1
EXHIBIT 13
HISTORICAL SUMMARY OF OPERATING RESULTS AND FINANCIAL POSITION - December 31
--------------------------------------------------------------------------------
(Dollars in thousands, except per share)
1994 1993 1992 1991(a) 1990 1989 1988 1987
----------------------------------------------------------------------------------------------------------------
OPERATIONS - for the year
Revenues $262,105 $224,700 $185,410 $137,681 $115,644 $87,008 $66,935 $39,223
Cost of sales 126,254 112,882 90,756 68,716 57,207 42,048 32,309 18,174
Operations expense 78,204 64,178 54,572 39,247 32,070 24,415 18,446 11,419
Administration expense 13,918 12,416 11,362 7,692 7,297 6,343 5,460 3,021
Amortization and
depreciation 12,359 9,962 7,026 4,738 3,944 3,139 2,635 1,532
----------------------------------------------------------------------------------------------------------------
Operating income 31,370 25,262 21,694 17,288 15,126 11,063 8,085 5,077
Interest expense, net 6,265 3,608 1,419 1,720 1,492 203 139 309
Other income/(expense) (147) 112 73 250 57 241 54 58
Securities gains - - - 1,646 - - - -
----------------------------------------------------------------------------------------------------------------
Income before taxes
and extraordinary item 24,958 21,766 20,348 17,464 13,691 11,101 8,000 4,826
Provision for income taxes 9,460 7,927 7,342 6,951 5,029 4,099 2,913 2,085
----------------------------------------------------------------------------------------------------------------
Income before
extraordinary item 15,498 13,839 13,006 10,513 8,662 7,002 5,087 2,741
Extraordinary item - - - 393 - - - -
----------------------------------------------------------------------------------------------------------------
Net income $ 15,498 $ 13,839 $ 13,006 $ 10,906 $ 8,662 $ 7,002 $ 5,087 $ 2,741
================================================================================================================
Earnings per share -
Fully diluted $.53 $.48 $.45 $.44 $.36 $.29 $.22 $.16
Dividends per share $.05 $.05 $.04 3/4 $.04 $.02 2/3 $.02 $.02 $.01 2/3
Weighted average shares
outstanding - Fully
diluted (in thousands) 29,269 29,070 28,788 24,640 24,216 24,110 23,050 17,646
----------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION - at year end
Loans $ 78,095 $ 49,089 $ 46,926 $ 28,990 $ 23,305 $20,043 $12,893 $10,220
Inventory 80,894 62,817 55,007 35,610 30,335 21,103 15,331 11,677
Working capital 168,209 117,727 109,902 70,741 59,595 46,334 46,042 26,120
Total assets 324,257 245,094 216,449 137,693 116,920 97,855 90,208 66,827
Long-term debt 119,796 64,000 50,000 30,528 20,050 9,575 2,709 8,628
Stockholders' equity 183,434 166,722 153,946 100,099 89,937 81,570 82,484 53,296
Current ratio 9.0x 9.3x 9.8x 11.0x 9.6x 7.9x 10.2x 6.3x
Debt to equity 65.3% 38.4% 32.5% 30.5% 22.3% 11.7% 3.3% 16.2%
----------------------------------------------------------------------------------------------------------------
LOCATIONS - at year end 340 280 249 178 151 123 101 82
================================================================================================================
(a) Income before extraordinary item and net income include $469,000 of
securities gains, net of taxes.
12
2
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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IMPACT OF EXPANDING OPERATIONS
The Company has expanded its operations over the three years ended December
31, 1994 by acquiring 88 stores and by opening an additional 88 units.
Fourteen stores were closed or combined into existing locations to end the
three-year period with 340 operating pawnshops, or a net addition of 162 stores
compared to the December 31, 1991 total of 178. Of these new locations, 28
stores were acquired and two were opened in the United Kingdom, with the
initial 26 of these units acquired in the Harvey & Thompson acquisition during
February 1992. On June 30, 1993 the Company acquired 18 pawnshops in Texas
from Express Cash International Corporation for the largest domestic
acquisition in the period. On September 22, 1994 a subsidiary of Cash America
acquired the largest pawnbroking chain in the Kingdom of Sweden, Svensk
Pantbelaning, which operates 10 stores in Stockholm and five other cities
throughout Sweden.
Revenues net of cost of sales increased 21% in 1994 and 18% in 1993, with
stores in operation for at least one year increasing 9% in 1994 and 3% in 1993.
The remaining increase was attributed to increases in the average number of
stores in operation of 18% in 1994 and 19% in 1993.
SALES AND GROSS PROFIT
Retail sales have increased during the periods by 12% in 1994 and 22% in
1993. Sales increases in 1994 were impacted by flat same store sales in 1994
compared to 4% same store sales growth during 1993 combined with the increase
in average number of locations as noted above.
Gross profit margins during 1994 and 1993 were consistent at 19%, compared
to the 21% margin during 1992. Higher gross profit margins in 1992 were the
result of the Company deriving an increased percentage of its sales from
purchased merchandise than from unredeemed pledged goods. Since the Company
has a higher cost basis in its unredeemed pledged goods than in purchased
merchandise, this change in the mix of merchandise sold decreased margins after
1992. Additionally, during the most recent two-year period the Company
operated with higher average inventory levels per store. Historically, when
higher average inventory levels per store have occurred, the Company has
utilized price discounting to increase sales and reduce inventories per store,
which depressed gross profit margins on sales in 1994 and 1993 compared to
1992.
PAWN SERVICE CHARGES
Pawn service charge revenues increased 25% in 1994 and 20% in 1993 as a
result of same store increases in average pawn loans outstanding of 12% in 1994
and 5% in 1993, and the increases in the average number of stores in operation
as noted above. In addition, the results of operations of Svensk Pantbelaning
during the period it was owned by the Company contributed 3% of the increase in
pawn service charges during 1994.
During the periods the consolidated average yield on loans outstanding
remained relatively constant, although several factors applied pressure to the
yield in offsetting directions. The approximate 172% annual yield represents a
weighted average of the distinctive loan yields which the Company realizes in
the three different countries in which it operates. In its domestic
operations, Cash America has historically realized in excess of a 200% annual
yield, with the three-year period producing yields of 214% in 1994, 201% in
1993 and 200% in 1992. Internationally, loans at Harvey & Thompson in the
United Kingdom yielded 71% during 1994 compared to yields in 1993 and 1992 of
just under 70%, while Svensk Pantbelaning in Sweden yielded approximately 50%
per annum during the period after its acquisition in 1994, producing a blended
international yield in 1994 of 65%. Domestic yields increased in 1994 compared
to the two earlier years as a result of an increase in loans in the
lower-dollar loan stratification, which produces higher pawn service charge
rates, and due to expansion into states which allow higher rates than those
states in which the Company has historically operated. The combination of the
higher domestic yield and lower international yield in 1994 produced a
consolidated annual yield on loans of 172%, which is consistent with the 173%
and 171% annual yields achieved during 1993 and 1992, respectively.
The increases in average loan balance per average location in operation and
in the average pawn loan at the end of the year are both a result of the
acquisition of the Swedish pawnbroking locations, which have higher averages
per location and amounts per loan. There were no significant variations during
the three periods in either the U.S. or the U.K. relating to the average loan
balance per average location or the average pawn loan at end of year.
EXPENSES
Operating and administrative expenses as a percentage of revenues net of
cost of sales have declined slightly throughout the periods as a result of
greater efficiencies of scale of operating multiple units and increased
international operations. Domestic increases in the number of new store
start-ups, from an average of 23 in 1992 and 1993 to 41 in 1994, caused
domestic expenses as a percentage of revenues net of cost of sales to increase
from 70% in 1993 to 70.5% in 1994, which were both improved from 71.5% in 1992
as a result of spreading costs of administration over a larger store base.
International improvement in this ratio due to improved efficiencies and the
addition of Svensk Pantbelaning in 1994 caused the overall percentage to
decline compared to 1993 despite the domestic increase. The lower cost
structure in the U.K. and Sweden is due to the nature of the loans-only,
primarily jewelry operation, in which low loan forfeiture rates and the
resulting reduced retail operations allow for sharply lower personnel,
occupancy and other costs than in domestic stores.
Depreciation and amortization as a percentage of revenues net of cost of
sales increased during both 1993 and 1994 as a result of two factors.
Depreciation and amortization related to leasehold improvements, equipment,
startup expenses, and intangible assets on the 162 net store additions during
the periods accounted for much of the increase. Additionally, depreciation
expense increased as a result of the Company's installation during the periods
of a point-of-sale computer system and related supporting systems, which was
substantially completed in late 1994.
Interest expense increased sharply during the periods due to increased
interest rates and higher levels of average debt outstanding. Rates increased
in 1993 over 1992 as a result of a long-term, fixed rate debt related to a
private placement of $30 million completed in May 1993. During 1994 short-term
rates on the Company's borrowings under its bank line of credit increased due
to the increasing interest rate market in the United States in the second half
of the year. Also contributing to the increased interest expense was the
acquisition of Svensk Pantbelaning in September 1994, which was financed almost
entirely with borrowings of Swedish kronor under a term loan which bears
interest at rates in effect for Swedish currency which are higher than U.S.
short-term interest rates.
13
3
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
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OTHER INCOME
Other income consists of rent income, miscellaneous refunds, gains or
losses on the disposition of non-operating assets and other items. In 1994 the
Company recognized a loss before taxes on the sale of non-operating assets of
approximately $200,000. In addition, the $23,000 adjustment to the Company's
equity investment in Mr. Payroll Corporation is included as a reduction of
other income for 1994.
INCOME TAXES
Effective income tax rates have increased during the periods to 37.9% in
1994 from 36.4% in 1993 and 36.1% in 1992. On 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, resulting in the
reduction of income taxes by $265,000. Without this change the resulting rate
would have been 37.6% in 1993. The increase in rates in 1994 and 1993 as
compared to 1992 is due to the implementation of provisions in the 1993 Revenue
Reconciliation Act and to increased earnings in states which have state income
taxes.
IMPACT OF FOREIGN OPERATIONS ON
FUTURE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is subject to the risk of unexpected changes in foreign
currency exchange rates by virtue of its operations in the United Kingdom and
the Kingdom of Sweden. The Company's foreign assets, liabilities and earnings
are denominated in either British pounds sterling or Swedish kronor, but are
converted to U.S. dollars in accordance with generally accepted accounting
principles for consolidation into the Company's financial statements. Any
translation losses or gains resulting from converting balance sheet accounts
are recorded in the equity section of the balance sheet.
