheduled to mature on June 6, 1995. As of September 30, 1994, no
borrowings had been made under the $25,000,000 portion of the bank line of
credit. The Company has the option each year to request a one-year extension,
thus moving the maturity date of the entire facility forward one year.
Interest is paid quarterly at rates determined at the Company's option of
either the bank's prime lending rate or LIBOR plus 1%. In addition the
agreement provides for annual commitment fees of 3/8% per annum on the unused
portion of $100,000,000 of the commitment and .15% per annum on the unused
portion of $25,000,000 of the commitment.
NOTE 5 -INVESTMENT IN AFFILIATE
On July 13, 1994, the Company paid $2 million to acquire a 49%
interest in Mr. Payroll, a private, Texas-based company which sells franchised
check-cashing kiosks primarily in Southwestern states. The Company intends to
operate franchised check-cashing kiosks in some of its pawnshop locations.
In conjunction with the Company's investment, the Company has entered
into a revolving credit agreement with Mr. Payroll which provides for maximum
borrowings of $1 million from the Company. Interest is payable quarterly at
the LIBOR rate plus four percent. The entire unpaid principal balance is due
and payable in full on February 28, 1997. Mr. Payroll has granted the Company
a security interest and lien in and to all of its assets. As of September 30,
1994, Mr. Payroll had borrowings outstanding of $200,000.
NOTE 6 - LITIGATION
The Company is a defendant in certain lawsuits encountered in the ordinary
course of its business. In the opinion of management, the resolution of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
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SUMMARY OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER ENDED SEPTEMBER 30, 1994 vs
THIRD QUARTER ENDED SEPTEMBER 30, 1993
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data with
respect to the Company for the three months ended September 30, 1994 and 1993.
($ in thousands)
1994 1993 Change
---------- ---------- ----------
Sales $34,198 $32,755 4%
Cost of sales 28,405 26,792 6%
---------- ---------- ----------
Gross profit 5,793 5,963 (3)%
Pawn service charges 29,063 22,314 30%
---------- ---------- ----------
Revenues net of cost of sales $34,856 $28,277 23%
========== ========== ==========
Other Data:
Gross profit as a percentage of sales 16.9% 18.2% (7)%
Average annual inventory turnover 1.6X 1.6X 0%
Annual yield on loans 174% 174% 0%
Average inventory balance per
average location in operation $231 $238 (3)%
---------- ---------- ----------
Average loan balance per
average location in operation $209 $187 12%
Average pawn loan at end of
period (whole dollars) $86 $73 18%
Expenses as a percentage of
revenues net of cost of sales:
Operations 56.4% 55.5% 2%
Administration 10.2% 10.6% (4)%
Depreciation and amortization 9.1% 9.2% (1)%
Interest, net 5.0% 3.8% 32%
Locations in Operation:
Beginning of period 306 270
Acquired 10 1
Established 17 5
Combined --- (2)
---------- ----------
End of period 333 274 22%
========== ========== ==========
Average number of locations in
operations during the period (a) 316 273 16%
========== ========== ==========
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
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NINE MONTHS ENDED SEPTEMBER 30, 1994 vs
NINE MONTHS ENDED SEPTEMBER 30, 1993
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Summary Consolidated Financial Data
The following table sets forth selected consolidated financial data with
respect to the Company for the nine months ended September 30, 1994 and 1993.
($ in thousands)
1994 1993 Change
---------- ---------- ----------
Sales $100,691 $96,353 5%
Cost of sales 81,682 79,740 2%
---------- ---------- ----------
Gross profit 19,009 16,613 14%
Pawn service charges 75,087 63,072 19%
---------- ---------- ----------
Revenues net of cost of sales $94,096 $79,685 18%
========== ========== ==========
Other Data:
Gross profit as a percentage of sales 18.9% 17.2% 10%
Average annual inventory turnover 1.6X 1.8X (11)%
Annual yield on loans 175% 173% 1%
Average inventory balance per
average location in operation $223 $235 (5)%
Average loan balance per
average location in operation $191 $190 1%
Average pawn loan at end of
period (whole dollars) $86 $73 18%
Expenses as a percentage of
revenues net of cost of sales:
Operations 58.1% 58.8% (1)%
Administration 10.7% 11.6% (8)%
Depreciation and amortization 9.4% 9.0% 4%
Interest, net 4.2% 3.1% 35%
Locations in Operation:
Beginning of period 280 249
Acquired 21 21
Established 35 13
Combined (3) (9)
---------- ----------
End of period 333 274 22%
========== ========== ==========
Average number of locations in
operation during the period (a) 300 257 17%
========== ========== ==========
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
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3RD QUARTER AND NINE MONTHS ENDING
SEPTEMBER 30, 1994 VS. 1993
IMPACT OF EXPANDING OPERATIONS
The Company expanded its operations over the 21-month period from
January 1, 1993 through September 30, 1994 with the addition of 97 pawnshops.
