Cash America International, Inc. (NYSE:CSH) announced today that reported net income attributable to the Company for the third quarter ended September 30, 2014, was $9,916,000 (34 cents per share). During the third quarter of 2014, management implemented plans that generated $14.1 million in after tax expenses (48 cents per share) related to the sale of non-strategic operations, the early extinguishment of long-term debt and to complete a corporate reorganization to create efficiencies in its Retail Services segment. Excluding the $14.1 million of unusual expense items incurred in the third quarter of 2014, adjusted net income, a non-GAAP measure, would have been $24.0 million (82 cents per share) for the third quarter ended September 30, 2014. Net income for the comparable third quarter of 2013 was $46,186,000 ($1.52 per share), which included an after tax net benefit of $21.9 million (72 cents per share) that was created by a tax credit that was partially offset by a significant litigation settlement during the period. The adjusted net income, a non-GAAP measure, for the third quarter of 2013, excluding the net benefit, was $24.3 million (80 cents per share).

Consolidated total revenue during the third quarter of 2014 increased by 8% to $472.2 million compared to $437.8 million during the same period in 2013. Consolidated net revenue for the three months ended September 30, 2014, increased 12% to $276.4 million from $247.0 million in the same period of 2013 as loss rates on the consumer loan portfolio were lower overall and pawn-related net revenue was up for the second consecutive quarter in 2014. The aggregate balance of consumer loans outstanding rose slightly as U.S. consumer loan growth outstripped the anticipated decline in foreign consumer loans related to changes in the regulatory environment in the United Kingdom. Total pawn loan balances in the United States were up 6.5% year-over-year and same store pawn loan balances were up 2.1% as of the end of the third quarter of 2014 compared to the same period in 2013.

During the third quarter of 2014, the Company sold non-strategic lending operations, including the disposition of 47 locations in Mexico and the disposition of 5 locations in Colorado, which generated approximately $21.5 million in net cash proceeds but contributed to an aggregate loss of $6.4 million after taxes (22 cents per share). In addition, the Company purchased $103.5 million of its outstanding long-term fixed-rate senior notes in the open market during the third quarter, which generated $6.0 million in pretax charges ($3.8 million after taxes, or 13 cents per share) related to the early extinguishment of debt. Management also completed a corporate reorganization effort in anticipation of the impending separation of its Retail Services segment and its E-Commerce segment and incurred severance and benefits costs of $6.1 million before taxes ($3.9 million after taxes, or 13 cents per share). In the third quarter of 2013, the Company recognized a tax benefit of $33.2 million ($1.09 per share) related to the reorganization of its Mexico-based pawn operations, and incurred an $18.0 million pre-tax expense ($11.3 million after taxes or 37 cents per share) associated with a negotiated settlement of a class-action lawsuit. These two items combined to create a net benefit to after tax income of $21.9 million (72 cents per share) for the period ended September 30, 2013.

Commenting on the results for the third quarter, Daniel R. Feehan, President and Chief Executive Officer, said, “We have completed a variety of strategic initiatives during the third quarter, including the refocusing of our domestic pawn operations and the positioning of our E-Commerce segment to be an independent public company. We have taken the steps we feel have the greatest potential for delivering long-term value to our shareholders for many periods in the future. Operationally, we also successfully moved through the initial transition of our U.K. e-commerce business to meet the new regulatory requirements in the United Kingdom, and we maintained our positive metrics of pawn lending that started in the second quarter.”

For the nine-month period ended September 30, 2014, the Company reported net income of $76,624,000 ($2.61 per share) compared to $115,244,000 ($3.73 per share) for the same period in 2013. Excluding the unusual items discussed above in the third quarter of 2014 totaling $14.1 million after tax (48 cents per share) plus an additional $16.5 million pre-tax ($10.4 million after tax, or 36 cents per share) attributable to the early extinguishment of debt in the first two quarters of 2014, adjusted net earnings, a non-GAAP measure, would have been $101.5 million ($3.45 per share) for the nine-month period ended September 30, 2014. This compares to adjusted net earnings, a non-GAAP measure, of $93.4 million ($3.02 per share) for the nine-month period ended September 30, 2013, when adding back the unusual items discussed above for the 2013 period, which totaled $21.9 million (71 cents per share).

Total revenue was $1.4 billion for the nine-month period ended September 30, 2014, compared to $1.3 billion for the same nine-month period in 2013.