At December 31, 1994 the Company had recorded a cumulative reduction to
stockholders' equity of $3.7 million as a result of fluctuations in the foreign
currency exchange rates. Of this amount, a $1.6 million increase occurred in
1994 and a $600,000 decrease occurred during 1993, resulting from changes in
the exchange rates in the United Kingdom as of the balance sheet dates in 1994,
1993 and 1992, respectively. Foreign currency exchange rates had an immaterial
effect on the balance sheet for Svensk Pantbelaning at December 31, 1994 as
compared to the acquisition date due to its small net equity at year-end,
resulting from the Company acquiring the subsidiary with debt denominated in
Swedish kronor.
For income statement purposes, British pounds sterling during 1994, 1993,
and 1992 and Swedish kronor in 1994 were translated to U.S. dollars using the
average foreign exchange rate in effect for each of the respective years. Net
income from foreign operations during 1994, 1993 and 1992 translated to $4.1
million, $2.6 million and $2.3 million, respectively, for the three years.
Future earnings and comparisons with prior periods reported by the Company
may fluctuate depending on applicable average exchange rates in effect during
the periods. In the past, the Company has entered into hedging arrangements
designed to minimize exchange rate fluctuations that may impact reported
earnings and their comparisons, and it may consider similar transactions in
future periods.
LIQUIDITY AND CAPITAL RESOURCES
For the year 1994, the Company invested $12 million on the acquisition of
21 pawnshops and $23 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 these
acquisitions was the September 22, 1994 acquisition of all of the shares of a
group of companies in Sweden which comprise the Svensk Pantbelaning chain of 10
pawnbroking locations. The transaction was denominated in Swedish kronor, and
at foreign exchange rates in effect at the date of finalization 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 capital investments has come from the Company's $125 million
revolving line of credit, operating earnings, and a term loan for 193,750,000
Swedish kronor ($26 million at December 31, 1994 exchange rates), which was
used to facilitate 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%. The $125
million revolving line of credit is with a syndicate of five banks, had a
balance of $64 million at December 31, 1994, and bears interest at a rate of
LIBOR plus 1%. The line of credit is segmented into two traunches--a $100
million three-year facility and a $25 million one-year facility. All
borrowings in 1994 were under the three-year facility. Harvey & Thompson has
entered into a 5 million pound sterling line of credit with a U.K.-based
commercial bank, with no usage under this line in 1994.
Effective May 12, 1993, the Company issued $30 million of Senior Unsecured
Notes, maturing May 2003, in a private placement to Teachers Insurance and
Annuity Association of America. Proceeds were used to pay down on the
Company's bank line of credit. The unsecured notes bear interest at 8.33% per
year and are payable in seven equal principal installments beginning May 1,
1997. Effective June 2, 1993, the Company entered into interest rate exchange
contracts on $20 million of the debt. The effective interest rate under the
notes for the twelve months ended December 31, 1994 was 8.12%. For the
six-month period commencing December 2, 1994 the effective interest rate on the
notes is 9.52% on an annualized basis.
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 the southwestern states. The Company has
accounted for the investment and the earnings therefrom under the equity method
of accounting.
Management believes that borrowings available under its $125 million and
5 million pound sterling revolving bank line of credit facilities, cash
generated from operations and current working capital of $168 million will be
sufficient to meet the Company's anticipated future capital requirements.
14
4
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - December 31
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(Dollars in thousands)
SUMMARY
The Company has expanded its operations significantly over the past three
years by increasing its operating locations from 178 locations at December 31,
1991, to 340 locations at December 31, 1994. This growth in store locations has
occurred from acquisitions and the start-up of new Company stores. Presented
below is selected consolidated data for the Company for the three years ended
December 31:
1994 1993 1992
----------------------------------------------------------------------------------------------------
REVENUES NET OF COST OF SALES
Sales $156,247 $139,950 $115,008
Cost of sales 126,254 112,882 90,756
----------------------------------------------------------------------------------------------------
Gross profit 29,993 22.1% 27,068 24.2% 24,252 25.6%
Pawn service charges 105,858 77.9% 84,750 75.8% 70,402 74.4%
----------------------------------------------------------------------------------------------------
Revenues net of
cost of sales $135,851 100.0% $111,818 100.0% $ 94,654 100.0%
====================================================================================================
OTHER DATA
Gross profit as a percentage
of sales 19.2% 19.3% 21.1%
Average annual inventory
turnover 1.8x 1.8x 2.1x
Average inventory per
average location
in operation $230 $236 $201
Yield on loans outstanding 172% 173% 171%
Average loan balance
per average location
in operation $202 $187 $187
Average pawn loan at end
of year (whole dollars) $ 89 $ 75 $ 77
Expenses as a percentage
of revenues net of
cost of sales:
Operations and
Administration 67.8% 68.5% 69.7%
Depreciation and
amortization 9.1 8.9 7.4
Interest, net 4.6 3.2 1.5
Income before income taxes as
a percent of total revenues 9.5% 9.7% 11.0%
Locations in operation:
Beginning of year 280 249 178
Acquired 21 22 45
Start-ups 42 19 27
Combined or closed (3) (10) (1)
----------------------------------------------------------------------------------------------------
End of year 340 280 249
----------------------------------------------------------------------------------------------------
Average number of
locations in operation 309 262 220
====================================================================================================
15
5
CONSOLIDATED BALANCE SHEETS - December 31
--------------------------------------------------------------------------------
(Dollars in thousands)
1994 1993
--------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,827 $ 2,245
Service charges receivable 18,626 12,740
Loans 78,095 49,089
Inventory, net 80,894 62,817
Prepaid expenses and other 6,794 4,986
--------------------------------------------------------------------------------
Total current assets 189,236 131,877
Property and equipment, net 63,241 49,867
Intangible assets, net 64,915 60,490
Other assets 6,865 2,860
--------------------------------------------------------------------------------
Total assets $324,257 $245,094
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 13,790 $ 8,990
Customer layaway deposits 3,576 2,753
Income taxes currently payable 3,661 2,407
--------------------------------------------------------------------------------
Total current liabilities 21,027 14,150
Long-term debt 119,796 64,000
Deferred income taxes - 222
--------------------------------------------------------------------------------
Total liabilities 140,823 78,372
--------------------------------------------------------------------------------
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $.10 par value per share,
80,000,000 shares authorized; shares
issued, 30,235,164 in 1994 and 1993 3,024 3,024
Paid in surplus 121,481 120,955
Retained earnings 70,081 56,004
Foreign currency translation adjustment (3,692) (5,308)
--------------------------------------------------------------------------------
190,894 174,675
Less - shares held in treasury, at cost
(1,666,099 in 1994 and 1,832,137
in 1993) (7,460) (7,953)
--------------------------------------------------------------------------------
Total stockholders' equity 183,434 166,722
--------------------------------------------------------------------------------
Total liabilities and stockholders' equity $324,257 $245,094
================================================================================
See notes to consolidated financial statements.
16
6
CONSOLIDATED INCOME STATEMENTS - Years Ended December 31
--------------------------------------------------------------------------------
(Dollars in thousands, except per share)
1994 1993 1992
--------------------------------------------------------------------------------
REVENUES
Sales $156,247 $139,950 $115,008
Pawn service charges 105,858 84,750 70,402
--------------------------------------------------------------------------------
Total revenues 262,105 224,700 185,410
COST OF SALES 126,254 112,882 90,756
--------------------------------------------------------------------------------
Revenues net of cost of sales 135,851 111,818 94,654
--------------------------------------------------------------------------------
OPERATING EXPENSES
Operations 78,204 64,178 54,572
Administration 13,918 12,416 11,362
Amortization 3,545 3,278 2,435
Depreciation 8,814 6,684 4,591
--------------------------------------------------------------------------------
Total operating expenses 104,481 86,556 72,960
--------------------------------------------------------------------------------
Income from operations 31,370 25,262 21,694
Interest expense, net (6,265) (3,608) (1,419)
Other income/(expense) (147) 112 73
--------------------------------------------------------------------------------
Income before income taxes 24,958 21,766 20,348
Provision for income taxes 9,460 7,927 7,342
--------------------------------------------------------------------------------
NET INCOME $ 15,498 $ 13,839 $ 13,006
================================================================================
Earnings per share:
Primary $.54 $.48 $.45
Fully diluted $.53 $.48 $.45
Weighted average shares (in thousands):
Primary 28,930 28,938 28,698
Fully diluted 29,269 29,070 28,788
================================================================================
See notes to consolidated financial statements.
17
7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Years Ended December 31
--------------------------------------------------------------------------------
(Dollars in thousands, except per share)
Foreign
Common Stock Treasury Stock Currency
--------------- Paid in Retained ------------------ Translation
Shares Amount Surplus Earnings Shares Amount Adjustment Total
------------------------------------------------------------------------------------------------------------------------
Balance at
December 31, 1991 25,635,164 $2,564 $ 72,859 $31,874 1,881,774 $(7,198) $ 0 $100,099
Shares issued in exercise
of warrants - - (50) - (13,134) 50 - -
Shares issued in public
offering 4,600,000 460 47,977 - - - - 48,437
Treasury shares acquired - - - - 235,000 (1,916) - (1,916)
Treasury shares reissued - - 36 - (65,916) 266 - 302
Dividends declared -
$.04 3/4 per share - - - (1,302) - - - (1,302)
Foreign currency
translation adjustment - - - - - - (4,680) (4,680)
Net income - - - 13,006 - - - 13,006
------------------------------------------------------------------------------------------------------------------------
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 - - (128) - (205,587) 845 - 717
Tax benefit from exercise
of option shares - - 261 - - - - 261
Dividends declared -
$.05 per share - - - (1,413) - - - (1,413)
Foreign currency
translation adjustment - - - - - - (628) (628)
Net income - - - 13,839 - - - 13,839
------------------------------------------------------------------------------------------------------------------------
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 - - 441 - (234,538) 1,045 - 1,486
Tax benefit from exercise
of option shares - - 85 - - - - 85
Dividends declared -
$.05 per share - - - (1,421) - - - (1,421)
Foreign currency
translation adjustment - - - - - - 1,616 1,616
Net income - - - 15,498 - - - 15,498
------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1994 30,235,164 $3,024 $121,481 $70,081 1,666,099 $(7,460) $(3,692) $183,434
========================================================================================================================
See notes to consolidated financial statements.