Fifty-four stores were started during the period and forty-three stores were
acquired, culminating with the September 22, 1994 acquisition of the 10-store
chain of loan-only pawnshops of Svensk Pantbelaning based in Stockholm, Sweden.
Thirteen stores were combined into existing locations, for a net addition of 84
stores during the period. At the end of the period, the Company operated 333
pawnshops--294 in 14 states in the United States, 29 jewelry-only, loan-only
pawnshops in the United Kingdom, which operate under a subsidiary of the
Company, Harvey & Thompson, Ltd., and the ten locations in Sweden. In addition
to the acquisition of the Svensk Pantbelaning group, included in the acquired
stores is a chain of 18 pawnshops acquired from Express Cash International
Corporation ("Express Cash") on June 30, 1993.
Revenues net of cost of sales increased 23% and 18%, respectively, in
the third quarter and first nine months of 1994 compared to the same periods of
1993, with the increase arising from new store additions in the periods and
growth in existing stores. The average number of stores in operation for the
periods increased by 16% in the third quarter and 17% for the nine month
period. Revenues net of cost of sales on comparable stores (those in operation
more than one year) increased 12% in the third quarter and 5% in the
year-to-date period ending September 30, 1994, compared to the same periods in
the prior year.
SALES AND GROSS PROFIT
Sales for the three months and nine months ended September 30, 1994
increased 4% and 5% compared to the same periods of 1993. Sales from new
stores accounted for the increase in overall sales, with comparable store sales
down 3% and 6% from the third quarter and first nine months of the prior
periods. Gross profit margins for the three months and nine months ended
September 30, 1994 were 17% and 19%, respectively, which were relatively
unchanged compared to 18% and 17% for the same periods in 1993. Inventory
turns were down to 1.6 times for the three months and nine months ending
September 30, 1994 compared to 1.6 and 1.8 times, respectively, in the prior
periods. Contributing to the decline in inventory turns were higher
concentrations of startup stores, which have lower turns during the first year
of operations, and a decrease in comparable store sales.
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The decline in comparable store sales is partially attributable to the
Company's decision to omit a seasonal sales promotion during the first half of
1994, and to reduced sales of jewelry and other merchandise at wholesale.
PAWN SERVICE CHARGES
Pawn service charges for the three months and nine months ended
September 30, 1994 increased 30% and 19%, respectively, compared to the same
periods in 1993. The average number of pawnshops increased by 16% and 17%
during the periods, and loans outstanding on comparable stores increased by 16%
and 9% in 1994 over the three and nine month periods ending September 30, 1993.
The average annual yield on pawn loans outstanding during the three and nine
month periods ending September 30, 1994 was virtually unchanged at
approximately 174% during the periods, compared to the same periods in 1993.
The increase in average pawn loans and loan balances per location by
18% and 12%, respectively, is due to the acquisition of Svensk Pantbelaning,
which lends higher amounts per average loan and has larger loan balances per
shop.
EXPENSES
Operating expenses increased 25% and 17%, respectively, for the three
months and nine months ended September 30, 1994 over the same periods in 1993,
resulting from the increase in number of stores in operation during the
periods. Operating expenses relative to revenues net of cost of sales were
relatively unchanged during the periods at 56% and 58% in the third quarter and
first nine months of 1994, compared to 56% and 59% for the same periods in
1993. The increase during the third quarter in excess of the 16% growth in
average number of stores in operation was the result of more personnel being
trained during the quarter in preparation for the 1994 holiday season and for
future store development.
Administrative expenses for the three months and nine months ended
September 30, 1994 were up 19% and 9% over the same periods in 1993, with the
increases related to the number of stores opened. As a result of low growth in
administrative expenses and an increase in revenues net of cost of sales,
administrative expense as a percentage of revenues net of cost of sales dropped
from 11% and 12% for the third quarter and year to date of 1993 to 10% and 11%
during the same periods in 1994.
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Depreciation and amortization as a percentage of revenues net of cost
of sales was virtually unchanged at approximately 9% in each of the four
periods. Net interest expense increased from 4% to 5% of revenues net of cost
of sales during the third quarter, and from 3% to 4% in the first nine months
from 1993 to 1994 due to higher interest rates on outstanding debt and a larger
average outstanding balance during the 1994 periods. In addition, interest
rates increased on a long-term, fixed rate debt related to a private placement
of $30,000,000 in May 1993, the proceeds of which were used to reduce
lower-rate short term bank debt.
OTHER INCOME
During the first nine months of 1994, the Company sold certain
non-operating assets at a loss, before taxes, of approximately $200,000. Other
income for the third quarter of 1994 includes $16,000 for the Company's
proportionate share of the net earnings of Mr. Payroll Corporation. The
remainder of the other income is rent income, miscellaneous refunds and other
items.