Cash America will host a conference call to discuss the third quarter results and the previously announced spin-off of the Company’s e-commerce segment on Thursday, October 23, 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 November 19, 2014, to shareholders of record on November 5, 2014.

Outlook for the Fourth Quarter of 2014 and 2015 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 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. The fourth quarter, during the seasonally important holiday selling season, represents an important period of retail sales for the Company, and results will be affected by consumer sentiments during the period. There are various other elements that could affect the growth in revenue, such as the regulation of consumer loan products and the development and growth of additional markets for the Company’s e-commerce segment for consumer lending products. As the Company enters the fourth quarter of 2014, management anticipates that demand for the Company’s consumer loan products will continue on a similar pace to the one it has experienced during the first nine months of 2014, with a continued heavier weighting to the consumer loan portfolio and longer-term installment and line of credit products. Demand for the Company’s pawn lending products during the second and third quarters of 2014 have improved, and management expects a continued growth in the Company’s pawn lending business, but at moderate levels for the balance of 2014 and the first half of 2015.

Due to the recent announcement of Board approval to spin-off the Company’s e-commerce segment, management is initiating its expectations for fiscal year 2015, breaking expectations out by each of the two segments into their relative expected range for adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, a non-GAAP measure. Based on its current views of the coming year, management establishes its initial anticipated range of adjusted EBITDA, of between $110 million to $135 million for fiscal 2015 for the retail services segment, including corporate services for that segment, and an anticipated range of adjusted EBITDA of between $180 million to $240 million for fiscal 2015 for the e-commerce segment, which is also known as Enova International, Inc.

Management is providing its expectations for the fourth quarter of 2014 as if the separation of the e-commerce segment, or Enova, does not occur before year-end 2014 in order to remain consistent with past practice related to reporting management’s expectations for future periods. Based on management’s views and on the preceding factors, management expects the fourth quarter 2014 consolidated net income per share to be between $1.00 and $1.10 per share as if the separation of the e-commerce segment does not occur before year end 2014. This range compares to $1.01 per share of consolidated net income in the fourth quarter of 2013, which included $2.8 million of after-tax expenses related to the closure of 28 locations in Texas that offered unsecured consumer loans as the primary source of revenue, a regulatory penalty incurred during the period, an adjustment to the remaining expected liability for the voluntary refund to customers in Ohio and expenses related to the early extinguishment of debt.

Based on the Company’s results through the first nine months of 2014, management expects its consolidated fiscal year 2014 earnings per share to be in a range of between $4.40 and $4.50 per share as if the separation of the e-commerce business does not occur before year end 2014, on a non-GAAP adjusted basis, adjusted for the third quarter unusual items discussed above of 48 cents per share, plus 35 cents per share related to the early extinguishment of debt in the first half of 2014, or 83 cents in total. This compares to the fiscal year 2013 consolidated net earnings per share of $4.04 per share, on a non-GAAP adjusted basis, which excludes a net benefit from unusual items during the year of $18.8 million (a benefit of 62 cents per share). During 2013, the Company recorded 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).

Non-GAAP Measures

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

About the Company

As of September 30, 2014, Cash America International, Inc. (the “Company”) operated 948 total locations offering specialty financial services to consumers, which included the following:
  • 863 lending locations in 21 states in the United States primarily under the names “Cash America Pawn,” “SuperPawn,” “Cash America Payday Advance,” and “Cashland;” and
  • 85 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 September 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

http://www.youxinyi.cn

http://www.headwaycapital.com

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 Financial Conduct

Authority in the United Kingdom, 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 segment, 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 Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Consolidated Operations:
Total revenue $ 472,178 $ 437,801 $ 1,420,368 $ 1,316,309
Net revenue 276,352 247,007 847,279 763,138
Total expenses     231,351       218,488       656,670       607,785  
 
Income from Operations $ 45,001 $ 28,519 $ 190,609 $ 155,353
Income before income taxes     21,394       18,173       127,282       128,279  
 
Net Income   $ 9,916     $ 46,186     $ 76,624     $ 115,552  
 
Net income attributable to the noncontrolling interest   $     $     $     $ (308 )
 
Net Income Attributable to Cash America International, Inc.   $ 9,916     $ 46,186     $ 76,624     $ 115,244  
 