18
8
CONSOLIDATED STATEMENTS OF CASH FLOWS - Years Ended December 31
--------------------------------------------------------------------------------
(Dollars in thousands)
1994 1993 1992
----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Sales $ 156,247 $ 139,950 $ 115,008
Pawn service charges 64,525 51,904 41,821
Other income (expense) (147) 267 302
Additions to inventory, including loans forfeited (104,611) (85,981) (80,322)
Operations and administration expense (91,108) (80,450) (63,425)
Interest paid (6,408) (3,538) (1,679)
Layaway deposits, net 759 (13) 605
Income taxes paid (9,197) (7,021) (5,658)
----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 10,060 15,118 6,652
----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans forfeited and transferred to inventory 73,143 64,025 51,767
Loans repaid or renewed 201,929 160,697 134,210
Loans made, including loans renewed (285,818) (224,157) (192,536)
----------------------------------------------------------------------------------------------------
Net (increase) decrease in loans (10,746) 565 (6,559)
----------------------------------------------------------------------------------------------------
Acquisitions (11,693) (9,347) (42,107)
Investment in and advances to affiliate (2,600) - -
Purchases of property and equipment (22,784) (16,704) (19,616)
Proceeds from sales of property and equipment 1,330 186 16
----------------------------------------------------------------------------------------------------
Net cash used by investing activities (46,493) (25,300) (68,266)
----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 778 717 48,716
Net borrowings (payments) under bank lines of credit 55,533 (16,000) 19,500
Proceeds from issuance of long-term debt - 30,000 -
Payments on notes payable and other obligations (15,471) (5,076) (51)
Treasury shares acquired (552) - (1,916)
Dividends paid (1,421) (1,413) (1,302)
----------------------------------------------------------------------------------------------------
Net cash provided by financing activities 38,867 8,228 64,947
----------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 148 (34) (529)
----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,582 (1,988) 2,804
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,245 4,233 1,429
----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,827 $ 2,245 $ 4,233
----------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 15,498 $ 13,839 $ 13,006
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization 3,545 3,278 2,435
Depreciation 8,814 6,684 4,591
(Increase) decrease in service charge receivable (3,439) 91 (1,991)
Increase in inventory (16,251) (6,036) (16,156)
Increase in prepaid expenses and other (2,286) (1,595) (707)
Increase (decrease) in accounts payable and accrued expenses 3,157 (2,036) 3,185
Increase (decrease) in layaway deposits, net 759 (13) 605
Increase in income taxes currently payable 1,235 791 2,198
Increase (decrease) in deferred income taxes (972) 380 (514)
Cumulative effect of accounting change - (265) -
----------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 10,060 $ 15,118 $ 6,652
====================================================================================================
See notes to consolidated financial statements.
19
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Cash America International, Inc. and its wholly owned subsidiaries
("Company") and the Company's 49% investment in and share of net earnings or
losses of an unconsolidated affiliate treated as an equity investment. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The Company is engaged in acquiring, establishing and operating pawnshops
in the United States, the United Kingdom and the Kingdom of Sweden.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of international subsidiaries are translated
into United States Dollars at the rates of exchange in effect at the balance
sheet date, and resulting adjustments are accumulated as a separate component
of stockholders' equity. Revenues and expenses are translated at the average
exchange rates prevailing during the year.
CASH AND CASH EQUIVALENTS
The Company considers cash on hand in stores, deposits in banks, and
short-term marketable securities with original maturities of 90 days or less as
cash and cash equivalents.
LOANS AND INCOME RECOGNITION
Pawn loans ("loans") are generally made on the pledge of tangible
personal property. Pawn service charges on loans are recorded on a constant
yield basis over the loan term. If the loan is not repaid, the principal amount
loaned plus accrued pawn service charges becomes the carrying value of the
forfeited collateral ("inventory") which is recovered through sale.
INVENTORY
Inventory represents merchandise acquired from forfeited loans,
merchandise purchased directly from the public and new merchandise purchased
from vendors.
Inventory is stated at the lower of cost or market. The Company provides
an allowance for shrinkage and valuation based on management's evaluation of
the merchandise. The allowance deducted from the carrying value of inventory
amounted to $2,514,000 and $2,120,000, at December 31, 1994 and 1993,
respectively.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation expense is
generally provided on a straight-line basis, using estimated useful lives of 15
to 30 years on buildings and 3 to 10 years for equipment and leasehold
improvements.
The cost of property retired or sold and the related accumulated
depreciation is removed from the accounts, and any resulting gain or loss is
recognized in the income statement.
INTANGIBLE ASSETS
Intangible assets, consisting primarily of excess purchase price over net
assets acquired in acquisitions, are being amortized on a straight-line basis
over their expected periods of benefit, generally 25 to 40 years. Management
assesses the realizability of intangible assets by comparing the intangible
assets to earnings generated by the acquired stores over the anticipated period
of benefit.
Pre-opening costs associated with the establishment of new stores are
capitalized and expensed over three years. Generally, revenues in new pawnshops
attain a mature store level after three years. Pre-opening costs remaining to
be amortized totaled $655,000 and $723,000 at December 31, 1994 and 1993,
respectively.
Accumulated amortization of intangible assets at December 31, 1994 and
1993 was $13,463,000 and $12,081,000, respectively.
INCOME TAXES
The Company files a consolidated federal income tax return for its
domestic operations. The provision for income taxes is based on pretax income
as reported for financial statement purposes. Deferred income taxes result from
differences in the bases of certain assets and liabilities for income tax
purposes and financial reporting purposes.
Deferred federal income taxes are not provided on the undistributed
earnings of its foreign subsidiaries to the extent the Company intends to
permanently reinvest such earnings in the United Kingdom and the Kingdom of
Sweden.
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method required by
FAS 109. As permitted under the new rules, prior years' financial statements
have not been restated. The cumulative effect of adopting FAS 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.
20
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
-----------------------------------------------------------------------------
FAIR VALUES OF FINANCIAL INSTRUMENTS
Pawn loans are outstanding for a relatively short period, generally 90
days or less for domestic loans and 180 days or less for foreign loans,
depending on local regulations. The rate of pawn service charge bears no
relationship to interest rate market movements. Generally, pawn loans may not
be resold to anyone but a licensed pawnbroker. For these reasons, management
believes that the fair value of pawn loans approximates their carrying value.
The Company's bank credit facilities bear interest at rates which adjust
frequently based on market rate changes. Accordingly, management believes that
the fair value of that debt approximates its carrying value. The fair value of
the 8.33% Senior Unsecured Notes payable (See Note 6) was estimated based on
quoted market values for debt issues with similar characteristics, or rates
currently available for debt with similar terms. Management believes that the
fair value of that debt approximates its carrying value.
The Company is not an active participant in financial derivative
transactions other than some hedging instruments entered into in the ordinary
course of business. The Company may, from time to time, enter into forward
sale contracts with an industry buyer of fine gold which is produced from the
Company's liquidation of forfeited gold merchandise. In the event the Company
transfers funds between foreign currencies, it may enter into a currency hedge
at the time of the transaction to eliminate the risk of foreign currency
fluctuations. The Company is a party to two interest rate exchange contracts
to modify the interest rate pricing on a small portion of its outstanding debt
(which is described more fully in the long-term debt discussion).
SHARES, PER SHARE DATA AND EARNINGS PER SHARE
Earnings per share calculations assume exercise of all outstanding stock
options and warrants with appropriate adjustment to weighted average shares
outstanding using the treasury stock method of calculation.
RECLASSIFICATIONS
Interest expense and other income have been reclassified in the
consolidated statements of operations for the years ended December 31, 1993 and
1992 to conform with the presentation for the year ended December 31, 1994.
These reclassifications have no effect on the net income as previously
reported.
NOTE 2 - ACQUISITIONS
During 1994, the Company acquired 21 pawnshops in purchase transactions
occurring throughout the year for an aggregate consideration of $11,693,000. On
September 22, 1994, the Company acquired all of the shares of a group of
companies which comprise Svensk Pantbelaning, which consisted of 10 pawnshops
located in the Kingdom of Sweden, for cash consideration of approximately $5
million and assumed liabilities of $17 million. Eleven other pawnshops were
acquired in purchase transactions throughout 1994. The results of operations
for these pawnshops have been included in the Company's operations from the
date of acquisition.
During 1993, the Company acquired 22 pawnshops in purchase transactions
throughout the year for an aggregate cash consideration of $9,347,000. 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, and the
assumption of $8.7 million of Express Cash liabilities, to obtain 18 pawnshops.
The four other pawnshops were acquired in individual purchase transactions
during 1993.
NOTE 3 - PROPERTY AND EQUIPMENT
Major classifications of property and equipment at December 31, 1994 and
1993 were as follows:
1994 1993
-----------------------------------------------------------------
(Dollars in thousands)
Land $ 4,995 $ 4,151
Buildings and improvements 10,936 9,117
Equipment, leasehold improvements
and other 74,308 55,188
-----------------------------------------------------------------
Total 90,239 68,456
Less - accumulated depreciation (26,998) (18,589)
-----------------------------------------------------------------
Property and equipment - net $ 63,241 $ 49,867
=================================================================
NOTE 4 - INVESTMENT IN AFFILIATE
On July 13, 1994, the Company paid $2 million to acquire a 49% interest
in a private Texas based company which sells franchised check-cashing kiosks.
In conjunction with this investment, the Company has entered into a revolving
credit agreement with the affiliate, which provides for a maximum borrowing of
$1 million from the Company. As of December 31, 1994 the affiliate had
borrowings outstanding of $600,000. The affiliate has granted a security
interest and lien to all of its assets. The entire unpaid principal balance is
due and payable on February 28, 1997, with interest paid quarterly at LIBOR
plus 4 percent. The amounts are included in other assets.
21
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
-----------------------------------------------------------------------------
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 1994 and 1993 were
as follows:
1994 1993
------------------------------------------------------------------
(Dollars in thousands)
Trade accounts payable $ 4,864 $3,692
Accrued taxes, other than income 3,572 2,505
Accrued payroll and fringes 3,069 1,687
Accrued interest payable 836 523
Other accrued liabilities 1,449 583
------------------------------------------------------------------
Total $13,790 $8,990
==================================================================
NOTE 6 - LONG-TERM DEBT
On June 7, 1994, the Company made certain modifications to its three-year
$125,000,000 unsecured 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 portion scheduled
to mature on June 6, 1995. The entire $125,000,000 line of credit is governed
by a single credit agreement which requires that the Company maintain certain
financial ratios and limit specific payments and equity distributions,
including cash dividends and the redemption of Company stock. At year end, the
agreement limits the aggregate of such payments to approximately $10.7 million.
The Company has the option each year to request a one-year extension, thus
moving the maturity date of each 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.
During 1994 the weighted average amount outstanding under the line of
credit was $54,700,000, with an effective interest rate paid of 5.62%. At
December 31, 1994, the amount outstanding under the $100,000,000 portion of the
facility was $63,700,000 with a weighted average interest rate of 6.83%.
On May 12, 1993, the Company issued $30,000,000 of "8.33% Senior
Unsecured Notes," due May 1, 2003. Interest is payable on May 1 and November 1
of each year. Mandatory annual payments of $4,285,714 commence May, 1997. On
May 28, 1993, the Company entered into two three-year swap agreements for
$10,000,000 each, under which the Company receives a fixed rate of 4.87% and
pays a variable rate based on the prevailing six-month BBA average LIBOR rate
(6.5625% as of December 31, 1994), repriced every six months. The effective
interest rate on the Senior Unsecured Notes for the twelve months ended
December 31, 1994, was 8.12% after taking into account the two swap
transactions. For the six-month period commencing December 2, 1994, the
effective rate of interest on the Senior Unsecured Notes is 9.52% on an
annualized basis. The 8.33% Senior Unsecured Notes are governed by a separate
note agreement which requires that the Company maintain certain financial
ratios and limit specific payments and equity distributions, including cash
dividends and the redemption of Company stock.
