Cash America Reports Second Quarter Net Income And Declares Dividend

Cash America International, Inc. (NYSE: CSH) reported today that its net income for the second quarter ended June 30, 2013 was $25,132,000 (81 cents per share), which compares to the second quarter 2012 net income of $29,820,000 (94 cents per share). Earnings per share for the second quarter of 2013 were in line with the Company’s pre-announced earnings issued on July 15, 2013. The reduction in earnings for the second quarter of 2013, when compared to the second quarter of 2012, is primarily attributable to a decline in gross profit on disposition proceeds primarily associated with the commercial sales of refined gold in the Company’s Domestic Retail Services Segment. The second quarter earnings fell short of the Company’s published earnings guidance primarily due to reduced customer demand for the loan products provided through the Company’s Domestic Retail Services Segment, higher expenses for health insurance and personnel costs and additional interest expense associated with the $300 million senior note offering which closed in early May.

Total revenue for the second quarter ended June 30, 2013 was $411.0 million compared to $411.6 million in the second quarter of 2012. Net revenue, which is total revenue less cost of merchandise sold and loan loss provision expense, was up 5% to $244.8 million for the three-month period ended June 30, 2013 compared to the prior year primarily due to growth in the Company’s E-Commerce Segment. The E-Commerce Segment posted higher total revenue levels and lower loan losses as a percentage of revenue leading to a 22% increase in net revenue, which reached $106.0 million for the second quarter ended June 30, 2013 compared to $86.6 million in the same quarter in 2012. The E-Commerce Segment generated income from operations of $36.4 million in the second quarter of 2013, representing an increase of 21% compared to the same period in 2012.

Commenting on the results of the quarter, Daniel R. Feehan, President and Chief Executive Officer of Cash America said, “The overall financial results for the second quarter reflect the trends that we have experienced over the past four quarters. Our Domestic Retail Services Segment has faced an industry-wide challenge of adjusting to the rapidly changing environment for the commercial sales of scrap gold and to historically tepid loan demand. At the same time, our E-Commerce Segment remains a bright spot for our enterprise with ongoing growth in its revenue and earnings associated with its diversification of loan products in both the U.S. and international markets. We expect the trends reflected in our second quarter results will continue through the balance of 2013.”

For the first six months of fiscal year 2013, total revenue increased 1% to $879.1 million compared to $869.1 million for the same period in 2012 and net revenue for the same comparison period was up 5% reaching $516.7 million in 2013 versus $490.4 million in 2012. The Company posted net income of $69,058,000 ($2.23 per share) for the first six months of fiscal year 2013 compared to $71,287,000 ($2.24 per share) for the same period in 2012.

Cash America will host a conference call to discuss the second quarter results on Thursday, July 25, at 7:00 AM CDT. A live webcast of the call will be available on the Investor Relations section of the Company’s corporate website ( http://www.cashamerica.com). To listen to the live call, please go to the website at least fifteen minutes early to register, download, and install any necessary audio software. A replay will be available on the Company’s website following the call.

Additionally, the Company announced that the Board of Directors, at its regularly scheduled quarterly meeting, declared a $0.035 (3.5 cents) per share cash dividend on common stock outstanding. The dividend will be paid at the close of business on August 21, 2013 to shareholders of record on August 7, 2013.

Outlook for the Third Quarter of 2013 and Related Fiscal Year

Management believes that the opportunities for growth in revenue and earnings will be largely associated with the customer demand for the credit products provided by the Company, which take the form of pawn loans and consumer loans and the disposition of unredeemed collateral by way of consumer spending on retail sales and the commercial sale of refined gold and diamonds. Other elements that could affect the growth in revenue include the regulatory governance of consumer loan products, the continued development and growth of new lending products offered by the Company’s E-Commerce Segment, the development and growth of the Company’s Mexico-based pawn operations, and the prevailing market price of gold. As the Company enters the third quarter of 2013, management anticipates that demand for the Company’s consumer loan products in its Retail Services Segment will continue on a moderate pace similar to the pace we experienced in the second quarter of 2013, which will be partially offset by growth in the E-Commerce Segment. Demand for the Company’s pawn lending products continued to prove challenging in the second quarter and management expects future growth in its pawn lending business, but is reserved about expectations for the remainder of 2013.

Based on its views and on the preceding factors, management expects the third quarter 2013 net income per share to be between 75 cents and 85 cents per share compared to 37 cents per share in the third quarter of 2012, which included unusual items mostly related to the Company’s reorganization of its Mexico based pawn operations in 2012 that reduced net income and earnings per share by $20.4 million and 65 cents per share, respectively. Based on the Company’s results through the first half of 2013, which produced earnings per share of $2.23, and the factors noted above for the remainder of 2013, management expects its fiscal year 2013 earnings per share to be in a range of between $4.15 and $4.35 per share, compared to $3.42 per share in fiscal 2012, which included $25.4 million (81 cents per share) related to the Mexico reorganization, $8.4 million (27 cents per share) related to the Ohio refund expense, and $2.5 million (7 cents per share) related to expenses associated with the July 2012 withdrawal of the Enova International, Inc. proposed initial public offering.

About the Company

As of June 30, 2013, Cash America International, Inc. operated 964 total locations offering specialty financial services to consumers, which included the following:
  • 827 lending locations in 22 states in the United States primarily under the names “Cash America Pawn,” “SuperPawn,” “Cash America Payday Advance,” and “Cashland;”
  • 47 pawn lending locations in central and southern Mexico under the name “Cash America casa de empeño;” and
  • 90 check cashing centers (all of which are unconsolidated franchised check cashing centers) operating in 14 states in the United States under the name “Mr. Payroll.”