Earnings per share:
Net Income attributable to Cash America International, Inc. common shareholders:
Basic $ 0.34 $ 1.62 $ 2.66 $ 4.01
Diluted $ 0.34 $ 1.52 $ 2.61 $ 3.73
 
Weighted average common shares outstanding:
Basic 29,186 28,426 28,808 28,747
Diluted 29,312 30,379 29,371 30,857
 

     
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share information)
(Unaudited)
 
September 30, December 31,
2014 2013 2013
Assets
Current assets:
Cash and cash equivalents $ 123,532 $ 80,359 $ 67,228
Restricted cash 60 8,000
Pawn loans 264,612 253,678 261,148
Consumer loans, net 348,225 328,281 358,841
Merchandise held for disposition, net 215,263 193,115 208,899
Pawn loan fees and service charges receivable 54,501 50,090 53,438
Income taxes receivable 10,931 9,535
Prepaid expenses and other assets 33,871 28,840 33,655
Deferred tax assets     36,076       46,429       38,800  
Total current assets 1,076,140 991,723 1,039,544
Property and equipment, net 245,382 257,787 261,223
Goodwill 699,061 670,037 705,579
Intangible assets, net 47,490 46,860 52,256
Other assets     32,272       21,185       21,129  
Total assets   $ 2,100,345     $ 1,987,592     $ 2,079,731  
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses $ 141,351 $ 133,736 $ 140,068
Customer deposits 19,271 15,123 14,803
Income taxes currently payable 1,399
Current portion of long-term debt           22,606       22,606  
Total current liabilities 162,021 171,465 177,477
Deferred tax liabilities 110,624 96,286 101,417
Other liabilities 1,124 1,287 1,031
Long-term debt     700,043       660,243       717,383  
Total liabilities   $ 973,812     $ 929,281     $ 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 87,718 152,872 150,833
Retained earnings 1,091,629 991,682 1,017,981
Accumulated other comprehensive income (loss) 2,073 2,614 4,649
Treasury shares, at cost (1,379,345 shares, 2,164,873 shares and 2,224,902 shares as of September 30, 2014 and 2013, and as of December 31, 2013, respectively)     (57,911 )     (91,881 )     (94,064 )
Total equity     1,126,533       1,058,311       1,082,423  
Total liabilities and equity   $ 2,100,345     $ 1,987,592     $ 2,079,731  
 

       
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Revenue
Pawn loan fees and service charges $ 85,313 $ 79,298 $ 246,490 $ 227,940
Proceeds from disposition of merchandise 155,087 128,660 478,314 438,909
Consumer loan fees 229,435 227,563 688,956 640,199
Other     2,343       2,280       6,608       9,261  
Total Revenue     472,178       437,801       1,420,368       1,316,309  
Cost of Revenue
Disposed merchandise 114,293 91,101 343,367 301,397
Consumer loan loss provision     81,533       99,693       229,722       251,774  
Total Cost of Revenue     195,826       190,794       573,089       553,171  
Net Revenue     276,352       247,007       847,279       763,138  
Expenses
Operations and administration 205,731 199,705 592,292 553,471
Loss on divestitures 5,176 5,176
Depreciation and amortization     20,444       18,783       59,202       54,314  
Total Expenses     231,351       218,488       656,670       607,785  
Income from Operations 45,001 28,519 190,609 155,353
Interest expense (17,467 ) (9,260 ) (40,363 ) (25,608 )
Interest income 10 1 28 69
Foreign currency transaction loss (159 ) (741 ) (439 ) (1,053 )
Loss on early extinguishment of debt (5,991 ) (346 ) (22,553 ) (346 )
Equity in loss of unconsolidated subsidiary                       (136 )
Income before Income Taxes 21,394 18,173 127,282 128,279
Provision (benefit) for income taxes     11,478       (28,013 )     50,658       12,727  
Net Income 9,916 46,186 76,624 115,552
Net income attributable to the noncontrolling interest                       (308 )
Net Income Attributable to Cash America International, Inc.   $ 9,916     $ 46,186     $ 76,624     $ 115,244  
Earnings Per Share:
Net Income attributable to Cash America International, Inc. common shareholders:
Basic $ 0.34 $ 1.62 $ 2.66 $ 4.01
Diluted $ 0.34 $ 1.52 $ 2.61 $ 3.73
Weighted average common shares outstanding:
Basic 29,186 28,426 28,808 28,747
Diluted 29,312 30,379 29,371 30,857
Dividends declared per common share $ 0.035 $ 0.035 $ 0.105 $ 0.105
 