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 $26.1
million as of December 31, 1994). 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 the Stockholm InterBank
Offered Rate (STIBOR) plus 1% (8.98% as of December 31, 1994). The term loan is
governed by a credit agreement which relies on the same financial covenants
contained in the Company's $125,000,000 line of credit agreement.
The Company's wholly owned subsidiary, Harvey & Thompson, Ltd., has a
committed 5 million pound sterling unsecured line of credit, which matures on
February 8, 1996, from a U.K. based commercial bank. Interest is payable
quarterly at an interest rate equal to the Bank's sterling cost of funds plus
60 basis points for borrowings less than 13 days and 55 basis points for
borrowings of 14 days or more. Harvey & Thompson, Ltd. pays a fee on the unused
portion of the line of credit of .15% per annum. The facility is governed by a
credit agreement which provides minimum levels of assets and net worth which
must be maintained by Harvey & Thompson. Harvey & Thompson did not borrow under
the line of credit during 1994, and there was no balance outstanding as of
December 31, 1994.
The annual maturities of long-term debt through 1999 are: 1995-none;
1996-none; 1997-$94.1 million; 1998-$4.3 million; 1999-$4.3 million. The
scheduled maturities in 1997 include $63.7 million outstanding under the
Company's line of credit which contains an annual extension option as noted
above.
22
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
--------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES
The components of the Company's deferred tax liabilities and assets as of
December 31 are as follows:
1994 1993
----------------------------------------------------------------------
(Dollars in thousands)
Deferred tax liabilities:
Deferred acquisition and start-up costs $ 224 $442
Reversal of revenues reported on a cash
basis by acquired subsidiary 97 194
Amortization of acquired intangibles 215 101
Foreign tax reserves 172 -
Other 293 216
----------------------------------------------------------------------
Total deferred tax liabilities $1,001 $ 953
======================================================================
Deferred tax assets:
Provision for inventory
valuation allowance $ 648 $ 509
Tax over book depreciation 813 224
Net operating loss carryforwards 652 782
Other 363 242
----------------------------------------------------------------------
Total deferred tax assets $2,476 $1,757
Valuation allowance for deferred
tax assets (702) (905)
----------------------------------------------------------------------
Net deferred tax assets 1,774 852
----------------------------------------------------------------------
Net deferred tax (assets) liabilities $ (773) $ 101
======================================================================
The components of the provision for income taxes and the income to which
it relates for the years ended December 31, 1994, 1993 and 1992 are shown
below:
1994 1993 1992
--------------------------------------------------------------------------------
(Dollars in thousands)
Income from continuing operations
before income taxes:
Domestic $18,625 $17,752 $17,082
Foreign 6,333 4,014 3,266
--------------------------------------------------------------------------------
$24,958 $21,766 $20,348
================================================================================
Provision for income taxes:
Liability Deferred
Method Method
--------------------------------------------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------
(Dollars in thousands)
Current portion of provision:
Federal $7,293 $6,145 $6,419
Foreign 2,151 1,399 1,138
State and local 428 231 299
--------------------------------------------------------------------------------
$9,872 $7,775 $7,856
================================================================================
Deferred portion of (benefit) provision:
Federal $ (491) $ 118 $ (559)
Foreign 79 34 45
State and local - - -
--------------------------------------------------------------------------------
$ (412) $ 152 $ (514)
--------------------------------------------------------------------------------
Total provision $9,460 $7,927 $7,342
================================================================================
The effective tax rate differs from the federal statutory rate for the
following reasons:
Liability Deferred
Method Method
--------------------------------------------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------
(Dollars in thousands)
Tax provision computed at the
statutory federal income tax rate $8,735 $7,618 $6,918
Non-deductible amortization of
intangible assets 439 421 392
Foreign tax rate difference (170) (78) (33)
Other 456 (34) 65
--------------------------------------------------------------------------------
Total provision $9,460 $7,927 $7,342
================================================================================
Effective tax rate 37.9% 36.4% 36.1%
================================================================================
As of December 31, 1994, the Company has net operating loss carryforwards
of $1,451,000 for U.S. income tax purposes. The loss carryforwards resulted
from the 1993 acquisition of Express Cash International Corporation and expire
December 31, 2002 through 2006. The amount of these losses which the Company
can utilize each year is limited to approximately $342,000. At December 31,
1994, the deferred tax assets related to these carryforwards and
pre-acquisition deductible temporary differences of Express Cash have been
offset by a $702,000 valuation allowance. When realized, the tax benefits from
these items will be applied to reduce goodwill related to the Express Cash
acquisition. During 1994 goodwill was reduced by $482,000 for the realization
of deductible temporary differences and utilization of net operating loss
carryforwards.
The Company also has a $519,000 net operating loss carryforward which was
incurred by a Swedish subsidiary in 1994. No valuation allowance has been
provided against the deferred tax asset related to this carryforward because
the loss can be used to reduce 1995 taxes of other Swedish subsidiaries.
During 1994 the Company realized an $85,000 tax benefit from the exercise
of stock options by officers and directors. This benefit was applied as a
direct increase to paid in surplus.
Domestic income taxes have not been provided on undistributed earnings of
foreign subsidiaries to the extent that it is the Company's intent to reinvest
these earnings overseas indefinitely. Upon distribution of accumulated earnings
of all foreign subsidiaries, the Company would be subject to U.S. income taxes
(net of foreign tax credits) of approximately $273,000.
23
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
--------------------------------------------------------------------------------
NOTE 8 - STOCKHOLDERS' EQUITY
On February 20, 1992, the Company completed a public offering of
4,600,000 shares (after stock split) of its $.10 par value common stock at
$11.25 per share. The Company received, after underwriting discounts and
commissions, net proceeds of $49,059,000. After paying expenses of $622,000
the Company added $48,437,000 to stockholders' equity. The Company used the net
proceeds to retire $48,000,000 of its revolving line of credit, of which
$26,851,000 was incurred in the acquisition of the Pawnbroking division of
Harvey & Thompson PLC.
On March 25, 1992, the Board of Directors declared a 2-for-1 stock split
to be effected in the form of a 100% common stock dividend, payable on April
22, 1992 to stockholders of record on April 8, 1992. Average common shares and
common equivalent shares outstanding, income per average common share and
common equivalent share, stock option prices and exercise prices have been
restated to reflect the stock split.
Pursuant to a stock repurchase program during the fourth quarter of 1992,
the Company purchased a total of 235,000 shares of its common stock in private
and public transactions for a total of $1,916,000.
The Company has reserved 1,500,000 shares of its common stock for
issuance under its 1987 Stock Option Plan (with appreciation rights) ("1987
Plan"), 3,000,000 shares for issuance under its 1989 Non-Employee Director
Stock Option Plan and Key Employee Stock Option Plan ("1989 Plans") and
1,400,000 shares for issuance under the 1994 Long-Term Incentive Plan ("1994
Plan").
Under the 1987 Plan, options are granted at fair market prices at the
date of the grant, and expire in five years from the date of the grant. Options
that have been granted pursuant to the 1987 Plan are exercisable 25% each year
beginning one year after the date of the grant.
At December 31, 1994, 44,872 shares were reserved for future grants under
the 1987 Plan.
A summary of stock option activity under the 1987 Plan is as follows:
Options Outstanding
----------------------------------------------------------------------
Number Option Price
Stock Option Activity of Shares per Share
----------------------------------------------------------------------
December 31, 1991 895,618 $3.54-$9.38
Granted 236,500 $7.75-$9.88
Exercised (63,526) $3.54-$7.00
----------------------------------------------------------------------
December 31, 1992 1,068,592 $3.54-$9.88
Granted 173,000 $6.88-$8.88
Exercised (212,349) $3.54-$7.75
Cancelled (13,372) $5.94-$9.38
----------------------------------------------------------------------
December 31, 1993 1,015,871 $3.54-$9.88
----------------------------------------------------------------------
Granted 75,000 $7.75
Exercised (210,371) $3.54-$7.00
Cancelled (7,500) $7.00
----------------------------------------------------------------------
December 31, 1994 873,000 $5.94-$9.88
----------------------------------------------------------------------
Exercisable at December 31, 1994 490,500 $5.94-$9.88
======================================================================
Under the 1989 Plans, options were granted in October 1989 to purchase
3,000,000 shares at $6.34 per share. The options were granted at fair market
price at date of grant and expire 10 years from that date. Options granted to
purchase 1,545,000 of the 3,000,000 shares are exercisable 40% six months from
date of grant and 10% each year thereafter. Options granted to purchase 750,000
shares are exercisable 40% from date of grant and 10% each year thereafter.
Options granted to purchase 705,000 shares are exercisable 20% from date of
grant and 20% each year thereafter.
A summary of stock option activity under the 1989 Plan is as follows:
Options Outstanding
----------------------------------------------------------------------
Number Option Price
Stock Option Activity of Shares per Share
----------------------------------------------------------------------
Inception of plan - October 1989 3,000,000 $6.34
Cancelled 1990 (150,000) $6.34
Cancelled 1992 (30,000) $6.34
----------------------------------------------------------------------
Outstanding at December 31, 1994 2,820,000 $6.34
----------------------------------------------------------------------
Exercisable at December 31, 1994 2,590,500 $6.34
======================================================================
On April 27, 1994, the Company adopted the 1994 Long-Term Incentive Plan
("1994 Plan") and reserved 1,400,000 shares of Company Common Stock to be used
in the form of stock options, performance shares and restricted stock for key
employees of the Company. The 1994 Plan will expire ten years from its
effective date unless terminated earlier or extended by the Board of Directors.
Options that have been granted pursuant to the 1994 Plan are exercisable 25%
each year beginning one year after the date of the grant.
24
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
--------------------------------------------------------------------------------
A summary of stock option activity under the 1994 Plan is as follows:
Options Outstanding
----------------------------------------------------------------------
Number Option Price
Stock Option Activity of Shares per Share
----------------------------------------------------------------------
Granted 1994 449,500 $7.88
----------------------------------------------------------------------
Exercisable at December 31, 1994 - -
======================================================================
Shares issued upon exercise of options may be issued from treasury shares
or from authorized but unissued shares.
