Cash America International, Inc. (NYSE: CSH) reported today that its net income for the second quarter ended June 30, 2014 was $20,971,000 (72 cents per share), which compares to the second quarter 2013 net income of $25,132,000 (81 cents per share). Included in the results for the second quarter ended June 30, 2014 is $15.0 million in charges related to the early extinguishment of debt related to the prepayment of long-term notes during the period. Excluding the after-tax impact of the early extinguishment of debt costs of $9.5 million (32 cents per share), net income attributable to the Company adjusted for this expense, a non-GAAP measure, would have increased 21% to $30.4 million for the three months ended June 30, 2014, and net income per share adjusted for this expense, a non-GAAP measure, would have been $1.04 per share, representing a 28% increase in earnings per share from the same period in 2013. Net income per share adjusted for this expense for the second quarter of 2014 exceeded the Company’s published guidance range of 85 cents per share to 95 cents per share announced on April 24, 2014.

Total revenue for the second quarter ended June 30, 2014 was $455.1 million compared to $410.4 million in the second quarter of 2013. Net revenue, which is total revenue less cost of merchandise sold and loan loss provision expense, was up 13% to $275.9 million for the three-month period ended June 30, 2014 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 27% increase in net revenue, which reached $134.6 million for the second quarter ended June 30, 2014 compared to $106.0 million during the same period in 2013. The E-Commerce Segment generated income from operations of $58.1 million in the second quarter of 2014, representing an increase of 60% compared to the same period in 2013.

The Company’s Retail Services Segment posted its first year-over-year increase in net revenue in two years as net revenue increased 3% to $141.1 million for the three months ended June 30, 2014. The increase in net revenue was supported by an 11% increase in revenue from pawn loans, which ended the month of June 2014 with a balance outstanding of $263.7 million, up 14.9% from the end of June 2013. Same store pawn loan balances in the Company’s U.S. lending locations were up 4.5% on June 30, 2014 compared to the same period in 2013.

Commenting on the results of the quarter, Daniel R. Feehan, President and Chief Executive Officer of Cash America said, “The second quarter’s results exceeded our expectations due to much lower loan loss rates in our unsecured consumer loan products during the period, which led to strong gains in operating income from our E-Commerce Segment. In addition, our pawn lending activities experienced renewed demand leading to a healthy increase in overall pawn loans and the first domestic same store pawn loan balance increase since early 2012.”

For the first six months of fiscal year 2014, total revenue increased 8% to $948.2 million compared to $878.5 million for the same period in 2013, and net revenue for the same comparison period was up 11%, reaching $570.9 million in 2014 versus $516.1 million in 2013. The Company reported net income of $66,708,000 ($2.27 per share) for the first six months of fiscal year 2014, which includes the $10.4 million of after-tax expenses related to the early extinguishment of debt (36 cents per share) discussed above. Net income attributable to the Company as adjusted for these expenses, a non-GAAP measure, would have increased to $77.1 million for the six-month period ended June 30, 2014 and net income per share as adjusted for these expenses, a non-GAAP measure, would have been $2.63 per share, up 18% compared to $69,058,000 ($2.23 per share) from the same six month period in 2013.

Cash America will host a conference call to discuss the second quarter results on Thursday, July 24, 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 20, 2014 to shareholders of record on August 6, 2014.

Outlook for the Third Quarter of 2014 and Related Fiscal Year

Management believes that the opportunities for growth in revenue and earnings will be largely associated with customer demand for the credit products provided by the Company, which take the form of pawn loans, 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. Management expects that changes to its U.K. business practices that it has adopted in response to new regulatory requirements in the United Kingdom will significantly reduce loan volumes, balances and revenue levels in that market for the remainder of the year and potentially into 2015, although the decrease could be offset by higher balances from domestic consumer loan products, among other things. Other elements that could affect the growth in revenue include the regulatory governance of the consumer loan products and the continued development and growth of new lending products offered by the Company’s E-Commerce Segment. In addition, the Company’s wholly-owned subsidiary, Enova International, Inc., completed a $500 million long-term note offering during the second quarter of 2014 that has significantly increased the Company’s interest expense as the proceeds were used to pay-off long-term notes at lower interest rates. Management estimates that the after tax additional interest expense burden will amount to 13 cents per share per quarter.

Based on its views and on the preceding factors, management expects the third quarter 2014 net income per share to be between 70 cents and 80 cents per share compared to $1.52 per share in the third quarter of 2013, which included a tax benefit of $33.2 million ($1.09 per share) related to the reorganization of its Mexico-based pawn operations and an $18 million pre-tax expense (37 cents per share after taxes) associated with a negotiated settlement of a class-action lawsuit. These two items combined to create a net after-tax benefit to income of $21.9 million (72 cents per share) for the three months ended September 30, 2013. Adjusted earnings per share for the third quarter of 2013, excluding the net effect of these two items, was 80 cents per share.

Based on the Company’s results through the first half of 2014, which produced adjusted earnings per share of $2.64, a non-GAAP measure, and excludes the first quarter after-tax impact of $1.1 million in expenses primarily related to the early extinguishment of debt (4 cents per share) and the second quarter $9.5 million (32 cents per share) discussed above, management expects its fiscal year 2014 earnings per share to be in a range of between $4.20 and $4.40 per share. This guidance range compares to actual full year 2013 earnings per share of $4.66, which includes a tax benefit related to the disposition of assets and reorganization of its Mexico-based pawn lending business of $33.2 million ($1.09 per share), which was partially offset by unusual expense items of $14.4 million (47 cents per share) related to a litigation settlement during the third quarter of 2013, the closure of consumer lending locations, a regulatory penalty, an adjustment to the remaining expected liability for the voluntary refund to customers in Ohio and expenses for the early extinguishment of debt. Combining these amounts generates the net benefit of unusual items in 2013 of $18.8 million (62 cents per share). Adjusting for the full year effects of the net benefit in 2013 would result in adjusted net income attributable to the Company, a non-GAAP measure, of $123.7 million ($4.04 per share).

Non-GAAP Measures

The “Adjusted Earnings and Adjusted Earnings Per Share” section included in the attachments to this press release contains a discussion of the reasons why the Company’s management believes that presentation of the non-GAAP financial measures discussed above provide useful information to investors regarding the Company’s financial condition and results of operations.

About the Company

As of June 30, 2014, Cash America International, Inc. (the “Company”) operated 1,004 total locations offering specialty financial services to consumers, which included the following:
  • 869 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
  • 88 check cashing centers (all of which are unconsolidated franchised check cashing centers) operating in 12 states in the United States under the name “Mr. Payroll.”