 
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 nine months ended September 30, 2014 and 2013 (dollars in thousands except where otherwise noted):
 
As of September 30,
2014     2013     Change   % Change
Ending pawn loan balances
Domestic retail services $ 264,612 $ 248,427 $ 16,185 6.5 %
Foreign retail services           5,251       (5,251 )   (100.0 )%
Consolidated pawn loan balances   $ 264,612     $ 253,678     $ 10,934     4.3 %
Ending merchandise balance, net
Domestic retail services $ 215,263 $ 186,878 $ 28,385 15.2 %
Foreign retail services           6,237       (6,237 )   (100.0 )%
Consolidated merchandise balance, net   $ 215,263     $ 193,115     $ 22,148     11.5 %
 
Three Months Ended September 30,
2014   2013   Change % Change
Pawn loan fees and service charges
Domestic retail services $ 84,081 $ 77,532 $ 6,549 8.4 %
Foreign retail services     1,232       1,766       (534 )   (30.2 )%
Consolidated pawn loan fees and service charges   $ 85,313     $ 79,298     $ 6,015     7.6 %
Average pawn loan balance outstanding
Domestic retail services $ 263,509 $ 241,785 $ 21,724 9.0 %
Foreign retail services     5,971       5,012       959     19.1 %
Consolidated average pawn loans outstanding   $ 269,480     $ 246,797     $ 22,683     9.2 %
Amount of pawn loans written and renewed
Domestic retail services $ 277,651 $ 258,055 $ 19,596 7.6 %
Foreign retail services     9,942       14,043       (4,101 )   (29.2 )%
Consolidated amount of pawn loans written and renewed   $ 287,593     $ 272,098     $ 15,495     5.7 %
Average amount per pawn loan (in ones)
Domestic retail services $ 125 $ 125 $ %
Foreign retail services $ 86 $ 86 $ %
Consolidated average amount per pawn loan (in ones)   $ 123     $ 122     $ 1     0.8 %
Annualized yield on pawn loans
Domestic retail services 126.6 % 127.2 %
Foreign retail services 134.5 % 139.8 %
Consolidated annualized yield on pawn loans     127.0 %     127.5 %              
Gross profit margin on disposition of merchandise
Domestic retail services 26.5 % 29.6 %
Foreign retail services 16.6 % 17.1 %
Gross profit margin on disposition of merchandise     26.3 %     29.2 %              
Merchandise turnover
Domestic retail services 2.1 2.1
Foreign retail services 3.3 2.3
Consolidated merchandise turnover     2.2       2.1                
 

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

(dollars in thousands, except where otherwise noted)
 
Nine Months Ended September 30,
2014 2013 Change % Change
Pawn loan fees and service charges
Domestic retail services $ 241,459 $ 222,508 $ 18,951 8.5 %
Foreign retail services     5,031       5,432       (401 )   (7.4 )%
Consolidated pawn loan fees and service charges   $ 246,490     $ 227,940     $ 18,550     8.1 %
Average pawn loan balance outstanding
Domestic retail services $ 247,002 $ 228,048 $ 18,954 8.3 %
Foreign retail services     5,347       4,910       437     8.9 %
Consolidated average pawn loans outstanding   $ 252,349     $ 232,958     $ 19,391     8.3 %
Amount of pawn loans written and renewed
Domestic retail services $ 781,437 $ 707,758 $ 73,679 10.4 %
Foreign retail services     38,837       42,303       (3,466 )   (8.2 )%
Consolidated amount of pawn loans written and renewed   $ 820,274     $ 750,061     $ 70,213     9.4 %
Average amount per pawn loan (in ones)
Domestic retail services $ 124 $ 127 $ (3 ) (2.4 )%
Foreign retail services $ 87 $ 87 $ %
Consolidated average amount per pawn loan (in ones)   $ 122     $ 124     $ (2 )   (1.6 )%
Annualized yield on pawn loans
Domestic retail services 130.7 % 130.5 %
Foreign retail services 144.9 % 147.9 %
Consolidated annualized yield on pawn loans     131.2 %     130.8 %              
Gross profit margin on disposition of merchandise
Domestic retail services 28.4 % 31.7 %
Foreign retail services 21.0 % 17.9 %
Gross profit margin on disposition of merchandise     28.2 %     31.3 %              
Merchandise turnover
Domestic retail services 2.2 2.5
Foreign retail services 2.7 2.5
Consolidated merchandise turnover     2.3       2.5                
 