NOTE 9 - EMPLOYEE BENEFIT PLAN
The Cash America International, Inc. 401(K) Employees' Savings Plan,
which commenced on January 1, 1991 and was amended April 1, 1994, is open to
substantially all employees who have been employed for one year and work at
least 1,000 hours per year. Under the 401(K) plan a participant may contribute
up to 15% of their earnings not to exceed the current statutory limits. The
Company may make a discretionary matching contribution equal to a percentage of
the amount of the participant contributions. This percentage is determined
annually by the Company, and any matching contributions may be made in cash or
in Company stock. Contributions made to participants' accounts become vested at
the rate of 25% per year after two years of service until 100% vesting is
achieved after five years of service. Total Company contributions to this plan
were $162,000 and $38,000 in 1994 and 1993.
Adoption of the Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, during
1993 had no effect on results of operations. During the first quarter of 1994
the Company adopted the Statement of Financial Accounting Standards No. 112
"Employers' Accounting for Post Employment Benefits." The adoption of this
standard had no effect on the Company's results of operations.
NOTE 10 - BUSINESS SEGMENT INFORMATION
The Company operates in a single industry. In addition to its domestic
operations, it has subsidiaries in the United Kingdom and the Kingdom of
Sweden.
UNITED
STATES FOREIGN CONSOLIDATED
---------------------------------------------------------------------
(Dollars in thousands)
1994
----
Total revenues $248,514 $13,591 $262,105
Income from operations 24,495 6,875 31,370
Total assets excluding cash
and equivalents 265,229 54,201 319,430
1993
----
Total revenues $215,809 $ 8,891 $224,700
Income from operations 21,420 3,842 25,262
Total assets excluding cash
and equivalents 216,305 26,544 242,849
1992
----
Total revenues $177,200 $ 8,210 $185,410
Income from operations 18,359 3,335 21,694
Total assets excluding cash
and equivalents 188,629 23,587 212,216
=====================================================================
British pounds sterling and Swedish kronor are translated into dollars at
exchange rates in effect at each December 31 for balance sheet data, and at the
annual average exchange rate for income statement information.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company leases certain of its pawnshop facilities under operating
leases. Future minimum rentals due under non-cancelable leases are as follows
for each of the years ending December 31:
(Dollars in thousands)
1995 $12,951
1996 11,100
1997 8,200
1998 5,796
1999 3,706
Later years 8,091
----------------------------------------------------------
Total $49,844
==========================================================
Rent expense was $11,201,000, $9,110,000 and $7,323,000 for 1994, 1993
and 1992, respectively.
The Company is party to a number of 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.
25
15
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
CASH AMERICA INTERNATIONAL, INC.
We have audited the accompanying consolidated balance sheets of Cash
America International, Inc. and Subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cash America
International, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Fort Worth, Texas
January 27, 1995
26
16
INCOME STATEMENT QUARTERLY DATA (UNAUDITED)
--------------------------------------------------------------------------------
(In thousands, except per share)
FIRST SECOND THIRD FOURTH
1994 QUARTER QUARTER QUARTER QUARTER
-----------------------------------------------------------------------------------------
Total revenues $55,314 $57,203 $63,261 $86,327
Net income $ 2,932 $ 3,055 $ 4,211 $ 5,300
Net income per share - Fully diluted $.10 $.11 $.15 $.18
Weighted average shares - Fully diluted 28,984 28,864 28,869 29,304
1993
-----------------------------------------------------------------------------------------
Total revenues $51,987 $52,369 $55,069 $65,275
Net income $ 2,803 $ 2,535 $ 3,673 $ 4,828
Net income per share - Fully diluted $.10 $.09 $.13 $.17
Weighted average shares - Fully diluted 28,896 28,814 28,908 29,110
=========================================================================================
COMMON STOCK DATA
--------------------------------------------------------------------------------
The New York Stock Exchange is the principal exchange on which Cash America
International, Inc. common stock is traded. There were 942 stockholders of
record (not including individual participants in security listings) as of
February 22, 1995. The high and low sales prices of common stock as quoted on
the composite tape of the New York Stock Exchange and cash dividends per share
during 1994 and 1993 were as follows:
FIRST SECOND THIRD FOURTH
1994 QUARTER QUARTER QUARTER QUARTER
-----------------------------------------------------------------------------------------
High $10.13 $8.88 $8.50 $9.88
Low 7.63 7.75 7.50 7.63
Close 7.88 7.75 8.00 9.88
Cash Dividend .01 1/4 .01 1/4 .01 1/4 .01 1/4
1993
-----------------------------------------------------------------------------------------
High $11.00 $9.00 $9.00 $9.88
Low 8.00 6.38 7.00 8.13
Close 8.63 7.88 8.38 9.38
Cash Dividend .01 1/4 .01 1/4 .01 1/4 .01 1/4
=========================================================================================
27
17
CASH AMERICA INTERNATIONAL, INC.
1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 1995
To Our Shareholders:
The Annual Meeting of Shareholders of Cash America International, Inc. (the
"Company") will be held at the Fort Worth Club, 12th Floor, Fort Worth Club
Building, 306 West 7th Street, Fort Worth, Texas on Wednesday, April 26, 1995 at
10:00 a.m., Fort Worth Time, for the following purposes:
(1) To elect ten (10) persons to serve as directors of the Company to
hold office until the next annual meeting of shareholders or until their
successors are duly elected and qualified.
(2) To ratify the appointment of Coopers & Lybrand as the Company's
independent auditors for the year 1995.
(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of the Common Stock of the Company at the close of
business on March 8, 1995 are entitled to notice of and to vote at the Annual
Meeting. The presence, in person or by proxy, of the holders of a majority of
the issued and outstanding Common Stock entitled to vote at the meeting is
required for a quorum to transact business. The stock transfer books will not be
closed.
Management sincerely desires your presence at the meeting. However, so that
we may be sure that your shares are represented and voted in accordance with
your wishes, please sign and date the enclosed proxy and return it promptly in
the enclosed stamped envelope. If you attend the meeting, you may revoke your
proxy and vote in person.
By Order of the Board of Directors,
HUGH A. SIMPSON
Secretary
Fort Worth, Texas
March 27, 1995
18
CASH AMERICA INTERNATIONAL, INC.
1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102
(PRINCIPAL EXECUTIVE OFFICES)
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1995
SOLICITATION OF PROXIES
The proxy statement and accompanying proxy are furnished in connection with
the solicitation by the Board of Directors of Cash America International, Inc.,
a Texas corporation (the "Company"), of proxies to be voted at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the Fort Worth Club
located on the 12th Floor of the Fort Worth Club Building, 306 West 7th Street,
Fort Worth, Texas on Wednesday, April 26, 1995 at 10:00 a.m., Fort Worth Time
and at any recess or adjournment thereof. The solicitation will be by mail, and
this Proxy Statement and the accompanying form of proxy will be mailed to
shareholders on or about March 27, 1995.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by giving written notice of revocation
to the Secretary of the Company at its principal executive offices or by
executing and delivering a later-dated proxy or by attending the Annual Meeting
and voting his or her shares in person. However, no such revocation shall be
effective until such notice has been received by the Company at or before the
Annual Meeting. Such revocation will not affect a vote on any matters taken
prior to receipt of such revocation. Mere attendance at the Annual Meeting will
not of itself revoke the proxy.
The expense of such solicitation will be borne by the Company and will
include reimbursement paid to brokerage firms and other custodians, nominees and
fiduciaries for their expenses in forwarding solicitation material regarding the
meeting to beneficial owners. The Company has retained Kissel-Blake Inc. to
assist in the solicitation of proxies from shareholders, and will pay such firm
a fee for its services of approximately $4,000.00. Further solicitation of
proxies may be made by telephone, telegraph or oral communication following the
original solicitation by directors, officers and regular employees of the
Company or by its transfer agent who will not be additionally compensated
therefor, but will be reimbursed by the Company for out-of-pocket expenses.
A copy of the Annual Report to Shareholders of the Company for its fiscal
year ended December 31, 1994 is being mailed with this Proxy Statement to all
shareholders entitled to vote, but does not form any part of the information for
solicitation of proxies.
VOTING SECURITIES OUTSTANDING; QUORUM
The record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting was the close of business on March 8, 1995
(the "Record Date"). At the close of business on March 8, 1995, there were
28,577,575 shares of Common Stock, par value $.10 per share, issued and
outstanding, each of which is entitled to one vote on all matters properly
brought before the meeting. There are no cumulative voting rights. The presence
in person or by proxy of the holders of a majority of the issued and outstanding
shares of Common Stock on the Record Date is necessary to constitute a quorum at
the Annual Meeting. Assuming the presence of a quorum, the affirmative vote of a
majority of the shares of Common Stock present, or represented by proxy, and
entitled to vote at the Annual Meeting is necessary for the election of
directors and for ratification of the appointment of independent auditors.
Shares voted for a proposal and shares represented by returned proxies that do
not contain instructions to vote against a proposal
19
or to abstain from voting will be counted as shares cast for the proposal.
Shares will be counted as cast against the proposal if the shares are voted
either against the proposal or to abstain from voting. Broker non-votes will not
change the number of votes for or against the proposal and will not be treated
as shares entitled to vote.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the shareholders of the Company will consider and
vote on the following matters:
(1) The election of ten (10) persons to serve as directors of the
Company to hold office until the next annual meeting of shareholders or
until their successors are duly elected and qualified.
(2) Ratification of the appointment of Coopers & Lybrand as the
Company's independent auditors for the year 1995.
(3) Such other business as may properly come before the Annual Meeting
or any adjournments thereof.
ELECTION OF DIRECTORS
The Company's Board of Directors for the ensuing year will consist of ten
(10) members who are to be elected for a term expiring at the next annual
meeting of shareholders or until their successors shall be elected and shall
have qualified. The following slate of ten nominees has been chosen by the Board
of Directors and the Board recommends that each be elected. Unless otherwise
indicated in the enclosed form of Proxy, the persons named in such proxy intend
to nominate and vote for the election of the following nominees for the office
of director. All of such nominees are presently serving as directors.
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE DURING PAST FIVE YEARS SINCE
------------------------------ ----------------------------------------------------- --------
Jack Daugherty Chairman of the Board and Chief Executive Officer of 1983
(47)(a) the Company since its inception. Mr. Daugherty has
owned and operated pawnshops since 1971.
Morton A. Cohn Mr. Cohn has owned and served as President of Morton 1985
(54) Cohn Investments (a private investment firm) since
1970.
A. R. Dike Mr. Dike has owned and served as Chairman of the 1988
(59)(b) Board and Chief Executive Officer of The Dike Co.,
Inc. (a private insurance agency) for the past twenty
years. He was Chairman and Chief Executive Officer of
The Insurance Alliance, Inc. from January 1988 to
September 1991 and has been Chairman of Willis
Corroon Corporation of Texas since September 1991.
Daniel R. Feehan President and Chief Operating Officer of the Company 1984
(44)(a)(e) since January 1990.
James H. Greer President of Shelton W. Greer Co., Inc. (engineering, 1987
(68)(a)(d) manufacturing, fabrication and installation of
building specialty products) for more than five
years.