Additionally, as of June 30, 2014, 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.dollarsdirect.com.au

http://www.enova.com

http://www.dollarsdirect.ca

http://www.cashnetusa.com

http://www.quickquidflexcredit.co.uk

http://www.netcredit.com

http://www.onstride.co.uk

http://www.cashlandloans.com

http://www.simplic.com.br

http://www.quickquid.co.uk

http://www.mrpayroll.com

http://www.poundstopocket.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, compliance with 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 regulatory and examination authority of the Consumer Financial Protection Bureau in the U.S. and the UK Financial Conduct Authority, including the effect of and compliance with a consent order the Company entered into with the Consumer Financial Protection Bureau in November 2013 and changes to the Company’s UK business practices as a result of adapting the Company’s business in response to the requirements of the Financial Conduct Authority; changes in the political, regulatory or economic environment in foreign countries where the Company operates or in the future may operate; risks related to the potential separation of the Company’s online lending business that comprises its e-commerce division, Enova International, Inc.; the Company’s ability to process or collect consumer loans through the Automated Clearing House system; the actions of third parties who provide, acquire or offer products and services to, from or for the Company; public and regulatory perception of the Company’s business, including its consumer loan business and its business practices; 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; fluctuations, including a sustained decrease, in the price of gold or deterioration in economic conditions; a prolonged interruption in the Company’s operations of its facilities, systems and business functions, including its information technology and other business systems; changes in demand for the Company’s services and changes in competition; the Company’s ability to maintain an allowance or liability for estimated losses on consumer loans that are adequate to absorb credit losses; the Company’s ability to attract and retain qualified executive officers; 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; interest rate and foreign currency exchange rate fluctuations; changes in the capital markets, including the debt and equity 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; 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,
2014     2013   2014     2013  
Consolidated Operations:    
Total revenue $ 455,090 $ 410,380 $ 948,190 $ 878,508
Net revenue 275,891 244,190 570,927 516,131
Total expenses   214,472     194,942     425,319     389,297  
 
Income from Operations $ 61,419 $ 49,248 $ 145,608 $ 126,834
Income before income taxes   33,404     40,390     105,888     110,106  
 
Net Income   $ 20,971     $ 25,444     $ 66,708     $ 69,366  
 
Net income attributable to the noncontrolling interest   $     $ (312 )   $     $ (308 )
 
Net Income Attributable to Cash America International, Inc.   $ 20,971     $ 25,132     $ 66,708     $ 69,058  
 
Earnings per share:
Net Income attributable to Cash America International, Inc. common shareholders:
Basic $ 0.73 $ 0.88 $ 2.33 $ 2.39
Diluted $ 0.72 $ 0.81 $ 2.27 $ 2.23
 
Weighted average common shares outstanding:
Basic 28,823 28,721 28,616 28,910
Diluted 29,256 30,845 29,365 31,023

 
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share information)
(Unaudited)
     
June 30, December 31,
2014   2013   2013  
Assets
Current assets:
Cash and cash equivalents $ 192,915 $ 124,459 $ 67,228
Restricted cash 60 8,000
Pawn loans 263,668 229,574 261,148
Consumer loans, net 337,961 287,127 358,841
Merchandise held for disposition, net 198,919 155,112 208,899
Pawn loan fees and service charges receivable 51,986 45,566 53,438
Income taxes receivable 17 25,495 9,535
Prepaid expenses and other assets 42,545 30,985 33,655
Deferred tax assets   34,779     43,628     38,800  
Total current assets 1,122,850 941,946 1,039,544
Property and equipment, net 255,407 250,842 261,223
Goodwill 706,037 608,242 705,579
Intangible assets, net 49,135 34,067 52,256
Other assets   35,457     21,571     21,129  
Total assets   $ 2,168,886     $ 1,856,668     $ 2,079,731  
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses $ 120,417 $ 115,591 $ 140,068
Customer deposits 18,295 12,962 14,803
Income taxes currently payable
Current portion of long-term debt       22,606     22,606  
Total current liabilities 138,712 151,159 177,477
Deferred tax liabilities 113,157 103,759 101,417
Noncurrent income tax payable 36,834
Other liabilities 1,268 1,609 1,031
Long-term debt   793,863     547,218     717,383  
Total liabilities   $ 1,047,000     $ 840,579     $ 997,308  
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 86,184 156,349 150,833
Retained earnings 1,082,725 946,483 1,017,981
Accumulated other comprehensive income (loss) 7,998 (362 ) 4,649
Treasury shares, at cost (1,382,602 shares, 2,107,082 shares and 2,224,902 shares as of June 30, 2014 and 2013, and as of December 31, 2013, respectively)   (58,045 )   (89,405 )   (94,064 )
Total equity   1,121,886     1,016,089     1,082,423  
Total liabilities and equity   $ 2,168,886     $ 1,856,668     $ 2,079,731  

 

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,
2014     2013   2014     2013  
Revenue
Pawn loan fees and service charges $ 80,990 $ 72,728 $ 161,177 $ 148,642
Proceeds from disposition of merchandise 146,772 131,532 323,227 310,249
Consumer loan fees 225,339 202,431 459,521 412,636
Other   1,989     3,689     4,265     6,981  
Total Revenue   455,090     410,380     948,190     878,508  
Cost of Revenue
Disposed merchandise 104,510 88,961 229,074 210,296
Consumer loan loss provision   74,689     77,229     148,189     152,081  
Total Cost of Revenue   179,199     166,190     377,263     362,377  
Net Revenue   275,891     244,190     570,927     516,131  
Expenses
Operations and administration 194,975 176,942 386,561 353,766
Depreciation and amortization   19,497     18,000     38,758     35,531  
Total Expenses   214,472     194,942     425,319     389,297  
Income from Operations 61,419 49,248 145,608 126,834
Interest expense (12,828 ) (8,903 ) (22,896 ) (16,348 )
Interest income 8 5 18 68
Foreign currency transaction (loss) gain (179 ) 65 (280 ) (312 )
Loss on extinguishment of debt (15,016 ) (16,562 )
Equity in loss of unconsolidated subsidiary       (25 )       (136 )
Income before Income Taxes 33,404 40,390 105,888 110,106
Provision for income taxes   12,433     14,946     39,180     40,740  
Net Income 20,971 25,444 66,708 69,366
Net income attributable to the noncontrolling interest       (312 )       (308 )
Net Income Attributable to Cash America International, Inc.   $ 20,971     $ 25,132     $ 66,708     $ 69,058  
Earnings Per Share:
Net Income attributable to Cash America International, Inc. common shareholders:
Basic $ 0.73 $ 0.88 $ 2.33 $ 2.39
Diluted $ 0.72 $ 0.81 $ 2.27 $ 2.23
Weighted average common shares outstanding:
Basic 28,823 28,721 28,616 28,910
Diluted 29,256 30,845 29,365 31,023
Dividends declared per common share $ 0.035 $ 0.035 $ 0.070 $ 0.070