Additionally, as of June 30, 2013, the Company offered consumer loans over the Internet to customers:

For additional information regarding the Company and the services it provides, visit the Company’s websites located at:

http://www.cashamerica.com
 

http://www.poundstopocket.co.uk

http://www.enova.com

http://www.dollarsdirect.com.au

http://www.cashnetusa.com

http://www.dollarsdirect.ca

http://www.netcredit.com

http://www.goldpromise.com

http://www.cashlandloans.com

http://www.mrpayroll.com

http://www.quickquid.co.uk

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release contains forward-looking statements about the business, financial condition, operations and prospects of the Company. The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, without limitation: the effect of or changes in domestic and foreign pawn, consumer credit, tax and other laws and governmental rules and regulations applicable to the Company's business or changes in the interpretation or enforcement thereof; the anticipated regulation of providers of consumer financial products and services by the Consumer Financial Protection Bureau; public perception of the Company’s business, including its consumer loan business and its business practices; the deterioration of the political, regulatory or economic environment in foreign countries where the Company operates or in the future may operate; fluctuations, including a sustained decrease, in the price of gold or deterioration in economic conditions; the effect of any current or future litigation proceedings or any judicial decisions or rule-making that affect the Company, its products or its arbitration agreements; the actions of third parties who provide, acquire or offer products and services to, from or for the Company; changes in demand for the Company’s services, the Company’s ability to attract and retain qualified executive officers; a prolonged interruption in the Company’s operations of its facilities, systems and business functions, including its information technology and other business systems; the ability of the Company to open new locations in accordance with its plans or to successfully integrate newly acquired businesses into the Company’s operations; changes in competition; interest rate and foreign currency exchange rate fluctuations; changes in the capital markets; changes in the Company’s ability to satisfy its debt obligations or to refinance existing debt obligations or obtain new capital to finance growth; security breaches, cyber attacks or fraudulent activity; compliance with laws and regulations applicable to international operations; the implementation of new, or changes in the interpretation of existing, accounting principles or financial reporting requirements; acts of God, war or terrorism, pandemics and other events; the effect of any of such changes on the Company’s business or the markets in which it operates; and other risks and uncertainties indicated in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this release, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of this release.
 
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
HIGHLIGHTS OF CONSOLIDATED RESULTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
 
    Three Months Ended   Six Months Ended
June 30, June 30,
2013   2012 2013   2012
 
Consolidated Operations:
Total revenue $ 410,951 $ 411,644 $ 879,079 $ 869,132
Net revenue 244,761 233,608 516,702 490,392
Total expenses       195,513       179,377     389,868       364,153
 
Income from Operations $ 49,248 $ 54,231 $ 126,834 $ 126,239
 
Income before income taxes       40,390       47,283     110,106       112,114
 
Net Income     $ 25,444     $ 29,220   $ 69,366     $ 69,743
 
Net (income) loss attributable to the noncontrolling interest       (312 )     600     (308 )     1,544
 
Net Income Attributable to Cash America International, Inc.     $ 25,132     $ 29,820   $ 69,058     $ 71,287
 
Earnings per share:
Net Income attributable to Cash America International, Inc.

common shareholders:
Basic $ 0.88 $ 1.01 $ 2.39 $ 2.41
Diluted $ 0.81 $ 0.94 $ 2.23 $ 2.24
 
Weighted average common shares outstanding:
Basic 28,721 29,645 28,910 29,631
Diluted 30,845 31,822 31,023 31,867

 
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(Unaudited)
      June 30,     December 31,
  2013       2012 2012
 
Assets
Current assets:
Cash and cash equivalents $ 131,905 $ 68,939 $ 63,134
Pawn loans 229,574 232,909 244,640
Consumer loans, net 287,127 226,364 289,418
Merchandise held for disposition, net 155,112 144,814 167,409
Pawn loan fees and service charges receivable 45,566 44,606 48,991
Income taxes receivable 25,495 - -
Prepaid expenses and other assets 30,985 34,578 35,605
Deferred tax assets       43,628         37,846         48,992  
Total current assets 949,392 790,056 898,189
Property and equipment, net 250,842 255,685 261,771
Goodwill 608,242 564,313 608,216
Intangible assets, net 34,067 32,819 36,473
Other assets       21,571         15,503         13,609  
Total assets     $ 1,864,114       $ 1,658,376       $ 1,818,258  
 
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses $ 123,037 $ 93,569 $ 126,664
Customer deposits 12,962 11,537 11,420
Income taxes currently payable - 2,135 5,922
Current portion of long-term debt       22,606         35,939         43,617  
Total current liabilities 158,605 143,180 187,623
Deferred tax liabilities 103,759 93,930 101,711
Noncurrent income tax payable 36,834 2,449 2,703
Other liabilities 1,609 1,137 888
Long-term debt       547,218         438,462         534,713  
Total liabilities     $ 848,025       $ 679,158       $ 827,638  
 
Equity:
Cash America International, Inc. equity:

Common stock, $0.10 par value per share, 80,000,000 shares authorized, 30,235,164 shares issued and outstanding
3,024 3,024 3,024
Additional paid-in capital 156,349 166,135 157,613
Retained earnings 946,483 845,292 879,434
Accumulated other comprehensive (loss) income (362 ) (3,988 ) 3,128

Treasury shares, at cost (2,107,082 shares, 929,223 shares and 1,351,712 shares as of June 30, 2013 and 2012, and as of December 31, 2012, respectively)
      (89,405 )       (34,861 )       (51,304 )
Total Cash America International, Inc. shareholders' equity 1,016,089 975,602 991,895
Noncontrolling interest       -         3,616         (1,275 )
Total equity       1,016,089         979,218         990,620  
Total liabilities and equity     $ 1,864,114       $ 1,658,376       $ 1,818,258  

       

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(Unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
2013     2012 2013     2012
 
Revenue
Pawn loan fees and service charges $ 72,728 $ 72,051 $ 148,642 $ 144,950
Proceeds from disposition of merchandise 131,532 155,956 310,249 364,339
Consumer loan fees 202,431 180,722 412,636 353,562
Other       4,260         2,915         7,552         6,281  
Total Revenue       410,951         411,644         879,079         869,132  
Cost of Revenue
Disposed merchandise 88,961 105,639 210,296 243,960
Consumer loan loss provision       77,229         72,397         152,081         134,780  
Total Cost of Revenue       166,190         178,036         362,377         378,740  
 