B. D. Hunter Mr. Hunter is founder and Chairman of the Board and 1984
(65)(b)(d) Chief Executive Officer of Huntco, Inc. (a holding
company with interests in steel fabrication,
manufacturing, nursing homes, radio broadcasting and
farming).
Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer of 1984
(59)(a)(c)(d)(e) AmeriCredit Corp. (a publicly held company engaged in
the financing of used cars) since July 1988.
2
20
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE DURING PAST FIVE YEARS SINCE
------------------------------ ----------------------------------------------------- --------
Carl P. Motheral Mr. Motheral has served over twenty-five years as 1983
(68)(a)(c) President and Chief Executive Officer and also
Director of Motheral Printing Company (a commercial
printing company).
Samuel W. Rizzo Executive Vice President and Chief Financial Officer 1984
(59)(a)(c)(e) of Service Corporation International ("SCI"), a
publicly held company that owns and operates funeral
homes and related businesses, since February 1990
and, prior to that, Executive Assistant to the
Chairman of the Board of SCI since November 1987.
R. L. Waltrip Chairman of the Board of Directors and Chief 1984
(64)(a)(b)(e) Executive Officer of SCI since 1962.
---------------
(a) Member of Executive Committee.
(b) Member of Executive Compensation Committee.
(c) Member of Audit Committee.
(d) Member of Stock Option Committee.
(e) Member of Finance Committee.
The Board of Directors does not contemplate that any of the above-named
nominees for director will refuse or be unable to accept election as a director
of the Company. Should any of them become unavailable for nomination or election
or refuse to be nominated or accept election as a director of the Company then
the persons named in the enclosed form of proxy intend to vote such shares
represented in such proxy for the election of such other person or persons as
may be nominated or designated by the Board of Directors.
Certain nominees for director of the Company hold directorships in
companies with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934. Mr. Hunter is a director of Mark Twain
Bancshares, Celebrity, Inc., and Huntco Inc. Messrs. Greer and Morris are
directors of AmeriCredit Corp. Messrs. Greer, Hunter, Morris, Rizzo and Waltrip
are directors of SCI. Messrs. Daugherty, Feehan and Rizzo are directors of
Hallmark Financial Services, Inc., which is engaged in the insurance business.
Messrs. Daugherty and Feehan are also directors of KBK Capital Corporation, a
company engaged in the factoring business. Messrs. Waltrip, Greer and Rizzo are
also directors of Tanknology Environmental, Inc., a company engaged in the
environmental services business, primarily testing underground storage tanks.
Also, Mr. Daugherty is a director of Dog World Inc., which sells a variety of
pet services and supplies.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during the fiscal year ended
December 31, 1994. Standing committees of the Board include the Executive
Committee, Audit Committee, Executive Compensation Committee, Stock Option
Committee, and Finance Committee. The Company does not have a Nominating
Committee.
The Executive Committee's principal responsibilities include: (a) approval
of acquisitions, and (b) general review of the Company's financial condition and
results of operations, and (c) exercising other powers of the Board when the
Board is not in session. The Executive Committee held eight meetings during
fiscal 1994.
The Audit Committee's principal responsibilities consist of (a)
recommending the selection of independent accountants, (b) reviewing the scope
of the audit conducted by such auditors, as well as the audit itself, and (c)
reviewing the Company's internal audit activities and matters concerning
financial reporting, accounting and audit procedures, and policies generally.
The Audit Committee held four meetings during fiscal 1994.
3
21
The Stock Option Committee has the general duty to review and approve
granting of stock options. The Stock Option committee administers the Company's
1987 Stock Option Plan (with Stock Appreciation Rights) and the 1989 Key
Employee Plan. The Stock Option Committee did not meet during fiscal year 1994.
The Finance Committee has the responsibility of reviewing and making
recommendations to the Board concerning (a) the Company's credit facilities and
permitted indebtedness, (b) the Company's capital needs and its opportunities in
the capital markets, and (c) other aspects of the Company's financial
strategies, policies and structure. The Finance Committee did not meet in 1994.
All directors attended 75% or more of the total number of meetings of the
Board and of committees on which they serve.
DIRECTORS' COMPENSATION
Directors each receive a retainer of $1,500 per quarter. In addition, Board
members receive $1,500 per quarterly Board meeting attended, Executive Committee
members receive $1,200 for each Executive Committee meeting attended, and all
other committee members receive $750 for each committee meeting attended.
During 1989, the Company adopted the 1989 Non-Employee Director Stock
Option Plan (the "Non-Employee Director Plan"), which provided for the grant to
the Company's non-employee directors of options to purchase the Company's $.10
par value Common Stock. The Non-Employee Director Plan was approved by the
Company's shareholders at the 1990 Annual Meeting. Effective October 25, 1989,
options were granted under the Non-Employee Director Plan in the following
amounts (after adjustment for stock splits in 1990 and 1992): 225,000 shares to
each non-employee director serving on the Executive Committee of the Board of
Directors (i.e., Messrs. Waltrip, Rizzo, Cohn, Motheral and Morris), 150,000
shares to each other non-employee director with at least each two years of
service on the Board of Directors as of the date of grant (i.e., Messrs. Hunter
and Greer), and 120,000 shares to each other non-employee director (i.e., Mr.
Dike). The exercise price for all shares underlying such options was the last
reported sale price of the Common Stock on the American Stock Exchange on the
day preceding the date of grant ($6.33 after adjustment for stock splits in 1990
and 1992). The options granted are for a term of 10 years from the date of
grant. The options may be exercised with respect to 40 per cent of the number of
shares subject to the options six months after the date of grant, and an
additional 10 per cent of the shares subject to the options shall be exercisable
as of the first, second, third, fourth, fifth and sixth anniversaries of the
date of grant, except that in the event of the death or termination of service
as a director by reason of disability, or in the event of a "change in control"
of the Company (as that term is defined in the Non-Employee Director Plan), the
options shall be immediately exercisable in full. An option holder may use
already-owned Common Stock as full or partial payment for the exercise of
options granted under the Non-Employee Director Plan. As a condition to
participation in the Non-Employee Director Plan, each director named above in
this paragraph entered into a Consultation Agreement with the Company dated as
of April 25, 1990. Under these Agreements, the non-employee directors have
agreed to serve the Company in an advisory and consultive capacity. They do not
receive any additional compensation under these Agreements, however.
4
22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company has only one outstanding class of equity securities, its Common
Stock, par value $.10 per share.
The following table sets forth certain information, as of the Record Date,
with respect to each person or entity who is known to the Company to be the
beneficial owner of more than five percent (5%) of the Company's Common Stock.
The information below was derived solely from filings made by such owners with
the Securities and Exchange Commission.
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------------------------------------------------------------ --------- --------
David L. Babson & Co., Inc.............................................. 1,954,400(1) 6.88%
One Memorial Drive
Cambridge, Massachusetts 02142
Shufro, Rose & Ehrman................................................... 1,484,850(2) 5.23%
745 Fifth Avenue
New York, New York 10151
---------------
(1) Based upon information contained in a Schedule 13G, filed with the Company,
which indicates that David L. Babson & Co., Inc. has the voting power with
regard to 937,100 shares and the right to dispose of all 1,954,400 shares.
(2) Based upon information contained in a Schedule 13G, filed with the Company,
which indicates that Shufro, Rose & Ehrman has the voting power with regard
to 146,300 shares and the right to dispose of all 1,484,850 shares.
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock, as of February 27, 1995, by its
directors, nominees for election as directors, named executive officers, and all
directors and executive officers as a group.
AMOUNT AND NATURE
OF
BENEFICIAL PERCENT
NAME OWNERSHIP(1)(2) OF CLASS
---------------------------------------------------------- ----------------- --------
Jack Daugherty............................................ 801,875(3) 2.74%
Morton A. Cohn............................................ 381,298(4) 1.32%
A. R. Dike................................................ 114,000(5) .40%
Daniel R. Feehan.......................................... 386,983(6) 1.34%
James H. Greer............................................ 135,000(7) .47%
B. D. Hunter.............................................. 150,000(8) .52%
Clifton H. Morris, Jr..................................... 204,500(9) .71%
Carl P. Motheral.......................................... 421,565(10) 1.46%
Samuel W. Rizzo........................................... 284,210(11) .99%
R. L. Waltrip............................................. 230,778(12) .80%
Terry R. Kuntz............................................ 38,625(13) .13%
Gregory W. Trees.......................................... 17,715(14) *
Dale R. Westerfeld........................................ 45,535(15) .16%
All Directors and Executive Officers as a group (16
persons)................................................ 3,262,794(16) 10.49%
---------------
* Indicates ownership of less than .1% of the Company's Common Stock.
(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. Unless otherwise indicated, each of the persons named has sole
voting and investment power with respect to the shares reported.
(2) Except for the percentages of certain parties that are based on presently
exercisable options which are indicated in the following footnotes to this
table, the percentages indicated are based on 28,577,575
5
23
shares of Common Stock issued and outstanding on February 27, 1995. In the
case of parties holding presently exercisable options, the percentage
ownership is calculated on the assumption that the shares presently
purchasable or purchasable within the next sixty days underlying such
options are outstanding.
(3) This amount includes 736,375 shares subject to options that are exercisable
within the next sixty days.
(4) This amount includes 68,248 shares held in trust for Mr. Cohn's children
over which Mr. Cohn has voting power only in the form of an irrevocable
voting proxy. Mr. Cohn disclaims any beneficial ownership thereof. Also,
this amount includes 202,500 shares subject to options that are exercisable
within the next sixty days.
(5) Includes 108,000 shares subject to options that are exercisable within the
next sixty days.
(6) This amount includes 280,625 shares subject to options that are exercisable
within the next sixty days. This amount also includes 2,400 shares owned by
Mr. Feehan's wife and 600 shares in the name of Mr. Feehan's children.
(7) Consists of 135,000 shares subject to options that are exercisable within
the next sixty days.
(8) This amount includes 15,000 shares held by a corporation that Mr. Hunter
indirectly controls. Mr. Hunter disclaims beneficial ownership of such
shares. Also, this amount includes 135,000 shares subject to options that
are exercisable within the next sixty days.
(9) This amount includes 2,000 shares owned by Mr. Morris' wife. Also, this
amount includes 202,500 shares subject to options that are exercisable
within the next sixty days.
(10) This amount includes 202,500 shares subject to options that are exercisable
over the next sixty days.
(11) This amount includes 18,600 shares owned by trusts of which Mr. Rizzo is
trustee and 4,000 shares owned by Mr. Rizzo's wife. This amount also
includes 202,500 shares subject to options that are exercisable within the
next sixty days.
(12) This amount includes 202,500 shares subject to options that are exercisable
within the next sixty days.
(13) Consists of 38,625 shares subject to options that are exercisable within
the next 60 days.