 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

PAWN LENDING ACTIVITIES – FINANCIAL AND OPERATING DATA

(dollars in thousands, except where otherwise noted)
 

The following tables outline certain data related to 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, 2014 and 2013 (dollars in thousands):
 
As of June 30,
2014     2013     Change   % Change
Ending pawn loan balances
Domestic retail services $ 257,647 $ 224,622 $ 33,025 14.7 %
Foreign retail services 6,021     4,952     1,069     21.6 %
Consolidated pawn loan balances $ 263,668     $ 229,574     $ 34,094     14.9 %
Ending merchandise balance, net
Domestic retail services $ 192,745 $ 149,244 $ 43,501 29.1 %
Foreign retail services 6,174     5,868     306     5.2 %
Consolidated merchandise balance, net $ 198,919     $ 155,112     $ 43,807     28.2 %
Three Months Ended June 30,
2014   2013   Change % Change
Pawn loan fees and service charges
Domestic retail services $ 78,911 $ 70,802 $ 8,109 11.5 %
Foreign retail services 2,079     1,926     153     7.9 %
Consolidated pawn loan fees and service charges $ 80,990     $ 72,728     $ 8,262     11.4 %
Average pawn loan balance outstanding
Domestic retail services $ 235,187 $ 211,195 $ 23,992 11.4 %
Foreign retail services 5,683     5,237     446     8.5 %
Consolidated average pawn loans outstanding $ 240,870     $ 216,432     $ 24,438     11.3 %
Amount of pawn loans written and renewed
Domestic retail services $ 271,226 $ 234,327 $ 36,899 15.7 %
Foreign retail services 15,909     15,166     743     4.9 %
Consolidated amount of pawn loans written and renewed $ 287,135     $ 249,493     $ 37,642     15.1 %
Average amount per pawn loan (in ones)
Domestic retail services $ 123 $ 126 $ (3 ) (2.4 )%
Foreign retail services $ 88 $ 89 $ (1 ) (1.1 )%
Consolidated average amount per pawn loan (in ones) $ 120     $ 123     $ (3 )   (2.4 )%
Annualized yield on pawn loans
Domestic retail services 134.6 % 134.5 %
Foreign retail services 146.7 % 147.5 %
Consolidated annualized yield on pawn loans 134.9 %   134.8 %            
Gross profit margin on disposition of merchandise
Domestic retail services 29.0 % 32.9 %
Foreign retail services 23.0 % 16.4 %
Gross profit margin on disposition of merchandise 28.8 %   32.4 %            
Merchandise turnover
Domestic retail services 2.2 2.4
Foreign retail services 2.4 2.6
Consolidated merchandise turnover 2.2     2.4              

 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

PAWN LENDING ACTIVITIES – FINANCIAL AND OPERATING DATA

(dollars in thousands, except where otherwise noted)

 
Six Months Ended June 30,
2014     2013     Change   % Change
Pawn loan fees and service charges
Domestic retail services $ 157,378 $ 144,976 $ 12,402 8.6 %
Foreign retail services   3,799     3,666     133     3.6 %
Consolidated pawn loan fees and service charges   $ 161,177     $ 148,642     $ 12,535     8.4 %
Average pawn loan balance outstanding
Domestic retail services $ 239,089 $ 219,709 $ 19,380 8.8 %
Foreign retail services   5,175     4,858     317     6.5 %
Consolidated average pawn loans outstanding   $ 244,264     $ 224,567     $ 19,697     8.8 %
Amount of pawn loans written and renewed
Domestic retail services $ 503,786 $ 449,703 $ 54,083 12.0 %
Foreign retail services   28,895     28,259     636     2.3 %
Consolidated amount of pawn loans written and renewed   $ 532,681     $ 477,962     $ 54,719     11.4 %
Average amount per pawn loan (in ones)
Domestic retail services $ 124 $ 128 $ (4 ) (3.1 )%
Foreign retail services $ 88 $ 87 $ 1 1.1 %
Consolidated average amount per pawn loan (in ones)   $ 121     $ 124     $ (3 )   (2.4 )%
Annualized yield on pawn loans
Domestic retail services 132.7 % 133.1 %
Foreign retail services 148.0 % 152.2 %
Consolidated annualized yield on pawn loans   133.1 %   133.5 %            
Gross profit margin on disposition of merchandise
Domestic retail services 29.3 % 32.6 %
Foreign retail services 22.9 % 18.3 %
Gross profit margin on disposition of merchandise   29.1 %   32.2 %  

 
       
Merchandise turnover
Domestic retail services 2.3 2.7
Foreign retail services 2.5 2.6
Consolidated merchandise turnover   2.3     2.7              

 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

MERCHANDISE DISPOSITION, GROSS PROFIT AND INVENTORY OPERATING DATA

(dollars in thousands)
 

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 generally the principal amount loaned on an item 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, 2014 and 2013 (dollars in thousands):
 
Three Months Ended June 30,
2014   2013
Retail   Commercial   Total Retail   Commercial   Total
Proceeds from disposition $ 117,951 $ 28,821 $ 146,772 $ 89,836 $ 41,696 $ 131,532
Gross profit on disposition $ 38,681 $ 3,581 $ 42,262 $ 33,385 $ 9,186 $ 42,571
Gross profit margin 32.8 % 12.4 % 28.8 % 37.2 % 22.0 % 32.4 %
Percentage of total gross profit 91.5 % 8.5 % 100.0 % 78.4 % 21.6 % 100.0 %
Six Months Ended June 30,
2014   2013
Retail   Commercial   Total Retail   Commercial   Total
Proceeds from disposition $ 260,244 $ 62,983 $ 323,227 $ 202,246 $ 108,003 $ 310,249
Gross profit on disposition $ 88,033 $ 6,120 $ 94,153 $ 75,375 $ 24,578 $ 99,953
Gross profit margin 33.8 % 9.7 % 29.1 % 37.3 % 22.8 % 32.2 %
Percentage of total gross profit 93.5 % 6.5 % 100.0 % 75.4 % 24.6 % 100.0 %
 

The table below summarizes the age of merchandise held for disposition related to the Company’s pawn lending operations before valuation allowance of $2.1 million and $0.9 million as of June 30, 2014 and 2013, respectively (dollars in thousands):
 