Net Revenue       244,761         233,608         516,702         490,392  
Expenses
Operations and administration 177,513 164,190 354,337 334,345
Depreciation and amortization       18,000         15,187         35,531         29,808  
Total Expenses       195,513         179,377         389,868         364,153  
Income from Operations 49,248 54,231 126,834 126,239
Interest expense (8,903 ) (6,693 ) (16,348 ) (13,869 )
Interest income 5 28 68 57
Foreign currency transaction gain (loss) 65 (252 ) (312 ) (165 )
Equity in loss of unconsolidated subsidiary       (25 )       (31 )       (136 )       (148 )
Income before Income Taxes 40,390 47,283 110,106 112,114
Provision for income taxes       14,946         18,063         40,740         42,371  
Net Income 25,444 29,220 69,366 69,743
Net (income) loss attributable to the noncontrolling interest       (312 )       600         (308 )       1,544  
Net Income Attributable to Cash America International, Inc.     $ 25,132       $ 29,820       $ 69,058       $ 71,287  
Earnings Per Share:
Net Income attributable to Cash America International, Inc. common shareholders:
Basic $ 0.88 $ 1.01 $ 2.39 $ 2.41
Diluted $ 0.81 $ 0.94 $ 2.23 $ 2.24
Weighted average common shares outstanding:
Basic 28,721 29,645 28,910 29,631
Diluted 30,845 31,822 31,023 31,867
Dividends declared per common share $ 0.035 $ 0.035 $ 0.070 $ 0.070

   
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIESPAWN LENDING ACTIVITIES – FINANCIAL AND OPERATING DATA
 

The following tables outline certain data related to the pawn loan activities of Cash America International, Inc. and its subsidiaries (the “Company”) as of and for the three and six months ended June 30, 2013 and 2012 (dollars in thousands).
 
As of June 30,
2013     2012     Change     % Change
Ending pawn loan balances
Domestic retail services $ 224,622 $ 221,572 $ 3,050 1.4 %
Foreign retail services       4,952         11,337         (6,385 )     (56.3 )%
Consolidated pawn loan balances     $ 229,574       $ 232,909       $ (3,335 )     (1.4 )%
 
Ending merchandise balance, net
Domestic retail services $ 149,244 $ 132,758 $ 16,486 12.4 %
Foreign retail services       5,868         12,056         (6,188 )     (51.3 )%
Consolidated merchandise balance, net     $ 155,112       $ 144,814       $ 10,298       7.1 %
 
Three Months Ended June 30,
2013 2012 Change % Change
Pawn loan fees and service charges
Domestic retail services $ 70,802 $ 68,185 $ 2,617 3.8 %
Foreign retail services       1,926         3,866         (1,940 )     (50.2 )%
Consolidated pawn loan fees and service charges     $ 72,728       $ 72,051       $ 677       0.9 %
 
Average pawn loan balance outstanding
Domestic retail services $ 211,195 $ 207,195 $ 4,000 1.9 %
Foreign retail services       5,237         13,661         (8,424 )     (61.7 )%
Consolidated average pawn loans outstanding     $ 216,432       $ 220,856       $ (4,424 )     (2.0 )%
 
Amount of pawn loans written and renewed
Domestic retail services $ 234,327 $ 231,354 $ 2,973 1.3 %
Foreign retail services       15,166         32,240         (17,074 )     (53.0 )%
Consolidated amount of pawn loans written and renewed     $ 249,493       $ 263,594       $ (14,101 )     (5.3 )%
 
Average amount per pawn loan (in ones)
Domestic retail services $ 126 $ 129 $ (3 ) (2.3 )%
Foreign retail services $ 89 $ 84 $ 5 6.0 %
Consolidated average amount per pawn loan (in ones)     $ 123       $ 121       $ 2       1.7 %
 
Annualized yield on pawn loans
Domestic retail services 134.5 % 132.4 %
Foreign retail services 147.5 % 113.8 %
Consolidated annualized yield on pawn loans       134.8 %       131.2 %              
 
Gross profit margin on disposition of merchandise
Domestic retail services 32.9 % 34.0 %
Foreign retail services 16.4 % 10.3 %
Gross profit margin on disposition of merchandise       32.4 %       32.3 %              
 
Merchandise turnover
Domestic retail services 2.4 2.9
Foreign retail services 2.6 3.5
Consolidated merchandise turnover       2.4         3.0                

   

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

PAWN LENDING ACTIVITIES – FINANCIAL AND OPERATING DATA
 
Six Months Ended June 30,
2013     2012     Change     % Change
Pawn loan fees and service charges
Domestic retail services $ 144,976 $ 137,598 $ 7,378 5.4 %
Foreign retail services       3,666         7,352         (3,686 )     (50.1 )%
Consolidated pawn loan fees and service charges     $ 148,642       $ 144,950       $ 3,692       2.5 %
 
Average pawn loan balance outstanding
Domestic retail services $ 219,709 $ 214,058 $ 5,651 2.6 %
Foreign retail services       4,858         14,613         (9,755 )     (66.8 )%
Consolidated average pawn loans outstanding     $ 224,567       $ 228,671       $ (4,104 )     (1.8 )%
 
Amount of pawn loans written and renewed
Domestic retail services $ 449,703 $ 436,809 $ 12,894 3.0 %
Foreign retail services       28,259         69,636         (41,377 )     (59.4 )%
Consolidated amount of pawn loans written and renewed     $ 477,962       $ 506,445       $ (28,483 )     (5.6 )%
 
Average amount per pawn loan (in ones)
Domestic retail services $ 128 $ 130 $ (2 ) (1.5 )%
Foreign retail services $ 87 $ 92 $ (5 ) (5.4 )%
Consolidated average amount per pawn loan (in ones)     $ 124       $ 123       $ 1       0.8 %
 
Annualized yield on pawn loans
Domestic retail services 133.1 % 129.3 %
Foreign retail services 152.2 % 101.2 %
Consolidated annualized yield on pawn loans       133.5 %       127.5 %              
 
Gross profit margin on disposition of merchandise
Domestic retail services 32.6 % 34.7 %
Foreign retail services 18.3 % 10.0 %
Consolidated gross profit margin on disposition of merchandise       32.2 %       33.0 %              
 
Merchandise turnover
Domestic retail services 2.7 3.2
Foreign retail services 2.6 3.8
Consolidated merchandise turnover       2.7         3.3                

   

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIESMERCHANDISE DISPOSITION, GROSS PROFIT AND OPERATING DATA
 

Profit from the disposition of merchandise represents the proceeds received from the disposition of merchandise in excess of the cost of disposed merchandise, which is the Company's cost basis in the pawn loan or the amount paid for purchased merchandise. The following tables summarize the proceeds from the disposition of merchandise and the related profit for the three and six months ended June 30, 2013 and 2012 (dollars in thousands).
 