 

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 nine months ended September 30, 2014 and 2013 (dollars in thousands):
  Three Months Ended September 30,
2014   2013
Retail   Commercial   Total Retail   Commercial   Total
Proceeds from disposition $117,721 $37,366 $155,087 $94,169 $34,491 $128,660
Gross profit on disposition $36,994 $3,800 $40,794 $33,452 $4,107 $37,559
Gross profit margin 31.4% 10.2% 26.3% 35.5% 11.9% 29.2%
Percentage of total gross profit 90.7% 9.3% 100.0% 89.1% 10.9% 100.0%
 
  Nine Months Ended September 30,
2014   2013
Retail   Commercial   Total Retail   Commercial   Total
Proceeds from disposition $ 377,965 $ 100,349 $ 478,314 $ 296,415 $ 142,494 $ 438,909
Gross profit on disposition $ 125,027 $ 9,920 $ 134,947 $ 108,827 $ 28,685 $ 137,512
Gross profit margin 33.1 % 9.9 % 28.2 % 36.7 % 20.1 % 31.3 %
Percentage of total gross profit 92.6 % 7.4 % 100.0 % 79.1 % 20.9 % 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 $2.4 million and $0.9 million as of September 30, 2014 and 2013, respectively (dollars in thousands):
  As of September 30,
2014   2013
Amount   % Amount   %
Jewelry - held for one year or less $ 114,998 53.0 % $ 105,583 54.4 %
Other merchandise - held for one year or less     91,058     41.9 %     76,235     39.3 %
Total merchandise held for one year or less     206,056     94.9 %     181,818     93.7 %
Jewelry - held for more than one year 2,532 1.2 % 5,701 2.9 %
Other merchandise - held for more than one year     8,448     3.9 %     6,544     3.4 %
Total merchandise held for more than one year     10,980     5.1 %     12,245     6.3 %
Merchandise held for disposition, gross   $ 217,036     100.0 %   $ 194,063     100.0 %
Merchandise held for disposition, net of allowance   $ 214,636           $ 193,115        
 

               
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 nine months ended September 30, 2014 and 2013 (dollars in thousands):
 
Three Months Ended September 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   $ 21,476     $     $ 3,355     $ 24,831     $ 26,265     $     $ 3,239     $ 29,504  
E-commerce
Domestic 46,125 41,723 38,275 126,123 48,552 32,373 24,029 104,954
Foreign     15,760       39,186       23,535       78,481       43,958       18,131       31,016       93,105  
Total E-commerce     61,885       80,909       61,810       204,604       92,510       50,504       55,045       198,059  
Consumer loan fees $ 83,361 $ 80,909 $ 65,165 $ 229,435 $ 118,775 $ 50,504 $ 58,284 $ 227,563
Less: consumer loan loss provision     25,581       25,913       30,039       81,533       41,806       25,140       32,747       99,693  
Consumer loan fees, net loss provision   $ 57,780     $ 54,996     $ 35,126     $ 147,902     $ 76,969     $ 25,364     $ 25,537     $ 127,870  
Year-over-year change - $ $ (19,189 ) $ 29,632 $ 9,589 $ 20,032 $ (17,424 ) $ 14,943 $ 9,556 $ 7,075
Year-over-year change - % (24.9 )% 116.8 % 37.5 % 15.7 % (18.5 )% 143.4 % 59.8 % 5.9 %
Consumer loan loss provisionas a % of consumer loan fees     30.7 %     32.0 %     46.1 %     35.5 %     35.2 %     49.8 %     56.2 %     43.8 %
 