As of June 30,
2014   2013
Amount   % Amount   %
Jewelry - held for one year or less $ 107,905 53.7 % $ 90,105 57.8 %
Other merchandise - held for one year or less 80,050     39.8 %   56,398     36.1 %
Total merchandise held for one year or less 187,955     93.5 %   146,503     93.9 %
Jewelry - held for more than one year 5,480 2.7 % 3,856 2.4 %
Other merchandise - held for more than one year 7,593     3.8 %   5,702     3.7 %
Total merchandise held for more than one year 13,073     6.5 %   9,558     6.1 %
Merchandise held for disposition, gross $ 201,028     100.0 %   $ 156,061     100.0 %
Merchandise held for disposition, net of allowance $ 198,919           $ 155,112        

 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSUMER LOAN FINANCIAL AND OPERATING DATA

(dollars in thousands, except where otherwise noted)
 

The following tables set forth interest and fees on consumer loans by product type and segment, and the related loan loss provision for the three and six months ended June 30, 2014 and 2013 (dollars in thousands):
 
Three Months Ended June 30,
2014   2013
  Short-term loans   Line of credit accounts   Installment loans   Total   Short-term loans   Line of credit accounts   Installment loans   Total
Retail services $ 20,440     $     $ 3,460     $ 23,900     $ 23,529     $     $ 3,118     $ 26,647  
E-commerce            
Domestic 41,392 36,066 31,293 108,751 42,398 26,465 18,639 87,502
Foreign 24,316     38,828     29,544     92,688     60,633     1,818     25,831     88,282  
Total E-commerce 65,708     74,894     60,837     201,439     103,031     28,283     44,470     175,784  
Consumer loan fees $ 86,148 $ 74,894 $ 64,297 $ 225,339 $ 126,560 $ 28,283 $ 47,588 $ 202,431
Less: consumer loan loss provision 25,621     21,786     27,282     74,689     42,931     9,919     24,379     77,229  
Consumer loan fees, net loss provision $ 60,527     $ 53,108     $ 37,015     $ 150,650     $ 83,629     $ 18,364     $ 23,209     $ 125,202  
Year-over-year change - $ $ (23,102 ) $ 34,744 $ 13,806 $ 25,448 $ (3,750 ) $ 9,279 $ 11,348 $ 16,877
Year-over-year change - % (27.6 )% 189.2 % 59.5 % 20.3 % (4.3 )% 102.1 % 95.7 % 15.6 %

Consumer loan loss provision as a % of consumer loan fees
29.7 %   29.1 %   42.4 %   33.1 %   33.9 %   35.1 %   51.2 %   38.2 %
Six Months Ended June 30,
2014   2013
  Short-term loans   Line of credit accounts   Installment loans   Total   Short-term loans   Line of credit accounts   Installment loans   Total
Retail services $ 42,437     $     $ 7,222     $ 49,659     $ 48,736     $     $ 6,233     $ 54,969  
E-commerce            
Domestic 85,786 71,082 60,931 217,799 89,994 49,699 38,450 178,143
Foreign 52,899     76,848     62,316     192,063     128,045     1,818     49,661     179,524  
Total E-commerce 138,685     147,930     123,247     409,862     218,039     51,517     88,111     357,667  
Consumer loan fees $ 181,122 $ 147,930 $ 130,469 $ 459,521 $ 266,775 $ 51,517 $ 94,344 $ 412,636
Less: consumer loan loss provision 47,382     45,161     55,646     148,189     88,097     16,472     47,512     152,081  
Consumer loan fees, net loss provision $ 133,740     $ 102,769     $ 74,823     $ 311,332     $ 178,678     $ 35,045     $ 46,832     $ 260,555  
Year-over-year change - $ $ (44,938 ) $ 67,724 $ 27,991 $ 50,777 $ (797 ) $ 17,730 $ 24,840 $ 41,773
Year-over-year change - % (25.2 )% 193.2 % 59.8 % 19.5 % (0.4 )% 102.4 % 113.0 % 19.1 %
Consumer loan loss provision as a % of consumer loan fees 26.2 %   30.5 %   42.7 %   32.2 %   33.0 %   32.0 %   50.4 %   36.9 %
 

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.

 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSUMER LOAN FINANCIAL AND OPERATING DATA

(dollars in thousands, except where otherwise noted)

 

 

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. 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 loss provision for loans are impacted by the aggregate amount of loans owned by the Company and those guaranteed by the Company as reflected in its financial statements.
 

The following tables summarize selected data related to the Company’s consumer loan activities as of and for the three months ended June 30, 2014 and 2013.
 

 The following table shows short-term loans and related loan loss activity, which is based on the volume of loans written and renewed, for the three months ended June 30, 2014 and 2013.
Three Months Ended
June 30,
2014     2013  

Short-term consumer loans:
Consumer loan loss provision $ 25,621 $ 42,931
Charge-offs (net of recoveries) 24,507 42,541
Allowance and liability for losses 23,700 44,507
Combined consumer loans and fees receivable, gross(a) 141,775 208,912

Short-term loans:
Consumer loan loss provision as a % of combined consumer loans written and renewed(b) 5.1 % 6.3 %
Charge-offs (net of recoveries) as a % of combined consumer loans written and renewed(b) 4.9 % 6.3 %
Consumer loan loss provision as a % of consumer loan fees 29.7 % 33.9 %
Allowance and liability for losses as a % of combined consumer loans and fees receivable, gross(a) 16.7 %   21.3 %
 

(a) Non-GAAP measure.

(b) The disclosure regarding the amount of short-term consumer loans written and renewed is statistical data that is not included in the Company’s financial statements.

 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSUMER LOAN FINANCIAL AND OPERATING DATA

(dollars in thousands, except where otherwise noted)
 

The following table shows line of credit accounts and related loan loss activity, which is based on average amount of consumer loan balance, for the three months ended June 30, 2014 and 2013.
 
Three Months Ended
June 30,
2014     2013  

Line of credit accounts:
Consumer loan loss provision $ 21,786 $ 9,919
Charge-offs (net of recoveries) 26,877 7,334
Allowance and liability for losses 21,578 10,649
Average consumer loan balance(a) 120,707 47,513

Line of credit accounts:
Consumer loan loss provision as a % of average consumer loan balance(a) 18.0 % 20.9 %
Charge-offs (net of recoveries) as a % of average consumer loan balance(a) 22.3 % 15.4 %
Consumer loan loss provision as a % of consumer loan fees 29.1 % 35.1 %
Allowance for losses as a % of average consumer loan balance(a) 17.9 %   22.4 %

(a) The average consumer loan balance for line of credit accounts is the simple average of the beginning and ending consumer loan balance for the quarter for line of credit accounts.
 