INCOME TAXES
During the first quarter of 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability method
required by FASB Statement No. 109, "Accounting for Income Taxes". The
cumulative effect of adopting FAS 109 was to increase net income by $265,000
during the first quarter of 1993. Absent this change in accounting for income
taxes, the tax rate increased from 37% in the three and nine months ended
September 30, 1993 to 38% for the same periods in 1994 as the result of a 1%
change in the Federal statutory rate during 1993 and higher earnings during the
first half of 1994 from stores in states which have state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1994, the Company's capital
expenditures totaled $29 million. The Company invested $12 million on the
acquisition of 21 pawnshops and $17 million on real estate, leasehold
improvements, and equipment for startup locations, remodeling selected
pawnshops, additions to its computer systems, and other fixed asset purchases.
Included in the acquisitions noted above, on September 22, 1994 the
Company finalized a transaction in which a subsidiary of the Company acquired
all of the shares of a group of companies in Sweden which comprise the
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Svensk Pantbelaning chain of 10 pawnbroking locations. The Company paid $5
million and assumed liabilities of $17 million to obtain the companies, which
had as their principal assets pawn loans outstanding of $16 million.
The funding of these items has come from the Company's three-year,
$125 million revolving bank line of credit, operating earnings, and a new term
loan in Sweden for 193,750,000 Swedish Kronor (approximately $26 million),
which was used in making the acquisition of Svensk Pantbelaning. The term loan
was established on September 21, 1994 by the Company's wholly-owned subsidiary,
CAII Pantbelaning AB, matures three years from the date of inception, and has
no scheduled amortization of the principal balance prior to maturity. Interest
is payable at Stockholm InterBank Offered Rate (STIBOR) plus 1%. As of
September 30, 1994 SEK 75 million (approximately $10 million) was outstanding
under the loan.
On July 13, 1994 the Company acquired for $2 million a 49% interest in
Mr. Payroll Corporation, a private, Texas-based company which sells franchised
check-cashing kiosks primarily in southwestern states. The Company has
accounted for the investment and the earnings therefrom under the equity method
of accounting.
In addition to the bank line of credit, the Company on May 12, 1993
issued $30 million of Senior Unsecured Notes, due May 1, 2003, to Teachers
Insurance and Annuity Association of America. The unsecured notes bear
interest at 8.33% and are payable in seven equal principal installments
beginning May 1, 1997. The Company has entered into an interest rate swap on
$20 million of these notes, which resulted in an effective floating interest
rate, currently at 8.4%, on the debt.
Management believes that borrowings available under its $125 million
revolving bank line of credit facility, the term loan of SEK 193,750,000 in
Sweden, and a L.5 million line of credit available in Harvey & Thompson, Ltd.
through a U.K. commercial bank, combined with cash generated from operations
and current working capital of $168 million will be sufficient to meet the
Company's anticipated future capital requirements.
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FOREIGN OPERATIONS
Presented below is selected consolidated financial data for Harvey &
Thompson and Svensk Pantbelaning as of September 30, 1994 and 1993 and for the
third quarter and nine months then ended. Acquired on September 22, 1994,
Svensk Pantbelaning operates a ten store chain of loan-only pawnshops in Sweden
in a manner similar to the way Harvey & Thompson operates in the U.K. The
results of operations for Svensk Pantbelaning have been included in the
Company's operations for the month of September.
Balance sheet data for Harvey & Thompson has been converted from
pounds sterling into U.S. dollars using the end of the period currency exchange
rate of 1.5775 at September 30, 1994 and 1.4960 at September 30, 1993. Income
statement data for Harvey & Thompson has been converted at average exchange
rates of 1.5508 and 1.5163 respectively, for the three month and nine month
periods ending September 30, 1994 compared to 1.5058 and 1.4941 for the same
periods in 1993.
Balance sheet data for Svensk Pantbelaning has been converted from
Swedish kronor into U.S. dollars using the end of the period currency exchange
rate of 7.4783. Income statement data for Svensk Pantbelaning has been
converted at an average exchange rate of 7.5210 for the period ending September
30, 1994.