(14) This amount includes 15,375 shares subject to options that are exercisable
within the next sixty days.
(15) This amount includes 22,375 shares subject to options that are exercisable
within the next sixty days. This amount also includes 450 shares owned in
the name of Mr. Westerfeld's children.
(16) This amount includes 2,519,375 shares that directors and executive officers
have the right to acquire within the next sixty days through the exercise
of stock options.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's executive officers and directors are required to file under
the Securities Exchange Act of 1934 reports of ownership and changes of
ownership with the Securities and Exchange Commission. Based solely upon
information provided to the Company by individual directors and executive
officers, the Company believes that during the fiscal year ended December 31,
1994 all filing requirements applicable to executive officers and directors have
been complied with, except that Mr. Motheral inadvertently failed to file a Form
4 in a timely manner in connection with the open market purchase of 12,815
shares of the Company's common stock in April 1994 effected by the custodian of
his individual retirement account.
6
24
EXECUTIVE COMPENSATION
The following sets forth information concerning the compensation of the
Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company for the fiscal years shown.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION --
AWARDS
--------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------ UNDERLYING ALL OTHER
NAME AND OTHER ANNUAL OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SARS (#) ($)(1)
-------------------------- ---- --------- -------- --------------- -------------- ------------
Jack R. Daugherty, 1994 360,000 36,000 175,000 42,202
Chairman and CEO 1993 300,000 60,000 25,500 38,399
1992 303,461 -- 20,000 3,399
Daniel R. Feehan, 1994 300,000 28,500 33,200(2) 145,000 29,242
President and Chief 1993 240,000 48,000 20,500 27,721
Operating Officer 1992 242,769 -- 18,500 27,721
Terry R. Kuntz, 1994 215,000 19,000 15,000 4,144
Executive Vice 1993 190,000 19,000 14,500 2,644
President -- Operations(3) 1992 182,700 -- 50,000 151,376
Gregory W. Trees, 1994 137,500 12,500 7,000 2,576
Vice President -- 1993 125,000 9,375 6,500 1,034
Marketing and 1992 96,154 -- 27,500 67,238
Merchandising(4)
Dale R. Westerfeld, 1994 120,000 10,000 6,500 2,473
Vice President -- 1993 97,500 9,750 6,500 644
Chief Financial Officer 1992 98,625 6,750 7,500 644
---------------
(1) The amounts disclosed in this column include:
(a) Company contributions of the following amounts under the Company's
401(k) Employees' Savings Plan on behalf of Mr. Daugherty, $260 in
1992 and 1993 and $3,560 in 1994; Mr. Feehan, $260 in 1992 and 1993
and $2,560 in 1994; Mr. Kuntz, $1,500 in 1994; Mr. Trees, $390 in
1993 and $1,932 in 1994; and Mr. Westerfeld, $1,829 in 1994.
(b) Payment by the Company of premiums of $644 per year for term life
insurance on behalf of each of the named individuals, except that in
1994 the premiums for Messrs. Feehan, Trees and Westerfeld were
$377, $1,066, and $377, respectively.
(c) Payment of the following amounts for additional term life insurance
on behalf of Mr. Daugherty, $2,495 in 1992 and 1993 and $2,998 in
1994; Mr. Feehan, $1,817 in 1992 and 1993 and $1,038 in 1994; and Mr.
Kuntz, $2,000 in 1993 and 1994.
(d) Premium payments under split-dollar life insurance policies on Mr.
Feehan ($25,000 per year for 1992 through 1994) and on Mr.
Daugherty's spouse ($35,000 in 1993 and 1994).
(2) This amount includes a $1,100 per month automobile allowance and a $20,000
annual allowance for professional fees and expenses.
(3) Mr. Kuntz joined the Company on January 15, 1992. The amount in the last
column for fiscal 1992 includes $148,732, consisting of a signing bonus
and an allowance for moving and temporary living expenses.
(4) Mr. Trees joined the Company on March 30, 1992. The amounts in the last
column include $66,809 for fiscal 1992, which consists of a signing bonus
and an allowance for moving and temporary living expenses, and $9,721 for
additional moving and temporary living expenses in fiscal 1993.
7
25
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows all individual grants of stock options to the
named executive officers of the Company during the fiscal year ended December
31, 1994.
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS
SARS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME (#) FISCAL YEAR ($/SH) DATE VALUE($)(1)
-------------------------------------------- --------- ------------ ----------- ---------- -----------
Jack R. Daugherty, 87,500(2) 16.7 7.75 6/30/04 341,250
Chairman and CEO 87,500(3) 16.7 7.75 6/30/99 252,875
Daniel R. Feehan, 72,450(2) 13.8 7.75 6/30/04 282,555
President and Chief 72,550(3) 13.8 7.75 6/30/99 209,670
Operating Officer
Terry R. Kuntz, 15,000(4) 2.9 7.875 7/26/99 42,750
Executive Vice President -- Operations
Gregory W. Trees, 7,000(4) 1.3 7.875 7/26/99 19,950
Vice President -- Marketing and
Merchandising
Dale Westerfeld, 6,500(4) 1.2 7.875 7/26/99 18,525
Vice President -- Chief Financial Officer
---------------
(1) As permitted by the Securities and Exchange Commission's rules on executive
compensation disclosure, the Company used the Black-Scholes model of option
valuation to determine grant date present value. The Company does not
advocate or necessarily agree that the Black-Scholes model can properly
determine the value of an option. Calculations are based upon the following
assumptions: (i) dividend yield of .5% per share based on the Company's
history of dividend payments; (ii) volatility of 33.07 percent; (iii)
exercise of the option at the end of the option term; (iv) a risk-free rate
of return of 6.7% for five-year options and 7.3% for ten-year options
(based on the then quoted yield of Treasury Strips maturing 5 and 10 years
from the grant date, respectively); and (v) a 3% annual discount factor for
vesting limitations.
(2) These stock options become exercisable in seven equal annual installments
beginning one year after the grant date.
(3) These stock options become exercisable in two equal annual installments
beginning one year after the grant date.
(4) These stock options become exercisable in four equal annual installments
beginning one year after the grant date.
8
26
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table provides information concerning option exercises in
fiscal 1994 and the value of unexercised options held by each of the named
executive officers at the end of the Company's last fiscal year.
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
FY-END OPTIONS/SARS AT
(#)(1) FY-END ($)(2)
SHARES --------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
------------------------------------ ------------ ------------ --------------- --------------------
Jack R.Daugherty, 25,500 41,438 736,375/285,625 2,528,599/414,404
Chairman and CEO
Daniel R. Feehan, 22,500 28,125 280,625/175,875 919,674/346,204
President and Chief
Operating Officer
Terry R. Kuntz, -0- N/A 28,625/50,875 24,232/55,196
Executive Vice
President -- Operations
Gregory W. Trees, -0- N/A 15,375/25,625 9,586/27,694
Vice President -- Marketing
and Merchandising
Dale R. Westerfeld, 9,000 14,625 22,375/17,625 50,742/27,882
Vice President & CFO
---------------
(1) These figures reflect the appropriate adjustments for the Company's
three-for-two stock split in May 1990 and the two-for-one stock split in
April 1992.
(2) Values stated are based upon the closing price of $9.875 per share of the
Company's Common Stock on the New York Stock Exchange on December 30, 1994,
the last trading day of the fiscal year.
COMPENSATION COMMITTEE REPORT
The Executive Compensation Committee of the Company's Board of Directors
consists entirely of outside directors of the Company. The Committee oversees
and administers the Company's executive compensation program and administers the
Company's 1994 Long-Term Incentive Plan. Its decisions relating to executive
compensation are reviewed by the full Board of Directors. The Committee held one
meeting during fiscal 1994.
-- OVERALL EXECUTIVE COMPENSATION POLICIES
The basic philosophy of the Company's executive compensation program is to
link the compensation of its executive officers to their contribution toward the
enhancement of shareholder value. Consistent with that philosophy, the program
is designed to meet the following policy objectives:
- Attracting and retaining qualified executives critical to the long-term
success of the Company.
- Tying executive compensation to the Company's general performance and
specific attainment of long-term strategic goals.
- Rewarding executives for contributions to strategic management designed
to enhance long-term shareholder value.
- Providing incentives that align the executive's interest with those of
the Company's shareholders.
9
27
-- ELEMENTS OF EXECUTIVE COMPENSATION
The Company's executive compensation program consists of the following
elements designed to meet the policy objectives set out above:
Base Salary
The Committee set the annual salary of the Company's Chief Executive
Officer and the President and reviewed the annual salaries of the Company's
other executive officers for fiscal 1994. In setting appropriate annual
salaries, the Committee takes into consideration the minimum salaries set forth
in certain executives' employment contracts (described elsewhere in this Proxy
Statement), the level and scope of responsibility, experience, and performance
of the executive, the internal fairness and equity of the Company's overall
compensation structure, and the relative compensation of executives in similar
positions in the marketplace. The Committee relies on information supplied by an
outside compensation consulting firm pertaining to competitive compensation. The
Committee tends to position base salary and annual incentive targets at the 50th
percentile of the competitive market. The Committee believes that very few of
the companies in the peer group described below under "Performance Graph" are
included in the surveys used for compensation comparisons. Those surveys
represent a much broader collection of U.S. companies.
Annual Incentive Compensation
Beginning in fiscal 1989, the Board of Directors adopted an annual
incentive cash bonus plan for its highest ranking executive officers, who for
fiscal 1994 were Messrs. Daugherty and Feehan. Under this plan, such executive
officers could receive an annual incentive cash bonus based on the Company's
annual pre-tax earnings performance measured against the financial plan approved
by the Board of Directors for that year. The incentive bonus ranges from 20
percent to 50 percent of each executive officer's base salary. The 20 percent
bonus is payable upon the Company achieving the specified pre-tax earnings goal,
and additional sums are payable if and to the extent the Company exceeds the
goal, with the full 50 percent payable if the Company exceeds the goal by 5
percent or more.
The Board of Directors adopted a similar bonus plan for the other executive
officers and vice presidents of the Company. For those participants, the
incentive bonus ranges from 10 percent to 20 percent of their base salary.
No bonuses were paid in fiscal 1994 under this plan. However, in 1994 the
Committee elected to award a discretionary bonus to the participants in an
amount less than the minimum bonus payable under the bonus plan (except that, in
Mr. Daugherty's case, the amount equalled the minimum bonus payable under the
bonus plan). The Committee considered this award to be appropriate in light of
the following accomplishments of the Company in 1993: (1) a 21% increase in
total revenues over the prior fiscal year; (2) a 16% year-to-year improvement in
earnings before interest and taxes; (3) the acquisition of the 18-store Express
Cash International pawnbroking chain in Texas; (4) the successful implementation
of expense reduction and cost containment initiatives early in 1993; and (5) the
attainment of a $125,000,000 credit facility with a group of five banks and a
$30,000,000 private placement of notes with an institutional lender.