Three Months Ended June 30,
2013   2012
Retail   Commercial   Total Retail   Commercial   Total
Proceeds from disposition $ 89,836 $ 41,696 $ 131,532 $ 83,623 $ 72,333 $ 155,956
Gross profit on disposition $ 33,385 $ 9,186 $ 42,571 $ 31,701 $ 18,616 $ 50,317
Gross profit margin 37.2 % 22.0 % 32.4 % 37.9 % 25.7 % 32.3 %
Percentage of total gross profit 78.4 % 21.6 % 100.0 % 63.0 % 37.0 % 100.0 %
 
Six Months Ended June 30,
2013 2012
Retail Commercial Total Retail Commercial Total
Proceeds from disposition $ 202,246 $ 108,003 $ 310,249 $ 195,655 $ 168,684 $ 364,339
Gross profit on disposition $ 75,375 $ 24,578 $ 99,953 $ 73,447 $ 46,932 $ 120,379
Gross profit margin 37.3 % 22.8 % 32.2 % 37.5 % 27.8 % 33.0 %
Percentage of total gross profit 75.4 % 24.6 % 100.0 % 61.0 % 39.0 % 100.0 %
 

The following table summarizes the age of merchandise held for disposition before valuation allowance of $0.9 million and $0.7 million as of June 30, 2013 and 2012, respectively (dollars in thousands).
      As of June 30,
2013     2012
Amount     % Amount     %
Jewelry - held for one year or less $ 90,105 57.8 $ 89,125 61.3
Other merchandise - held for one year or less       56,398     36.1       49,666     34.1
Total merchandise held for one year or less       146,503     93.9       138,791     95.4
Jewelry - held for more than one year 3,856 2.4 2,562 1.8
Other merchandise - held for more than one year       5,702     3.7       4,161     2.8
Total merchandise held for more than one year       9,558     6.1       6,723     4.6
Total merchandise held for disposition     $ 156,061     100.0     $ 145,514     100.0
 

   
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIESCONSUMER LOAN FINANCIAL AND OPERATING DATA
 

The following tables set forth consumer loan fees by segment, adjusted for the deduction of the loan loss provision for the three and six months ended June 30, 2013 and 2012 (dollars in thousands, except where otherwise noted).
 
Three Months Ended June 30,
2013   2012

RetailServices
  E-Commerce   Total

RetailServices
  E-Commerce   Total
Interest and fees on short-term loans $ 23,529 $ 103,031 $ 126,560 $ 25,894 $ 112,046 $ 137,940
Interest and fees on line of credit accounts - 28,283 28,283 - 14,270 14,270
Interest and fees on installment loans       3,118       44,470       47,588       2,685       25,827       28,512  
Consumer loan fees $ 26,647 $ 175,784 $ 202,431 $ 28,579 $ 152,143 $ 180,722
Consumer loan loss provision       7,112       70,117       77,229       6,603       65,794       72,397  

Consumer loan fees, net of loss provision
    $ 19,535     $ 105,667     $ 125,202     $ 21,976     $ 86,349     $ 108,325  
 
Year-over-year change - $ $ (2,441) $ 19,318 $ 16,877 $ (588) $ 21,628 $ 21,040
Year-over-year change - % (11.1) % 22.4 % 15.6 % (2.6) % 33.4 % 24.1 %

Consumer loan loss provision as a % of consumer loan fees

 
      26.7 %     39.9 %     38.2 %     23.1 %     43.2 %     40.1 %
 
Six Months Ended June 30,
2013 2012

RetailServices
E-Commerce Total

RetailServices
E-Commerce Total
Interest and fees on short-term loans $ 48,736 $ 218,039 $ 266,775 $ 52,805 $ 221,777 $ 274,582
Interest and fees on line of credit accounts - 51,517 51,517 - 25,921 25,921
Interest and fees on installment loans       6,233       88,111       94,344       5,146       47,913       53,059  
Consumer loan fees $ 54,969 $ 357,667 $ 412,636 $ 57,951 $ 295,611 $ 353,562
Consumer loan loss provision       13,890       138,191       152,081       11,069       123,711       134,780  
Consumer loan fees, net of loss provision     $ 41,079     $ 219,476     $ 260,555     $ 46,882     $ 171,900     $ 218,782  
 
Year-over-year change - $ $ (5,803) $ 47,576 $ 41,773 $ 1,666 $ 46,204 $ 47,870
Year-over-year change - % (12.4) % 27.7 % 19.1 % 3.7 % 36.8 % 28.0 %

Consumer loan loss provision as a % of consumer loan fees
      25.3 %     38.6 %     36.9 %     19.1 %     41.8 %     38.1 %
 

In addition to reporting consumer loans owned by the Company and consumer loans guaranteed by the Company, which are either generally accepted accounting principles (“GAAP”) items or disclosures required by GAAP, the Company has provided combined consumer loans, which is a non-GAAP measure. In addition, the Company has reported consumer loans written and renewed, which is statistical data that is not included in the Company’s financial statements. The Company also reports allowances and liabilities for estimated losses on consumer loans individually and on a combined basis, which are GAAP measures that are included in the Company’s financial statements.

Management believes these measures provide investors with important information needed to evaluate the magnitude of potential loan losses and the opportunity for revenue performance of the consumer loan portfolio on an aggregate basis. Management believes the comparison of the aggregate amounts from period to period is more meaningful than comparing only the residual amount on the Company’s balance sheet since both revenue and the consumer loan loss provision are impacted by the aggregate amount of loans owned by the Company and those guaranteed by the Company as reflected in its financial statements.