Page 14
17
FOREIGN OPERATIONS
Three Months Three Months
Ended Ended
September 30 September 30
1994 1993 Change
------------ ------------ --------
($ in thousands)
Income Statement Data:
Total revenues $3,357 $2,318 45%
Cost of sales 161 196 (18%)
Expenses 1,492 1,002 49%
Income from operations 1,704 1,120 52%
Other Data:
Total average locations 32 27 19%
Gross profit margin 36.4% 38.9% (6%)
Average annual inventory turns 2.4X 2.5X (4)%
Ending loan balance $30,562 $11,494 166%
Average loan balance
per average location in operation $566 $415 36%
Expenses as a percentage of reven
net of cost of sales:
Operations 32.1% 32.4% (1%)
Administration 9.3% 9.7% (4%)
Nine Months Nine Months
Ended Ended
September 30 September 30
1994 1993 Change
------------ ------------ --------
($ in thousands)
Income Statement Data:
Total revenues $8,483 $6,439 32%
Cost of sales 522 558 (6%)
Expenses 3,791 2,897 31%
Income from operations 4,170 2,985 40%
Other Data:
Total average locations 30 26 15%
Gross profit margin 38.2% 35.8% 7%
Average annual inventory turns 2.9X 2.3X 26%
Average loan balance
per average location in operation $493 $411 20%
Expenses as a percentage of revenues
net of cost of sales:
Operating 32.5% 32.8% (1%)
Administrative 9.8% 11.3% (13%)
Page 15
18
DOMESTIC OPERATIONS
Presented below is selected financial data for the Company's domestic
operations as of September 30, 1994 and 1993 and for the three months then
ended:
($ in thousands)
1994 1993 Change
---------- ---------- ----------
Sales $33,945 $32,434 5%
Cost of sales 28,244 26,596 6%
---------- ---------- ----------
Gross profit 5,701 5,838 (2)%
Pawn service charges 25,959 20,317 28%
---------- ---------- ----------
Revenues net of cost of sales $31,660 $26,155 21%
Operating expenses:
Operations 18,623 14,999 24%
Depreciation and amortization 3,016 2,503 20%
Administration 3,258 2,794 17%
---------- ---------- ----------
Total operating expenses 24,897 20,296 23%
---------- ---------- ----------
Income from operations 6,763 5,859 15%
========== ========== ==========
Gross profit as a percentage of sales 16.8% 18.0% (7)%
Average annual inventory turnover 1.6X 1.6X 0%
Average inventory balance per
average location in operation $256 $262 (2)%
Average loan balance per
average location in operation $168 $162 4%
Average pawn loan at end of
period (whole dollars) $68 $68 0%
Expenses as a percentage of revenues
net of cost of sales:
Operations 58.8% 57.4% 2%
Administration 10.3% 10.7% (4)%
Depreciation and amortization 9.5% 9.6% (1)%
Interest, net 5.0% 4.3% 16%
Domestic Locations in Operation:
Beginning of period 277 244
Acquired --- ---
Established 17 5
Combined --- (2)
---------- ---------- ----------
End of period 294 247 19%
========== ========== ==========
Average number of locations in
operation during the period (a) 285 246 16%
========== ========== ==========
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 16
19
DOMESTIC OPERATIONS
Presented below is selected financial data for the Company's domestic
operations as of September 30, 1994 and 1993 and for the nine months then ended:
($ in thousands)
1994 1993 Change
---------- ---------- ----------
Sales $99,848 $95,484 5%
Cost of sales 81,161 79,182 2%
---------- ---------- ----------
Gross profit 18,687 16,302 15%
Pawn service charges 67,445 57,502 17%
---------- ---------- ----------
Revenues net of cost of sales $86,132 $73,804 17%
Operating expenses:
Operations 52,120 44,934 16%
Depreciation and amortization 8,419 6,903 22%
Administration 9,303 8,575 8%
---------- ---------- ----------
Total operating expenses 69,842 60,412 16%
---------- ---------- ----------
Income from operations 16,290 13,392 22%
========== ========== ==========
Other Data:
Gross profit as a percentage of sales 18.7% 17.1% 9%
Average annual inventory turnover 1.6X 1.7X (6)%
Average inventory balance per
average location in operation $247 $260 (5)%
Average loan balance per
average location in operation $157 $165 (5)%
Average pawn loan at end of
period (whole dollars) $68 $68 0%
Expenses as a percentage of revenues
net of cost of sales:
Operations 60.5% 60.8% 0%
Administration 10.8% 11.6% (7)%
Depreciation and amortization 9.8% 9.4% 4%
Interest, net 4.4% 3.5% 26%
---------- ---------- ----------
Domestic Locations in Operation:
Beginning of period 251 223
Acquired 11 20
Established 35 13
Combined (3) (9)
---------- ---------- ----------
End of period 294 247 19%
========== ========== ==========
Average number of locations in
operation during the period (a) 270 231 17%
========== ========== ==========
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 17
20
PART II
Item 1. LEGAL PROCEEDINGS
See Note 6 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 -
27 Financial Data Schedule
(b) Reports on Form 8-K - None
Page 18
21
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/ DALE R. WESTERFELD
Dale R. Westerfeld
Vice President and
Chief Financial Officer
Date: November 11, 1994
Page 19
22
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
27 Financial Data Schedule.