 

The following table shows installment loans and related loan loss activity, which is based on average amount of combined consumer loan balance, for the three months ended June 30, 2014 and 2013.
 
Three Months Ended
June 30,
2014     2013  

Installment loans:
Consumer loan loss provision $ 27,282 $ 24,379
Charge-offs (net of recoveries) 28,107 24,206
Allowance and liability for losses 30,085 27,754
Installment loan average loan balance:(a)
Company owned $ 181,358 $ 133,773
Guaranteed by the Company(b) 8,840     9,631  
Combined average consumer loan balance(c) $ 190,198     $ 143,404  

Installment loans:
Consumer loan loss provision as a % of combined average consumer loan balance(a)(c) 14.3 % 17.0 %
Charge-offs (net of recoveries) as a % of combined average consumer loan balance(a)(c) 14.8 % 16.9 %
Consumer loan loss provision as a % of consumer loan fees 42.4 % 51.2 %
Allowance and liability for losses as a % of combined average consumer loan balance(a)(c) 15.8 %   19.4 %

(a) The combined average consumer loan balance for installment loans is the simple average of the beginning and ending combined consumer loan balance for the quarter for installment loans.

(b) Represents loans originated by third-party lenders through the CSO programs, which are not included in the Company's financial statements.

(c) Non-GAAP measure.

 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSUMER LOAN FINANCIAL AND OPERATING DATA

(dollars in thousands, except where otherwise noted)
 

The following table summarizes consumer loan balances outstanding as of June 30, 2014 and 2013 (dollars in thousands):
 
As of June 30,
2014   2013
Company Owned(a)   Guaranteed by the Company(a)   Combined(b) CompanyOwned(a)   Guaranteedby the Company(a)   Combined(b)
Ending consumer loan balances:

Retail Services
Short-term loans $ 42,744 $ 3,976 $ 46,720 $ 45,324 $ 5,338 $ 50,662
Installment loans 7,643     8,565     16,208     9,819     10,131     19,950  
Total Retail Services, gross 50,387     12,541     62,928     55,143     15,469     70,612  

E-Commerce
Domestic
Short-term loans 30,545 34,914 65,459 31,594 35,115 66,709
Line of credit accounts 64,490 64,490 47,368 47,368
Installment loans 100,009         100,009     44,509         44,509  
Total Domestic, gross 195,044     34,914     229,958     123,471     35,115     158,586  
Foreign
Short-term loans 29,596 29,596 91,240 301 91,541
Line of credit accounts 57,919 57,919 10,703 10,703
Installment loans 77,202         77,202     86,433         86,433  
Total Foreign, gross 164,717         164,717     188,376     301     188,677  
Total E-Commerce, gross 359,761     34,914     394,675     311,847     35,416     347,263  
Total ending loan balance, gross 410,148     47,455     457,603     366,990     50,885     417,875  
Less: Allowance and liabilities for losses (72,187 )   (3,176 )   (75,363 )   (79,863 )   (3,047 )   (82,910 )
Total ending loan balance, net $ 337,961     $ 44,279     $ 382,240     $ 287,127     $ 47,838     $ 334,965  
Allowance and liability for losses as a % of consumer loan balances, gross 17.6 %   6.7 %   16.5 %   21.8 %   6.0 %   19.8 %

(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 consolidated balance sheets.

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

 

 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSUMER LOAN FINANCIAL AND OPERATING DATA

(dollars in thousands, except where otherwise noted)
 

The following tables summarize the consumer loans written and renewed for the three and six months ended June 30, 2014 and 2013 (dollars in thousands, except where otherwise noted):
 
Three Months Ended June 30,
2014   2013
Company Owned(a)   Guaranteed by the Company(a)(b)   Combined(a) CompanyOwned(a)   Guaranteedby the Company(a)(b)   Combined(a)
Amount of consumer loans written and renewed (dollars in thousands):

Retail Services
Short-term loans $ 157,268 $ 16,878 $ 174,146 $ 167,896 $ 26,446 $ 194,342
Installment loans 2,526     6,763     9,289     2,051     5,274     7,325
Total Retail Services 159,794     23,641     183,435     169,947     31,720     201,667

E-Commerce
Domestic
Short-term loans 73,493 157,905 231,398 71,507 163,236 234,743
Line of credit accounts 49,708 49,708 37,649 37,649
Installment loans 58,058         58,058     31,385         31,385
Total Domestic 181,259     157,905     339,164     140,541     163,236     303,777
Foreign
Short-term loans 95,250 95,250 249,953 739 250,692
Line of credit accounts 76,241 76,241 13,484 13,484
Installment loans 56,047         56,047     64,665         64,665
Total Foreign 227,538         227,538     328,102     739     328,841
Total E-Commerce 408,797     157,905     566,702     468,643     163,975     632,618
Total amount of consumer loans written and renewed $ 568,591     $ 181,546     $ 750,137     $ 638,590     $ 195,695     $ 834,285
Number of consumer loans written and renewed (in ones):

Retail Services
Short-term loans 331,032 31,482 362,514 354,546 51,763 406,309
Installment loans 1,833     5,180     7,013     1,798     928     2,726
Total Retail Services 332,865     36,662     369,527     356,344     52,691     409,035

E-Commerce
Domestic
Short-term loans 219,274 229,007 448,281 242,617 227,956 470,573
Line of credit accounts 198,956 198,956 139,550 139,550
Installment loans 37,751         37,751     30,229         30,229
Total Domestic 455,981     229,007     684,988     412,396     227,956     640,352
Foreign
Short-term loans 187,561 187,561 454,293 919 455,212
Line of credit accounts 255,171 255,171 30,748 30,748
Installment loans 44,200         44,200     56,679         56,679
Total Foreign 486,932         486,932     541,720     919     542,639
Total E-Commerce 942,913     229,007     1,171,920     954,116     228,875     1,182,991
Total number of consumer loans written and renewed 1,275,778     265,669     1,541,447     1,310,460     281,566     1,592,026

(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

(dollars in thousands, except where otherwise noted)
 
Six Months Ended June 30,
2014   2013
Company Owned(a)   Guaranteed by the Company(a)(b)   Combined(a) CompanyOwned(a)   Guaranteedby the Company(a)(b)   Combined(a)
Amount of consumer loans written and renewed (dollars in thousands):

Retail Services
Short-term loans $ 316,728 $ 35,242 $ 351,970 $ 339,816 $ 54,772 $ 394,588
Installment loans 4,351     11,201     15,552     3,497     8,986     12,483
Total Retail Services 321,079     46,443     367,522     343,313     63,758     407,071