Nine Months Ended September 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   $ 63,913     $     $ 10,577     $ 74,490     $ 74,999     $     $ 9,474     $ 84,473  
E-commerce
Domestic 131,910 112,804 99,208 343,922 138,546 82,072 62,479 283,097
Foreign     68,660       116,036       85,848       270,544       172,003       19,949       80,677       272,629  
Total E-commerce     200,570       228,840       185,056       614,466       310,549       102,021       143,156       555,726  
Consumer loan fees $ 264,483 $ 228,840 $ 195,633 $ 688,956 $ 385,548 $ 102,021 $ 152,630 $ 640,199
Less: consumer loan loss provision     72,963       71,074       85,685       229,722       129,903       41,612       80,259       251,774  
Consumer loan fees, net loss provision   $ 191,520     $ 157,766     $ 109,948     $ 459,234     $ 255,645     $ 60,409     $ 72,371     $ 388,425  
Year-over-year change - $ $ (64,125 ) $ 97,357 $ 37,577 $ 70,809 $ (18,220 ) $ 32,670 $ 34,398 $ 48,848
Year-over-year change - % (25.1 )% 161.2 % 51.9 % 18.2 % (6.7 )% 117.8 % 90.6 % 14.4 %
Consumer loan loss provision as a % of consumer loan fees     27.6 %     31.1 %     43.8 %     33.3 %     33.7 %     40.8 %     52.6 %     39.3 %
 

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. 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.

   
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSUMER LOAN FINANCIAL AND OPERATING DATA

(dollars in thousands, except where otherwise noted)
 

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

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

Short-term consumer loans:
Consumer loan loss provision $ 25,581 $ 41,806
Charge-offs (net of recoveries) 26,323 49,271
Allowance and liability for losses 22,958 37,042
Combined consumer loans and fees receivable, gross(a) 132,917 184,836

Short-term loans:
Consumer loan loss provision as a % of combined consumer loans written and renewed(b) 5.2 % 6.5 %
Charge-offs (net of recoveries) as a % of combined consumer loans written and renewed(b) 5.3 % 7.6 %
Consumer loan loss provision as a % of consumer loan fees 30.7 % 35.2 %
Allowance and liability for losses as a % of combined consumer loan balances, gross(a)     17.3 %     20.0 %
 

(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.
 
   

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 September 30, 2014 and 2013.
 
Three Months Ended
September 30,
2014 2013

Line of credit accounts:
Consumer loan loss provision $ 25,913 $ 25,140
Charge-offs (net of recoveries) 24,818 13,855
Allowance and liability for losses 22,673 21,934
Average consumer loan balance(a) 125,342 78,839

Line of credit accounts:
Consumer loan loss provision as a % of average consumer loan balance(a) 20.7 % 31.9 %
Charge-offs (net of recoveries) as a % of average consumer loan balance(a) 19.8 % 17.6 %
Consumer loan loss provision as a % of consumer loan fees 32.0 % 49.8 %
Allowance for losses as a % of consumer loan balances, gross(b)     17.7 %     22.0 %
 
(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.
(b) 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 shows installment loans and related loan loss activity, which is based on average amount of combined consumer loan balance, for the three months ended September 30, 2014 and 2013.
 
Three Months Ended
September 30,
2014 2013

Installment loans:
Consumer loan loss provision $ 30,039 $ 32,747
Charge-offs (net of recoveries) 27,954 26,691
Allowance and liability for losses 32,170 33,810
Installment loan average loan balance:(a)
Company owned $ 193,137 $ 157,183
Guaranteed by the Company(b)     8,357       10,203  
Combined average consumer loan balance(c)   $ 201,494     $ 167,386  

Installment loans:
Consumer loan loss provision as a % of combined average consumer loan balance(a)(c) 14.9 % 19.6 %
Charge-offs (net of recoveries) as a % of combined average consumer loan balance(a)(c) 13.9 % 15.9 %
Consumer loan loss provision as a % of consumer loan fees 46.1 % 56.2 %
Allowance and liability for losses as a % of combined consumer loan balances, gross(c)     15.4 %     18.4 %
 
(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 September 30, 2014 and 2013 (dollars in thousands):
 
As of September 30,
2014 2013

Company Owned(a)

Guaranteed by the Company(a)

Combined(b)

Company Owned(a)

Guaranteed by the Company(a)
Combined(b)
Ending consumer loan balances:

Retail Services
Short-term loans $ 42,978 $ 3,728 $ 46,706 $ 47,824 $ 4,681 $ 52,505
Installment loans     6,823       8,108       14,931       9,945       10,275       20,220  
Total Retail Services, gross     49,801       11,836       61,637       57,769       14,956       72,725  