   

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSUMER LOAN FINANCIAL AND OPERATING DATA
 

The following tables summarize selected data related to the Company’s consumer loan activities as of and for the three and six months ended June 30, 2013 and 2012 (dollars in thousands, except where otherwise noted).
 
Three Months Ended Six Months Ended
June 30, June 30,
2013     2012 2013   2012

Combined consumer loan loss provision as a % of combined consumer loans written and renewed(a)
9.3 % 8.8 % 9.2 % 8.4 %

Charge-offs (net of recoveries) as a % of combined consumer loans written and renewed(a)
8.9 % 7.2 % 9.5 % 8.0 %
 

Combined consumer loan loss provision as a % of consumer loan fees
    38.2 %     40.1 %     36.9 %     38.1 %

(a)

The disclosure regarding the amount and number of consumer loans written and renewed is statistical data that is not included in the Company’s financial statements.
 
 
  As of June 30,
2013 2012

CompanyOwned(a)
 

Guaranteedby theCompany(a)
  Combined(b)

CompanyOwned(a)

Guaranteedby theCompany(a)
Combined(b)
Ending consumer loan balances:

Retail Services
Short-term loans $ 45,324 $ 5,338 $ 50,662 $ 46,700 $ 7,055 $ 53,755
Installment loans     9,819       10,131       19,950       9,146       6,296       15,442  
Total Retail Services, gross     55,143       15,469       70,612       55,846       13,351       69,197  

E-Commerce
Domestic
Short-term loans 31,594 35,115 66,709 35,644 37,093 72,737
Line of credit accounts 47,368 - 47,368 30,595 - 30,595
Installment loans     44,509       -       44,509       25,795       -       25,795  
Total Domestic, gross     123,471       35,115       158,586       92,034       37,093       129,127  
 
Foreign
Short-term loans 91,240 301 91,541 94,411 3,541 97,952
Line of credit accounts 10,703 - 10,703 - - -
Installment loans     86,433       -       86,433       54,644       -       54,644  
Total Foreign, gross     188,376       301       188,677       149,055       3,541       152,596  
Total E-Commerce, gross     311,847       35,416       347,263       241,089       40,634       281,723  
 
Total ending loan balance, gross 366,990 50,885 417,875 296,935 53,985 350,920
Less: Allowance and liabilities for losses     (79,863 )     (3,047 )     (82,910 )     (70,571 )     (2,795 )     (73,366 )
Total ending loan balance, net   $ 287,127     $ 47,838     $ 334,965     $ 226,364     $ 51,190     $ 277,554  
Allowance and liability for losses as a % of consumer loan balances, gross(c)     21.8 %     6.0 %     19.8 %     23.8 %     5.2 %     20.9 %
 

(a)

GAAP measure. The consumer loan balances guaranteed by the Company represent loans originated by third-party lenders through the Company's credit services organization programs (the “CSO programs”), so these balances are not recorded in the Company’s financial statements. However, the Company has established a liability for estimated losses in support of its guarantee of these loans, which is reflected in the table above and included in its financial statements.

(b)

Except for allowance and liability for estimated losses, amounts represent non-GAAP measures.

(c)

Non-GAAP measure.

   

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIESCONSUMER LOAN FINANCIAL AND OPERATING DATA
 

The following tables summarize the consumer loans written and renewed for the three and six months ended June 30, 2013 and 2012 (dollars in thousands, except where otherwise noted).
 
Three Months Ended June 30,
2013   2012

CompanyOwned(a)
 

Guaranteedby theCompany(a)(b)
  Combined(a)

CompanyOwned(a)
 

Guaranteedby theCompany(a)(b)
  Combined(a)

Amount of consumer loans written and renewed (dollars in thousands):

Retail Services
Short-term loans $ 167,896 $ 26,446 $ 194,342 $ 177,924 $ 35,295 $ 213,219
Installment loans       2,051     5,274     7,325     2,153     4,296     6,449
Total Retail Services       169,947     31,720     201,667     180,077     39,591     219,668

E-Commerce
Domestic
Short-term loans 71,507 163,236 234,743 85,007 181,120 266,127
Line of credit accounts 37,649 - 37,649 29,136 - 29,136
Installment loans       31,385     -     31,385     16,101     -     16,101
Total Domestic       140,541     163,236     303,777     130,244     181,120     311,364
 
Foreign
Short-term loans 249,953 739 250,692 246,373 17,251 263,624
Line of credit accounts 13,484 - 13,484 - - -
Installment loans       64,665     -     64,665     31,728     -     31,728
Total Foreign       328,102     739     328,841     278,101     17,251     295,352
Total E-Commerce       468,643     163,975     632,618     408,345     198,371     606,716
 
Total amount of consumer loans

written and renewed
    $ 638,590   $ 195,695   $ 834,285   $ 588,422   $ 237,962   $ 826,384
 

Number of consumer loans written and renewed (in ones):

Retail Services
Short-term loans 354,546 51,763 406,309 381,179 64,945 446,124
Installment loans       1,798     928     2,726     1,943     567     2,510
Total Retail Services       356,344     52,691     409,035     383,122     65,512     448,634

E-Commerce
Domestic
Short-term loans 242,617 227,956 470,573 270,049 250,776 520,825
Line of credit accounts 139,550 - 139,550 100,144 - 100,144
Installment loans       30,229     -     30,229     15,796     -     15,796
Total Domestic       412,396     227,956     640,352     385,989     250,776     636,765
 
Foreign
Short-term loans 454,293 919 455,212 473,060 23,144 496,204
Line of credit accounts 30,748 - 30,748 - - -
Installment loans       56,679     -     56,679     28,421     -     28,421
Total Foreign       541,720     919     542,639     501,481     23,144     524,625
Total E-Commerce       954,116     228,875     1,182,991     887,470     273,920     1,161,390
 

Total number of consumer loans written and renewed
      1,310,460     281,566     1,592,026     1,270,592     339,432     1,610,024
 

(a)

The disclosure regarding the amount and number of consumer loans written and renewed is statistical data that is not included in the Company’s financial statements.