E-Commerce
Domestic
Short-term loans 144,949 320,633 465,582 144,135 337,502 481,637
Line of credit accounts 90,321 90,321 66,455 66,455
Installment loans 98,369         98,369     56,056         56,056
Total Domestic 333,639     320,633     654,272     266,646     337,502     604,148
Foreign
Short-term loans 210,432 210,432 516,280 13,971 530,251
Line of credit accounts 151,237 151,237 13,484 13,484
Installment loans 128,459         128,459     105,250         105,250
Total Foreign 490,128         490,128     635,014     13,971     648,985
Total E-Commerce 823,767     320,633     1,144,400     901,660     351,473     1,253,133
Total amount of consumer loans written and renewed $ 1,144,846     $ 367,076     $ 1,511,922     $ 1,244,973     $ 415,231     $ 1,660,204
Number of consumer loans written and renewed (in ones):

Retail Services
Short-term loans 659,497 64,970 724,467 709,859 105,752 815,611
Installment loans 3,327     8,221     11,548     3,194     1,562     4,756
Total Retail Services 662,824     73,191     736,015     713,053     107,314     820,367

E-Commerce
Domestic
Short-term loans 433,505 461,249 894,754 485,865 463,178 949,043
Line of credit accounts 370,061 370,061 251,201 251,201
Installment loans 67,779         67,779     53,414         53,414
Total Domestic 871,345     461,249     1,332,594     790,480     463,178     1,253,658
Foreign
Short-term loans 402,432 402,432 921,197 18,235 939,432
Line of credit accounts 499,408 499,408 30,748 30,748
Installment loans 104,301         104,301     89,754         89,754
Total Foreign 1,006,141         1,006,141     1,041,699     18,235     1,059,934
Total E-Commerce 1,877,486     461,249     2,338,735     1,832,179     481,413     2,313,592
Total number of consumer loans written and renewed 2,540,310     534,440     3,074,750     2,545,232     588,727     3,133,959

(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

(dollars in thousands)
 

The following tables contain operating segment data for the three and six months ended June 30, 2014 and 2013 (dollars in thousands).
 
  Retail Services   E-Commerce    
Domestic   Foreign   Total Domestic   Foreign   Admin   Total Corporate Consolidated

Three Months Ended June 30, 2014
 
Revenue
Pawn loan fees and service charges $ 78,911 $ 2,079 $ 80,990 $ $ $ $ $ $ 80,990
Proceeds from disposition of merchandise 142,447 4,325 146,772 146,772
Consumer loan fees 23,900 23,900 108,751 92,688 201,439 225,339
Other 1,718     45     1,763     35     8         43     183     1,989
Total revenue 246,976     6,449     253,425     108,786     92,696         201,482     183     455,090
Cost of revenue
Disposed merchandise 101,177 3,333 104,510 104,510
Consumer loan loss provision 7,849         7,849     38,729     28,111         66,840         74,689
Total cost of revenue 109,026     3,333     112,359     38,729     28,111         66,840         179,199
Net revenue 137,950     3,116     141,066     70,057     64,585         134,642     183     275,891
Expenses
Operations and administration 100,189 3,386 103,575 25,816 24,061 22,387 72,264 19,136 194,975
Depreciation and amortization 10,122     421     10,543     2,054     559     1,703     4,316     4,638     19,497
Total expenses 110,311     3,807     114,118     27,870     24,620     24,090     76,580     23,774     214,472
Income (loss) from operations $ 27,639     $ (691 )   $ 26,948     $ 42,187     $ 39,965     $ (24,090 )   $ 58,062     $ (23,591 )   $ 61,419

As of June 30, 2014
Total assets $ 952,990 $ 121,193 $ 1,074,183 $ 462,039 $ 205,249 $ 14,779 $ 682,067 $ 412,636 $ 2,168,886
Goodwill $ 495,672 $ 210,365 $ 706,037
     
Retail Services E-Commerce
Domestic   Foreign   Total Domestic   Foreign   Admin   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     258     2,176     361     16         377     1,136     3,689
Total revenue 226,581     6,502     233,083     87,863     88,298         176,161     1,136     410,380
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     2,893     137,010     54,520     51,524         106,044     1,136     244,190
Expenses
Operations and administration 89,487 2,998 92,485 21,838 26,284 16,985 65,107 19,350 176,942
Depreciation and amortization 8,900     430     9,330     2,532     835     1,218     4,585     4,085     18,000
Total expenses 98,387     3,428     101,815     24,370     27,119     18,203     69,692     23,435     194,942
Income (loss) from operations $ 35,730     $ (535 )   $ 35,195     $ 30,150     $ 24,405     $ (18,203 )   $ 36,352     $ (22,299 )   $ 49,248

As of June 30, 2013
Total assets $ 1,023,015 $ 123,601 $ 1,146,616 $ 374,720 $ 190,612 $ 11,909 $ 577,241 $ 132,811 $ 1,856,668
Goodwill $ 397,876 $ 210,366 $ 608,242

       

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

INCOME FROM OPERATIONS BY OPERATING SEGMENT

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

Six Months Ended June 30, 2014
 
Revenue
Pawn loan fees and service charges $ 157,378 $ 3,799 $ 161,177 $ $ $ $ $ $ 161,177
Proceeds from disposition of merchandise 314,617 8,610 323,227 323,227
Consumer loan fees 49,659 49,659 217,799 192,063 409,862 459,521
Other 3,720     130     3,850     74     11         85     330     4,265
Total revenue 525,374     12,539     537,913     217,873     192,074         409,947     330     948,190
Cost of revenue
Disposed merchandise 222,435 6,639 229,074 229,074
Consumer loan loss provision 15,447         15,447     67,364     65,378         132,742         148,189
Total cost of revenue 237,882     6,639     244,521     67,364     65,378         132,742         377,263
Net revenue 287,492     5,900     293,392     150,509     126,696         277,205     330     570,927
Expenses
Operations and administration 201,342 6,635 207,977 49,224 49,181 42,026 140,431 38,153 386,561
Depreciation and amortization 20,426     824     21,250     3,959     1,082     3,393     8,434     9,074     38,758
Total expenses 221,768     7,459     229,227     53,183     50,263     45,419     148,865     47,227     425,319
Income (loss) from operations $ 65,724     $ (1,559 )   $ 64,165     $ 97,326     $ 76,433     $ (45,419 )   $ 128,340     $ (46,897 )   $ 145,608
     
Retail Services E-Commerce
Domestic   Foreign   Total Domestic   Foreign   Admin   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     351     4,769     802     23         825     1,387     6,981
Total revenue 505,727     12,902     518,629     178,945     179,547         358,492     1,387     878,508
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     5,645     294,443     115,779     104,522         220,301     1,387     516,131
Expenses
Operations and administration 180,189 6,601 186,790 43,243 50,931 36,515 130,689 36,287 353,766
Depreciation and amortization 17,701     829     18,530     4,960     1,395     2,673     9,028     7,973     35,531
Total expenses 197,890     7,430     205,320     48,203     52,326     39,188     139,717     44,260     389,297
Income (loss) from operations $ 90,908     $ (1,785 )   $ 89,123     $ 67,576     $ 52,196     $ (39,188 )   $ 80,584     $ (42,873 )   $ 126,834
 

Corporate operations primarily include corporate expenses for both of the Company’s segments, such as legal, occupancy, 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.