E-Commerce
Domestic
Short-term loans 34,113 35,389 69,502 33,926 35,107 69,033
Line of credit accounts 72,648 72,648 59,341 59,341
Installment loans     135,664       40       135,704       62,460             62,460  
Total Domestic, gross     242,425       35,429       277,854       155,727       35,107       190,834  
Foreign
Short-term loans 16,709 16,709 63,276 22 63,298
Line of credit accounts 55,627 55,627 40,265 40,265
Installment loans     58,932             58,932       101,200             101,200  
Total Foreign, gross     131,268             131,268       204,741       22       204,763  
Total E-Commerce, gross     373,693       35,429       409,122       360,468       35,129       395,597  
Total ending loan balance, gross     423,494       47,265       470,759       418,237       50,085       468,322  
Less: Allowance and liabilities for losses     (75,269 )     (2,532 )     (77,801 )     (89,956 )     (2,830 )     (92,786 )
Total ending loan balance, net   $ 348,225     $ 44,733     $ 392,958     $ 328,281     $ 47,255     $ 375,536  
Allowance and liability for losses as a % of consumer loan balances, gross     17.8 %     5.4 %     16.5 %     21.5 %     5.7 %     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
INCOME FROM OPERATIONS BY OPERATING SEGMENT

(dollars in thousands)
 

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

Three Months Ended September 30, 2014
Revenue
Pawn loan fees and service charges $ 84,081 $ 1,232 $ 85,313 $ $ $ $ $ $ 85,313
Proceeds from disposition of merchandise 151,399 3,688 155,087 155,087
Consumer loan fees 24,831 24,831 126,123 78,481 204,604 229,435
Other     1,564     38       1,602     7     557           564     177       2,343
Total revenue     261,875     4,958       266,833     126,130     79,038           205,168     177       472,178
Cost of revenue
Disposed merchandise 111,216 3,077 114,293 114,293
Consumer loan loss provision     8,614           8,614     55,058     17,861           72,919           81,533
Total cost of revenue     119,830     3,077       122,907     55,058     17,861           72,919           195,826
Net revenue     142,045     1,881       143,926     71,072     61,177           132,249     177       276,352
Expenses
Operations and administration 100,128 1,740 101,868 32,201 23,238 25,857 81,296 22,567 205,731
Loss on divestitures 273 4,903 5,176 5,176
Depreciation and amortization     9,931     280       10,211     2,618     601     2,119       5,338     4,895       20,444
Total expenses     110,332     6,923       117,255     34,819     23,839     27,976       86,634     27,462       231,351
Income (loss) from operations   $ 31,713   $ (5,042 )   $ 26,671   $ 36,253   $ 37,338   $ (27,976 )   $ 45,615   $ (27,285 )   $ 45,001

As of September 30, 2014
Total assets $ 1,385,469 $ 714,876 $ 2,100,345
Goodwill $ 488,700 $ 210,361 $ 699,061
 
 
Retail Services E-Commerce
Domestic Foreign Total Domestic Foreign Admin   Total Corporate Consolidated

Three Months Ended September 30, 2013
Revenue
Pawn loan fees and service charges $ 77,532 $ 1,766 $ 79,298 $ $ $ $ $ $ 79,298
Proceeds from disposition of merchandise 124,352 4,308 128,660 128,660
Consumer loan fees 29,504 29,504 104,954 93,105 198,059 227,563
Other     1,731     66       1,797     249     69           318     165       2,280
Total revenue     233,119     6,140       239,259     105,203     93,174           198,377     165       437,801
Cost of revenue
Disposed merchandise 87,530 3,571 91,101 91,101
Consumer loan loss provision     10,037           10,037     49,225     40,431           89,656           99,693
Total cost of revenue     97,567     3,571       101,138     49,225     40,431           89,656           190,794
Net revenue     135,552     2,569       138,121     55,978     52,743           108,721     165       247,007
Expenses
Operations and administration 111,220 2,831 114,051 30,445 25,245 15,556 71,246 14,408 199,705
Depreciation and amortization     9,878     764       10,642     1,906     706     1,346       3,958     4,183       18,783
Total expenses     121,098     3,595       124,693     32,351     25,951     16,902       75,204     18,591       218,488
Income (loss) from operations   $ 14,454   $ (1,026 )   $ 13,428   $ 23,627   $ 26,792   $ (16,902 )   $ 33,517   $ (18,426 )   $ 28,519

As of September 30, 2013
Total assets $ 1,354,074 $ 633,518 $ 1,987,592
Goodwill $ 459,669 $ 210,368 $ 670,037
 