(b)

Loans guaranteed by the Company represent loans originated by third-party lenders through the CSO programs.

   

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSUMER LOAN FINANCIAL AND OPERATING DATA
 
Six Months Ended June 30,
2013   2012

CompanyOwned(a)
 

Guaranteedby theCompany(a)(b)
  Combined(a)

CompanyOwned(a)
 

Guaranteedby theCompany(a)(b)
  Combined(a)

Amount of consumer loans written and renewed (dollars in thousands):

 

Retail Services
Short-term loans $ 339,816 $ 54,772 $ 394,588 $ 353,598 $ 72,662 $ 426,260
Installment loans       3,497     8,986     12,483     3,664     6,156     9,820
Total Retail Services       343,313     63,758     407,071     357,262     78,818     436,080

E-Commerce
Domestic
Short-term loans 144,135 337,502 481,637 166,688 343,402 510,090
Line of credit accounts 66,455 - 66,455 47,513 - 47,513
Installment loans       56,056     -     56,056     27,367     -     27,367
Total Domestic       266,646     337,502     604,148     241,568     343,402     584,970
 
Foreign
Short-term loans 516,280 13,971 530,251 486,895 35,048 521,943
Line of credit accounts 13,484 - 13,484 - - -
Installment loans       105,250     -     105,250     56,410     -     56,410
Total Foreign       635,014     13,971     648,985     543,305     35,048     578,353
Total E-Commerce       901,660     351,473     1,253,133     784,873     378,450     1,163,323
 

Total amount of consumer loans written and renewed:
    $ 1,244,973   $ 415,231   $ 1,660,204   $ 1,142,135   $ 457,268   $ 1,599,403
 

Number of consumer loans written and renewed (in ones):

Retail Services
Short-term loans 709,859 105,752 815,611 750,563 131,676 882,239
Installment loans       3,194     1,562     4,756     3,480     844     4,324
Total Retail Services       713,053     107,314     820,367     754,043     132,520     886,563

E-Commerce
Domestic
Short-term loans 485,865 463,178 949,043 515,493 469,902 985,395
Line of credit accounts 251,201 - 251,201 171,085 - 171,085
Installment loans       53,414     -     53,414     25,811     -     25,811
Total Domestic       790,480     463,178     1,253,658     712,389     469,902     1,182,291
 
Foreign
Short-term loans 921,197 18,235 939,432 925,263 46,499 971,762
Line of credit accounts 30,748 - 30,748 - - -
Installment loans       89,754     -     89,754     50,203     -     50,203
Total Foreign       1,041,699     18,235     1,059,934     975,466     46,499     1,021,965
Total E-Commerce       1,832,179     481,413     2,313,592     1,687,855     516,401     2,204,256
 

Total number of consumer loans written and renewed
      2,545,232     588,727     3,133,959     2,441,898     648,921     3,090,819
 

(a)

The disclosure regarding the amount and number of consumer loans written and renewed is statistical data that is not included in the Company’s financial statements.

(b)

Loans guaranteed by the Company represent loans originated by third-party lenders through the CSO programs.

                   

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

INCOME FROM OPERATIONS BY OPERATING SEGMENT
 

The following tables contain operating segment data for the three and six months ended June 30, 2013 and 2012 by segment, for the Company’s corporate operations and on a consolidated basis (dollars in thousands).
 
 
Retail Services E-Commerce
Domestic Foreign Total Domestic Foreign Total Corporate Consolidated
 

Three Months Ended June 30, 2013
Revenue
Pawn loan fees and service charges $ 70,802 $ 1,926 $ 72,728 $ - $ - $ - $ - $ 72,728
Proceeds from disposition of merchandise 127,214 4,318 131,532 - - - - 131,532
Consumer loan fees 26,647 - 26,647 87,502 88,282 175,784 - 202,431
Other       1,918     829       2,747     361     16     377     1,136       4,260
Total revenue       226,581     7,073       233,654     87,863     88,298     176,161     1,136       410,951
Cost of revenue
Disposed merchandise 85,352 3,609 88,961 - - - - 88,961
Consumer loan loss provision       7,112     -       7,112     33,343     36,774     70,117     -       77,229
Total cost of revenue       92,464     3,609       96,073     33,343     36,774     70,117     -       166,190
 
Net revenue       134,117     3,464       137,581     54,520     51,524     106,044     1,136       244,761
Expenses
Operations and administration 89,487 3,569 93,056 30,489 34,618 65,107 19,350 177,513
Depreciation and amortization       8,900     430       9,330     3,750     835     4,585     4,085       18,000
Total expenses       98,387     3,999       102,386     34,239     35,453     69,692     23,435       195,513
Income (loss) from operations     $ 35,730   $ (535 )   $ 35,195   $ 20,281   $ 16,071   $ 36,352   $ (22,299 )   $ 49,248

As of June 30, 2013
Total assets $ 1,023,015 $ 123,601 $ 1,146,616 $ 389,155 $ 195,532 $ 584,687 $ 132,811 $ 1,864,114
Goodwill $ 397,876 $ 210,366 $ 608,242
 
Retail Services E-Commerce
Domestic Foreign Total Domestic Foreign Total Corporate Consolidated
 

Three Months Ended June 30, 2012
Revenue
Pawn loan fees and service charges $ 68,185 $ 3,866 $ 72,051 $ - $ - $ - $ - $ 72,051
Proceeds from disposition of merchandise 144,484 11,472 155,956 - - - - 155,956
Consumer loan fees 28,579 - 28,579 73,802 78,341 152,143 - 180,722
Other       2,185     211       2,396     288     11     299     220       2,915
Total revenue       243,433     15,549       258,982     74,090     78,352     152,442     220       411,644
Cost of revenue
Disposed merchandise 95,345 10,294 105,639 - - - - 105,639
Consumer loan loss provision       6,603     -       6,603     30,643     35,151     65,794     -       72,397
Total cost of revenue       101,948     10,294       112,242     30,643     35,151     65,794     -       178,036
Net revenue       141,485     5,255       146,740     43,447     43,201     86,648     220       233,608
Expenses
Operations and administration 88,204 7,822 96,026 25,773 27,778 53,551 14,613 164,190
Depreciation and amortization       7,514     1,121       8,635     2,727     300     3,027     3,525       15,187
Total expenses       95,718     8,943       104,661     28,500     28,078     56,578     18,138       179,377
Income (loss) from operations     $ 45,767   $ (3,688 )   $ 42,079   $ 14,947   $ 15,123   $ 30,070   $ (17,918 )   $ 54,231