Stock Options
In furtherance of the objective of providing long-term incentives that
relate to improvement in long-term shareholder value, the Company has awarded
stock options to its executive officers under its 1987 Stock Option Plan (with
Stock Appreciation Rights). As stated elsewhere in this Proxy Statement, this
Plan is administered by the Board's Stock Option Committee. The Company did not
grant any options to its executive officers under this Plan in 1994.
10
28
Long-Term Incentive Plan
Upon the recommendation of the Committee, the Board of Directors adopted
the 1994 Long-Term Incentive Plan in January 1994, and the shareholders of the
Company approved the 1994 Plan at the Annual Meeting in April 1994. The 1994
Plan provides for expanded forms of stock-based long-term incentive compensation
awards. This Plan is intended to further the objective of fostering and
promoting improvement in long-term financial results and increases in
shareholder value. Awards under the 1994 Plan may take the form of restricted
stock grants, stock options, stock appreciation rights, performance share
awards, or a combination of the above. The Company granted options to its
executive officers in 1994 at an exercise price equal to the closing price of
the Company's common stock on the New York Exchange on the day preceding the
date of grant. The options become exercisable in equal increments annually
beginning on the first anniversary of the date of grant. (For an explanation of
the different vesting schedules, see the "Options/SAR Grants in Last Fiscal
Year" table in this Proxy Statement.) This arrangement rewards effective
management that results in long-term increases in the Company's stock price. The
number of options granted to the Company's five highest paid executive officers,
as reflected elsewhere in this Proxy Statement, is based in part on many of the
same considerations underlying the determination of annual base salary. The
Committee relies on its outside compensation consultant to supply market data on
long-term incentives. The committee uses the Black-Scholes model to determine
competitive option awards equal to the 50th percentile of general industry
practices.
Deductibility Cap on Executive Compensation
Beginning in 1994, a new federal tax law disallows corporate deductibility
for certain compensation paid in excess of $1,000,000 to the Chief Executive
Officer and the four other most highly paid executive officers.
"Performance-based compensation," as defined in the tax law, is not subject to
the deductibility limitation, provided certain shareholder approval and other
requirements are met. Although the cash compensation paid to the Company's Chief
Executive Officer and the four other most highly paid executive officers is well
below the $1,000,000 level in each case, the Committee determined that the
Company should seek to ensure that future stock option and performance award
compensation under the 1994 Plan qualifies as "performance-based compensation."
Accordingly, the 1994 Plan is intended to meet the requirements of the new law
and thereby preserve full deductibility of both stock option and stock-based
performance award compensation expense.
-- CEO'S COMPENSATION FOR FISCAL 1994
The fiscal 1994 salary of Mr. Jack R. Daugherty, Chief Executive Officer of
the Company, was based primarily on his rights under his ten-year employment
agreement with the Company dated April 25, 1990, which is described elsewhere in
this Proxy Statement. Under that agreement, Mr. Daugherty's minimum base salary
is $225,000. The Committee has increased Mr. Daugherty's base salary annually
since that time (except in 1993) after taking into consideration the factors
described under "Base Salary" above. For fiscal 1994, the Committee set Mr.
Daugherty's base salary at $360,000. A portion of the increase in Mr.
Daugherty's base salary is attributable to the fact that he did not receive an
increase in 1993 from his base salary for 1992. In addition, the Committee
approved the payment of a $36,000 bonus to Mr. Daugherty in 1994 for the reasons
described above in "Annual Incentive Compensation." The Committee believes that
the total cash compensation paid to Mr. Daugherty was appropriate in light of
the Company's accomplishments in 1994, including the following: (1) a 21%
increase in revenue net of cost of goods sold; (2) a 24% increase in income from
operations; and (3) the acquisition of the Svensk Pantbelaning pawnbroking
chain, the largest chain of pawnshops in Sweden.
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These 1994 accomplishments also support the Committee's belief that the
fiscal 1994 cash compensation of the Company's other executive officers was set
at appropriate levels.
EXECUTIVE COMPENSATION COMMITTEE
R. L. Waltrip, Chairman
A. R. Dike
B. D. Hunter
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the preceding report and the Performance Graph on Page 13
shall not be incorporated by reference into any such filings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors serve on the Executive Compensation
Committee of the Company's Board of Directors: A. R. Dike, B. D. Hunter, and R.
L. Waltrip.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
As a condition to receiving grants of options under the 1989 Key Employee
Stock Option Plan for Cash America International, Inc. discussed below, the
recipients of the options entered into employment agreements with the Company
during fiscal 1990. The agreements contained initial terms of five years (ten
years in the case of Mr. Daugherty), and compensation thereunder is determined
annually by the Company's Board of Directors, subject to minimum annual
compensation for Messrs. Daugherty and Feehan of $225,000 and $190,000,
respectively. Included in each agreement is a covenant of the employee not to
compete with the Company during the term of his employment and for a period of
three years thereafter. The employment agreements also provide that if the
employee is terminated by the Company other than for cause, the Company will pay
to the employee the remainder of his current year's salary (undiscounted) plus
the discounted present value (employing an interest rate of 8%) of two
additional years' salary. In the event the employee resigns or is terminated
other than for cause within twelve months after a "change in control" of the
Company (as that term is defined in the employment agreement), the employee will
be entitled to earned and vested bonuses at the date of termination plus the
remainder of his current year's salary (undiscounted) plus the present value
(employing an interest rate of 8%) of two additional years' salary (for which
purpose "salary" includes the annual rate of compensation immediately prior to
the "change in control" plus the average annual cash bonus for the immediately
preceding three year period). Effective January 15, 1992, the Company entered
into a similar employment agreement with Terry R. Kuntz, who joined the Company
as its Executive Vice President -- Operations. The agreement provides for
minimum annual compensation to Mr. Kuntz of $190,000, and the term of the
agreement expires contemporaneously with the expiration of the agreement with
Mr. Feehan. The Company also entered into a similar employment agreement
effective March 30, 1992 with Gregory W. Trees, Vice President -- Marketing and
Merchandising. It provides for minimum annual compensation of $125,000. The
primary term of the agreement expires on March 31, 1995 and is followed by two
one-year renewal terms.
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PERFORMANCE GRAPH
The following Performance Graph shows the changes over the past five year
period in the value of $100 invested in: (1) the Company's Common Stock, (2) the
Standard & Poor's 500 Index, and (3) the common stock of a peer group of
companies whose returns are weighted according to their respective market
capitalizations. The values of each investment as of the beginning of each year
are based on share price appreciation and the reinvestment of dividends. The
peer group consists of the following companies, whose businesses taken as a
whole resemble the Company's unique combination of consumer lending and retail
activities: Beneficial Corp., Household International, Circuit City Stores,
Jewelmaster, Inc., Peoples Jewellers, MacFrugal's Bargains, Luria (L.) & Sons,
Inc., Oshman's Sporting Goods, Lowe's Corp., and Tandy Corp.
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN 1989 -- 1994
[GRAPH]
MEASUREMENT PERIOD CASH AMERICA PEER GROUP
(FISCAL YEAR COVERED) INTERNATIONAL S&P 500 INDEX
1989 100 100 100
1990 101 97 74
1991 129 126 104
1992 146 136 130
1993 127 150 184
1994 134 152 202
Data Source: S&P Compustat Services
TRANSACTIONS WITH MANAGEMENT
The Board of Directors of the Company adopted an officer stock loan program
in 1994. The purpose of the program is (i) to facilitate and encourage the
ownership of Company common stock by the officers of the Company and (ii) to
establish the terms for stock loan transactions with officers. Participants in
the program can utilize loan proceeds to acquire and hold common stock of the
Company by means of option exercises or otherwise. The stock to be held as a
result of the loan must be pledged to the Company to secure the obligation to
repay the loan. The loan proceeds for a particular borrowing may not exceed a
certain percentage of the then current value of the stock to be pledged, with
that percentage varying depending on whether the stock is acquired through
option exercise or otherwise. Under the terms of the loan, interest accrues at
the rate of 1% over a designated bank's "prime rate." Interest is payable
annually and may be paid with additional loan proceeds, provided that the
outstanding aggregate principal balance of the officer's loan would not exceed
the then aggregate value of the pledged stock that would secure the loan. The
limit on the principal balance that a participant may have outstanding under
this program is three times annual base salary for executive officers and twice
the amount of annual base salary for other officers. The aggregate principal
balance of all outstanding loans under the program may not exceed $5,000,000 at
any time. A participant may not obtain additional loan proceeds at any time when
his then outstanding principal balance would exceed the aggregate value of his
pledged stock. If that outstanding balance exceeds the value of the pledged
stock for a period of
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24 consecutive months, the borrower must repay the principal balance in 20 equal
quarterly installments. As of December 31, 1994, Messrs. Daugherty, Feehan and
Westerfeld had stock loans outstanding under this program in the aggregate
principal amounts of $450,500, $717,500, and $116,000, respectively.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand served as independent public accountants for the Company
for fiscal 1994 and has reported on the Company's financial statements. The
Board of Directors of the Company has selected Coopers & Lybrand of Fort Worth,
Texas to audit the accounts of the Company for the fiscal year ending December
31, 1995 and recommends to the shareholders to ratify this selection for the
ensuing fiscal year ending December 31, 1995. The Company has been advised that
Coopers & Lybrand has no relationship with the Company or its subsidiaries other
than that arising from the firm's employment as auditors. The affirmative vote
of a majority of the outstanding shares of Common Stock present at the Annual
Meeting in person or by proxy is necessary for the ratification of the
appointment of Coopers & Lybrand as independent public accountants.
A representative of Coopers & Lybrand is expected to be present at the
Annual Meeting and will be afforded an opportunity to make a statement and will
be available to respond to appropriate questions at such meeting.
While shareholder ratification is not required for the selection of Coopers
& Lybrand since the Board of Directors has the responsibility for the selection
of the Company's independent public accountants, the selection is being
submitted for ratification at the Annual Meeting with a view towards soliciting
the shareholders' opinion thereon, which opinion will be taken into
consideration in future deliberations.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF COOPERS & LYBRAND AS
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE 1995 FISCAL YEAR.
OTHER BUSINESS
Any proposal to be presented by a shareholder at the Company's 1996 Annual
Meeting of Shareholders must be presented to the Company at least 120 days prior
to the date that the Company mails the notice for such meeting. It is estimated
such deadline will be November 20, 1995, with the mailing of such notice to be
approximately March 19, 1996.
It is important that proxies be returned promptly to avoid unnecessary
expense. Therefore, shareholders are urged, regardless of the number of shares
of stock owned, to date, sign and return the enclosed proxy in the enclosed
reply envelope.
By Order of the Board of Directors
HUGH A. SIMPSON
Secretary
March 27, 1995
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