During the first quarter of 2014, the Company changed the presentation of financial information within its e-commerce segment to report certain administrative and depreciation and amortization expenses within that segment separately from its domestic and foreign operating components. Administrative expenses in the e-commerce segment, which were previously allocated between the domestic and foreign components based on the amount of loans written and renewed, are included under the “Admin” heading within the e-commerce segment information in the tables above. Depreciation and amortization related to the e-commerce administrative function is also included in this category. For comparison purposes, amounts for prior years have been conformed to the current presentation.

 

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 services as of June 30, 2014 and 2013. 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, some recently acquired domestic retail services locations operate under various names that are expected to be changed to “Cash America Pawn.” The Company’s foreign retail services locations operate under the name “Cash America casa de empeño.”
 
As of June 30,
2014   2013
Domestic(a)   Foreign   Total Domestic(a)   Foreign   Total
Retail services locations offering:
Both pawn and consumer lending 576 576 581 581
Pawn lending only 256 47 303 169 47 216
Consumer lending only 37 37 77 77
Other(b) 88         88     90         90
Total retail services 957     47     1,004     917     47     964
 

(a) Except as described in (b) below, includes locations that operated in 22 states in the United States as of June 30, 2014 and 2013, respectively.

(b) As of June 30, 2014 and 2013, includes 88 and 90 unconsolidated franchised check cashing locations, respectively, that operated in 12 and 14 states in the United States, respectively.
 

E-Commerce Segment

As of June 30, 2014 and 2013, the Company’s e-commerce segment provided services in 33 and 32 states, respectively, in the United States and in four foreign countries:

On June 30, 2014, the Company launched a pilot program in Brazil where it arranges loans that are made by a third-party lender in accordance with applicable laws and provides certain guarantees for payment of defaulted loans in the pilot program.
 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

NON-GAAP DISCLOSURE

ADJUSTED EARNINGS AND ADJUSTED EARNINGS PER SHARE
 

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 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.

Adjusted Earnings and Adjusted Earnings Per Share

In addition to reporting financial results in accordance with GAAP, the Company has provided adjusted net income, adjusted diluted net income per share attributable to the Company, adjusted earnings and adjusted earnings per share (collectively, the “Adjusted Earnings Measures”), 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 the Adjusted Earnings Measures, 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. In addition, management believes that the adjustments shown below, especially the loss on the early extinguishment of a portion of the Company’s debt (the “Debt Extinguishment”) and the charges related to the Company's settlement of a litigation matter in 2013 (the “2013 Litigation Settlement”) are useful to investors in order to allow them to compare the Company’s financial results for the current quarter and current six-month period with the prior year quarter and prior year six-month period, respectively. The computation of Adjusted Earnings Measures as presented below may differ from the computation of similarly-titled measures provided by other companies.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

NON-GAAP DISCLOSURE

ADJUSTED EARNINGS AND ADJUSTED EARNINGS PER SHARE
 

The following table provides a reconciliation for the three and six months ended June 30, 2014 and 2013, respectively, between net income attributable to the Company and diluted earnings per share calculated in accordance with GAAP to the Adjusted Earnings Measures, which are shown net of tax (dollars in thousands, except per share data):
 
   
Three Months Ended June 30, Six Months Ended June 30,
2014   2013 2014   2013
$   Per Diluted Share(a) $   PerDiluted Share(a) $   Per Diluted Share(a) $   PerDiluted Share(a)
Net income and diluted net income per share attributable to Cash America International, Inc. $ 20,971 $ 0.72 $ 25,132 $ 0.81 $ 66,708 $ 2.27 $ 69,058 $ 2.23
Adjustments (net of tax):
Loss on Debt Extinguishment(b) 9,460 0.32 10,434 0.36
2013 Litigation Settlement(c)   236     0.01             400     0.01        
Adjusted net income and adjusted diluted net income per share attributable to the Company   30,667     1.05     25,132     0.81     77,542     2.64     69,058     2.23
Other adjustments (net of tax):
Intangible asset amortization 1,045 0.04 828 0.03 2,092 0.07 1,661 0.05
Non-cash equity-based compensation 1,040 0.04 770 0.03 1,982 0.06 1,758 0.05
Non-cash interest and debt issuance cost amortization 789 0.03 1,094 0.04 1,554 0.05 1,925 0.06
Foreign currency transaction loss (gain)   113         (41 )       176     0.01     197     0.01
Adjusted earnings and adjusted earnings per share   $ 33,654     $ 1.16     $ 27,783     $ 0.91     $ 83,346     $ 2.83     $ 74,599     $ 2.40

(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.

(b) For the three months ended June 30, 2014, represents charges related to the Debt Extinguishment of $15.0 million, net of tax benefit of $5.5 million. For the six months ended June 30, 2014, represents $16.6 million of charges, net of tax benefit of $6.1 million.

(c) For the three months ended June 30, 2014, represents charges related to the 2013 Litigation Settlement of $0.4 million, net of tax benefit of $0.2 million. For the six months ended June 30, 2014, represents $0.6 million of charges, net of tax benefit of $0.2 million.