As of June 30, 2012
Total assets $ 900,302 $ 113,498 $ 1,013,800 $ 360,912 $ 152,888 $ 513,800 $ 130,776 $ 1,658,376
Goodwill $ 353,945 $ 210,368 $ 564,313

           

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

INCOME FROM OPERATIONS BY OPERATING SEGMENT

 (dollars in thousands)
 
Retail Services E-Commerce
Domestic   Foreign   Total Domestic   Foreign   Total Corporate Consolidated
 

Six Months Ended June 30, 2013
Revenue
Pawn loan fees and service charges $ 144,976 $ 3,666 $ 148,642 $ - $ - $ - $ - $ 148,642
Proceeds from disposition of merchandise 301,364 8,885 310,249 - - - - 310,249
Consumer loan fees 54,969 - 54,969 178,143 179,524 357,667 - 412,636
Other       4,418     922       5,340     802     23     825     1,387       7,552
Total revenue       505,727     13,473       519,200     178,945     179,547     358,492     1,387       879,079
Cost of revenue
Disposed merchandise 203,039 7,257 210,296 - - - - 210,296
Consumer loan loss provision       13,890     -       13,890     63,166     75,025     138,191     -       152,081
Total cost of revenue       216,929     7,257       224,186     63,166     75,025     138,191     -       362,377
 
Net revenue       288,798     6,216       295,014     115,779     104,522     220,301     1,387       516,702
Expenses
Operations and administration 180,189 7,172 187,361 61,244 69,445 130,689 36,287 354,337
Depreciation and amortization       17,701     829       18,530     7,633     1,395     9,028     7,973       35,531
Total expenses       197,890     8,001       205,891     68,877     70,840     139,717     44,260       389,868
Income (loss) from operations     $ 90,908   $ (1,785 )   $ 89,123   $ 46,902   $ 33,682   $ 80,584   $ (42,873 )   $ 126,834
 
Retail Services E-Commerce
Domestic Foreign Total Domestic Foreign Total Corporate Consolidated
 

Six Months Ended June 30, 2012
Revenue
Pawn loan fees and service charges $ 137,598 $ 7,352 $ 144,950 $ - $ - $ - $ - $ 144,950
Proceeds from disposition of merchandise 340,470 23,869 364,339 - - - - 364,339
Consumer loan fees 57,951 - 57,951 142,926 152,685 295,611 - 353,562
Other       5,147     260       5,407     453     5     458     416       6,281
Total revenue       541,166     31,481       572,647     143,379     152,690     296,069     416       869,132
Cost of revenue
Disposed merchandise 222,473 21,487 243,960 - - - - 243,960
Consumer loan loss provision       11,069     -       11,069     52,597     71,114     123,711     -       134,780
Total cost of revenue       233,542     21,487       255,029     52,597     71,114     123,711     -       378,740
 
Net revenue       307,624     9,994       317,618     90,782     81,576     172,358     416       490,392
Expenses
Operations and administration 179,463 16,016 195,479 49,589 54,501 104,090 34,776 334,345
Depreciation and amortization       14,646     2,249       16,895     5,339     563     5,902     7,011       29,808
Total expenses       194,109     18,265       212,374     54,928     55,064     109,992     41,787       364,153
Income (loss) from operations     $ 113,515   $ (8,271 )   $ 105,244   $ 35,854   $ 26,512   $ 62,366   $ (41,371 )   $ 126,239
 

Corporate operations primarily include corporate expenses, such as legal, occupancy, and other costs related to corporate service functions, such as executive oversight, insurance and risk management, public and government relations, internal audit, treasury, payroll, compliance and licensing, finance, accounting, tax and information systems (except for online lending systems, which are included in the e-commerce segment). Corporate income includes miscellaneous income not directly attributable to the Company’s segments. Corporate assets primarily include corporate property and equipment, nonqualified savings plan assets, marketable securities, foreign exchange forward contracts and prepaid insurance.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES LOCATION INFORMATION

Retail Services Segment

The following table sets forth the number of domestic and foreign Company-owned and franchised locations in the Company’s retail services segment offering pawn lending, consumer lending, and other ancillary services as of June 30, 2013 and 2012. The Company’s domestic retail services locations operate under the names “Cash America Pawn,” “SuperPawn,” “Cash America Payday Advance,” “Cashland” and “Mr. Payroll.” In addition, certain domestic retail services locations acquired in late 2012 operate under various names that are expected to be changed to “Cash America Pawn” during 2013. The Company’s foreign retail services locations operate under the name “Cash America casa de empeño.”
   
As of June 30,
2013       2012
Domestic(a)     Foreign     Total       Domestic(a)(b)     Foreign     Total
Retail services locations offering:                
Both pawn and consumer lending 581 - 581 577 - 577
Pawn lending only 169 47 216 130 195 325
Consumer lending only 77 - 77 83 - 83
Other (c)     90     -     90       101     -     101
Total retail services     917     47     964       891     195     1,086
(a) Except as described in (c) below, includes locations operating in 22 and 23 states in the United States as of June 30, 2013 and 2012, respectively.
(b) Includes one unconsolidated franchised location operating under the name “Cash America Pawn” as of June 30, 2012.
(c) As of June 30, 2013 and 2012, includes 90 and 95 unconsolidated franchised check cashing locations, respectively, and as of June 30, 2012, includes six consolidated Company-owned check cashing locations. As of June 30, 2013 and 2012, includes locations operating in 14 and 16 states in the United States, respectively.
 