 

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, loss on extinguishment of debt, equity in earnings or loss of unconsolidated subsidiary, 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 estimated enterprise value. In addition, management believes that the adjustments shown below, especially the adjustments for the closure of 36 consumer lending-only retail services locations in Texas during the second half of 2013 (the “Texas Consumer Loan Store Closures”), the penalty paid to the Consumer Financial Protection Bureau (“CFPB”) in connection with the issuance of a consent order by the CFPB (the “Regulatory Penalty”), charges related to the 2013 Litigation Settlement, the withdrawal in July 2012 of the proposed initial public offering by the Company’s wholly-owned subsidiary, Enova International, Inc. (“Enova IPO”), an income tax benefit related to the change of tax basis in the stock of one of the Company's subsidiaries in connection with the Mexico Reorganization (as defined below) (the “Creazione Deduction”), the reorganization of the Company's Mexico-based pawn operations during 2012 (the “Mexico Reorganization”) and a voluntary program to reimburse Ohio customers in connection with legal collections proceedings initiated by the Company in Ohio (the “Ohio Reimbursement Program”), including a decrease in the Company's remaining liability related to the Ohio Reimbursement Program during 2013 after the assessment of the claims made to date and related matters (the “Ohio Adjustment”), are useful to investors in order to allow them to compare the Company’s financial results during the periods shown without the effect of each of these income and expense items. The computation of adjusted EBITDA as presented below may differ from the computation of similarly-titled measures provided by other companies. The following table provides a reconciliation between Net Income attributable to Cash America International, Inc., which is the nearest GAAP measure presented in the Company’s financial statements, to Adjusted EBITDA (dollars in thousands):
Trailing 12 Months Ended
June 30,
2014     2013  
Net income attributable to Cash America International, Inc. $ 140,178 $ 105,241
Adjustments:
Texas Consumer Loan Store Closures(a) 1,373
Regulatory Penalty(b) 5,000
2013 Litigation settlement(c) 18,635
Charges related to withdrawn proposed Enova IPO(d) 3,112
Charges related to Mexico Reorganization(e) 28,873
Charges related to Ohio Adjustment and Ohio Reimbursement Program(f) (5,000 ) 13,400
Depreciation and amortization expenses(g) 76,319 68,587
Interest expense, net 42,843 31,455
Foreign currency transaction loss 1,173 460
Loss on Debt Extinguishment(h) 17,169
Equity in loss of unconsolidated subsidiary 283
Provision for income taxes(i) 29,194 75,864
Net loss attributable to the noncontrolling interest(j)     (3,954 )
Adjusted EBITDA $ 326,884     $ 323,321  
Adjusted EBITDA margin calculated as follows:
Total revenue $ 1,866,337 $ 1,809,806
Adjusted EBITDA $ 326,884     $ 323,321  
Adjusted EBITDA as a percentage of total revenue 17.5 %   17.9 %

(a) Represents charges related to the Texas Consumer Loan Store Closures of $1.4 million, before tax benefit of $0.5 million.

(b) Represents charges for the Regulatory Penalty, which is nondeductible for tax purposes.

(c) Represents charges related to the 2013 Litigation Settlement of $18.6 million, before tax benefit of $6.9 million.

(d) Represents charges directly related to the withdrawn Enova IPO, before tax benefit of $1.1 million.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

NON-GAAP DISCLOSURE

ADJUSTED EBITDA
 
(e) 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 (g) and (i) below.
(f) For the trailing 12 months ended June 30, 2014, represents the Ohio Adjustment of $5.0 million, before tax provision of $1.8 million. For the trailing 12 months ended June 30, 2013, represents charges related to the Ohio Reimbursement Program, before tax benefit of $5.0 million.
(g) For the trailing 12 months ended June 30, 2014, excludes $0.2 million of depreciation and amortization expenses, which are included in the Texas Consumer Loan Store Closures. For the trailing 12 months ended June 30, 2013, excludes $12.6 million of depreciation and amortization expenses which are included in “Charges related to the Mexico Reorganization”.
(h) For the trailing 12 months ended June 30, 2014, represents charges of $17.2 million, before tax benefit of $6.4 million, related to the Debt Extinguishment.
(i) For the trailing 12 months ended June 30, 2014, includes income benefit of $33.2 million related to the Creazione Deduction. For the trailing 12 months ended June 30, 2013, 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 and includes an income tax benefit related to the Mexico Reorganization of $1.2 million.
(j) For the trailing twelve months ended June 30, 2013, includes $2.3 million of noncontrolling interests related to the Mexico Reorganization.
 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

NON-GAAP DISCLOSURE

ADJUSTED EBITDA
 

In addition, management believes that the adjusted EBITDA shown by segment and for the Company's corporate operations are useful to investors in order to allow them to compare the Company’s financial results during the periods shown without the effect of each of the applicable income and expense items discussed above. The following table provides a reconciliation between Income (loss) from operations, which is the nearest GAAP measure presented for the Company’s segments in the notes to the Company’s financial statements, to Adjusted EBITDA (dollars in thousands):
 
Trailing 12 Months Ended June 30,
2014   2013
Retail Services   E-Commerce   Corporate   Consolidated Retail Services   E-Commerce   Corporate   Consolidated
Income (loss) from operations $ 119,296 $ 198,371 $ (87,110 ) $ 230,557 $ 152,227 $ 144,506 $ (80,223 ) $ 216,510
Depreciation and amortization expenses(a) 42,181 16,549 17,589 76,319 36,683 16,398 15,506 68,587
Adjustments:
Texas Consumer Loan Store Closures 1,373 1,373
Regulatory Penalty 2,500 2,500 5,000
2013 Litigation Settlement 18,635 18,635
Charges related to withdrawn Enova IPO 3,112 3,112
Charges related to the Mexico Reorganization(b) 21,712 21,712
Charges related to Ohio Adjustment and Ohio Reimbursement(c) (5,000 )           (5,000 )   13,400             13,400
Adjusted EBITDA $ 178,985     $ 217,420     $ (69,521 )   $ 326,884     $ 224,022     $ 164,016     $ (64,717 )   $ 323,321
 

(a) For the trailing 12 months ended June 30, 2014, excludes $0.2 million of depreciation and amortization expenses, which are included in the Texas Consumer Loan Store Closures. For the trailing 12 months ended June 30, 2013, excludes $12.6 million of depreciation and amortization expenses which are included in “Charges related to the Mexico Reorganization.”

(b) Includes $12.6 million of depreciation and amortization expenses as noted in (a) above.

(c) For the trailing 12 months ended June 30, 2014, represents the Ohio Adjustment. For the trailing 12 months ended June 30, 2013, represents charges related to the Ohio Reimbursement Program.
 
Six Months Ended June 30,
2014   2013
Retail Services   E-Commerce   Corporate   Consolidated Retail Services   E-Commerce   Corporate   Consolidated
Income (loss) from operations $ 64,165 $ 128,340 $ (46,897 ) $ 145,608 $ 89,123 $ 80,584 $ (42,873 ) $ 126,834
Depreciation and amortization expenses 21,250 8,434 9,074 38,758 18,530 9,028 7,973 35,531
Adjustments:
2013 Litigation Settlement(a) 635             635                
Adjusted EBITDA $ 86,050     $ 136,774     $ (37,823 )   $ 185,001     $ 107,653     $ 89,612     $ (34,900 )   $ 162,365
 

(a) Represents charges related to the 2013 Litigation Settlement during the six months ended June 30, 2014.

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