E-Commerce Segment

As of June 30, 2013 and 2012, the Company’s e-commerce segment operated in 32 states in the United States and in three foreign countries:

During 2013, the e-commerce segment also offered a line of credit product in Mexico under the trade name “Debit Plus.” The Company stopped offering this line of credit product in Mexico during the second quarter of 2013. The results of operations associated with this product are not material to the e-commerce segment or to the Company.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NON-GAAP DISCLOSURE ADJUSTED EARNINGS AND ADJUSTED EARNINGS PER SHARE

Adjusted Earnings and Adjusted Earnings Per Share

In addition to reporting financial results in accordance with GAAP, the Company has provided adjusted earnings and adjusted earnings per share, which are non-GAAP measures. Management believes that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments and amortization methods, which provides a more complete understanding of the Company’s financial performance, competitive position and prospects for the future. Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted earnings and adjusted earnings per share, to assess operating performance and that such measures may highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP.

The following table provides a reconciliation for the three and six months ended June 30, 2013 and 2012 between net income attributable to the Company and diluted earnings per share calculated in accordance with GAAP to adjusted earnings and adjusted earnings per share, respectively, which are shown net of tax (dollars in thousands, except per share data):
     
Three Months Ended June 30, Six Months Ended June 30,
2013   2012 2013   2012
$  

PerDilutedShare(a)
$  

PerDilutedShare(a)
$  

PerDilutedShare(a)
$  

PerDilutedShare(a)

Net income and diluted earnings per share attributable to Cash America International, Inc.
$ 25,132 $ 0.81 $ 29,820 $ 0.94 $ 69,058 $ 2.23 $ 71,287 $ 2.24
Adjustments (net of tax):
Intangible asset amortization 828 0.03 664 0.02 1,661 0.05 1,403 0.04
Non-cash equity-based compensation 770 0.03 942 0.03 1,758 0.05 1,915 0.06

Convertible debt non-cash interest and issuance cost amortization
637 0.02 583 0.02 1,263 0.04 1,166 0.04
Foreign currency transaction loss (gain)       (41)     -     156     -     197     0.01     103     -
Adjusted earnings and adjusted earnings per share     $ 27,326   $ 0.89   $ 32,165   $ 1.01   $ 73,937   $ 2.38   $ 75,874   $ 2.38
 

(a)

Diluted shares are calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the period.
 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NON-GAAP DISCLOSURE ADJUSTED EBITDA

Adjusted EBITDA

The table below shows adjusted EBITDA, a non-GAAP measure that the Company defines as earnings excluding depreciation, amortization, interest, foreign currency transaction gains or losses, equity in earnings or loss of unconsolidated subsidiary and provision for income taxes and including the net income or loss attributable to noncontrolling interests. Management believes adjusted EBITDA is used by investors to analyze operating performance and evaluate the Company’s ability to incur and service debt and its capacity for making capital expenditures. Adjusted EBITDA is also useful to investors to help assess the Company’s liquidity and estimated enterprise value. In addition, management believes that the adjustments shown below, especially the adjustments for charges related to events that occurred during the third and fourth quarters of 2012, such as the withdrawn proposed initial public offering of the Company’s wholly-owned subsidiary, Enova International, Inc. (the “Enova IPO”), the reorganization of the Company's Mexico-based pawn operations (the “Mexico Reorganization”), and the voluntary reimbursements to Ohio customers (the “Ohio Reimbursements”) are useful to investors in order to allow them to compare the Company’s financial results for the current and prior year trailing 12 months. The computation of adjusted EBITDA as presented below may differ from the computation of similarly-titled measures provided by other companies (dollars in thousands):
 
Trailing 12 Months Ended
June 30,
2013     2012
Net income attributable to Cash America

International, Inc.
  $ 105,241   $ 143,891
 
Adjustments:
Charges related to withdrawn proposed Enova IPO(a) 3,112 767
Charges related to Mexico Reorganization(b) 28,873 -
Charges related to Ohio Reimbursements(c) 13,400 -
Depreciation and amortization expenses 68,587 (d) 59,207
Interest expense, net 31,455 27,859
Foreign currency transaction loss 460 1,149
Equity in loss of unconsolidated subsidiary 283 216
Provision for income taxes 75,864 (e) 86,428
Net loss attributable to the noncontrolling interest       (3,954 ) (f)         (2,014 )
Adjusted EBITDA     $ 323,321           $ 317,503  
 
Adjusted EBITDA margin calculated as follows:
Total revenue $ 1,810,377 $ 1,741,393
Adjusted EBITDA     $ 323,321           $ 317,503  
Adjusted EBITDA as a percentage of total revenue       17.9 %           18.2 %
(a)   Represents charges directly related to the proposed Enova IPO that was withdrawn in July 2012, before tax benefit of $1.1 million and $0.3 million for the trailing twelve months ended June 30, 2013 and 2012, respectively.
(b)

Represents charges related to the Mexico Reorganization, before tax benefit of $1.2 million and noncontrolling interest of $2.3 million. Includes $12.6 million and $7.2 million of depreciation and amortization expenses and charges for the recognition of a deferred tax asset valuation allowance, respectively, as noted in (d) and (e) below.
(c) Represents charges related to the Ohio Reimbursements, before tax benefit of $5.0 million.
(d) Excludes $12.6 million of depreciation and amortization expenses, which are included in “Charges related to the Mexico Reorganization” in the table above.
(e) Excludes a $7.2 million charge for the recognition of a deferred tax asset valuation allowance, which is included in “Charges related to the Mexico Reorganization” in the table above. Includes an income tax benefit related to the Mexico Reorganization of $1.2 million.
(f) Includes $2.3 million of noncontrolling interests related to the Mexico Reorganization.
 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NON-GAAP DISCLOSURE

Non-GAAP Disclosure

In addition to the financial information prepared in conformity with GAAP the Company provides historical non-GAAP financial information. Management believes that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company’s operations. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s business that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.

Management provides non-GAAP financial information for informational purposes and to enhance understanding of the Company’s GAAP consolidated financial statements. Readers should consider the information in addition to, but not instead of or superior to, its financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies, limiting the usefulness of those measures for comparative purposes.

Copyright Business Wire 2010

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