                 
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

Nine Months Ended September 30, 2014
Revenue
Pawn loan fees and service charges $ 241,459 $ 5,031 $ 246,490 $ $ $ $ $ $ 246,490
Proceeds from disposition of merchandise 466,016 12,298 478,314 478,314
Consumer loan fees 74,490 74,490 343,922 270,544 614,466 688,956
Other     5,284     168       5,452     81     568           649     507       6,608
Total revenue     787,249     17,497       804,746     344,003     271,112           615,115     507       1,420,368
Cost of revenue
Disposed merchandise 333,651 9,716 343,367 343,367
Consumer loan loss provision     24,061           24,061     122,422     83,239           205,661           229,722
Total cost of revenue     357,712     9,716       367,428     122,422     83,239           205,661           573,089
Net revenue     429,537     7,781       437,318     221,581     187,873           409,454     507       847,279
Expenses
Operations and administration 301,470 8,375 309,845 81,425 72,419 67,883 221,727 60,720 592,292
Loss on divestitures 273 4,903 5,176 5,176
Depreciation and amortization     30,357     1,104       31,461     6,577     1,683     5,512       13,772     13,969       59,202
Total expenses     332,100     14,382       346,482     88,002     74,102     73,395       235,499     74,689       656,670
Income (loss) from operations   $ 97,437   $ (6,601 )   $ 90,836   $ 133,579   $ 113,771   $ (73,395 )   $ 173,955   $ (74,182 )   $ 190,609
 
 
Retail Services

E-Commerce
Domestic Foreign Total

Domestic
Foreign Admin Total Corporate Consolidated

Nine Months Ended September 30, 2013
Revenue
Pawn loan fees and service charges $ 222,508 $ 5,432 $ 227,940

$

$ $ $ $ $ 227,940
Proceeds from disposition of merchandise 425,716 13,193 438,909

438,909
Consumer loan fees 84,473 84,473

283,097
272,629 555,726 640,199
Other     6,149     417       6,566    

1,051
    92           1,143     1,552       9,261
Total revenue     738,846     19,042       757,888    

284,148
    272,721           556,869     1,552       1,316,309
Cost of revenue
Disposed merchandise 290,569 10,828 301,397

301,397
Consumer loan loss provision     23,927           23,927    

112,391
    115,456           227,847           251,774
Total cost of revenue     314,496     10,828       325,324    

112,391
    115,456           227,847           553,171
Net revenue     424,350     8,214       432,564    

171,757
    157,265           329,022     1,552       763,138
Expenses
Operations and administration 291,409 9,432 300,841

73,688
76,176 52,071 201,935 50,695 553,471
Depreciation and amortization     27,579     1,593       29,172    

6,866
    2,101     4,019       12,986     12,156       54,314
Total expenses     318,988     11,025       330,013    

80,554
    78,277     56,090       214,921     62,851       607,785
Income (loss) from operations   $ 105,362   $ (2,811 )   $ 102,551  

$

91,203
  $ 78,988   $ (56,090 )   $ 114,101   $ (61,299 )   $ 155,353
 

Corporate operations primarily include corporate expenses 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.

 

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

INCOME FROM OPERATIONS BY OPERATING SEGMENT

(dollars in thousands)

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 providing pawn lending, consumer lending, and other services as of September 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.” Prior to the Company’s sale of its Mexico-based pawn operations in August 2014, the foreign retail services locations operated under the name “Cash America casa de empeño.”
  As of September 30,
2014   2013
Domestic(a)   Foreign   Total Domestic(a)   Foreign   Total
Retail services locations offering:
Both pawn and consumer lending 420 420 581 581
Pawn lending only 406 406 211 47 258
Consumer lending only 37 37 68 68
Other(b)   85     85   88     88
Total retail services   948     948   948   47   995
 

(a) Except as described in (b) below, includes locations that operated in 21 and 22 states in the United States as of September 30, 2014 and 2013, respectively.
(b) As of September 30, 2014 and 2013, includes 85 and 88 unconsolidated franchised check cashing locations, respectively, that operated in 12 and 13 states in the United States, respectively.
 

E-Commerce Segment

As of September 30, 2014 and 2013, the Company’s e-commerce segment provided services in 34 and 32 states, respectively, in the United States and in five foreign countries:

In June 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 guarantees the payment of these loans by agreeing to purchase the loans from the third-party under certain circumstances. In July 2014, the Company launched a pilot program in China where it has entered into a joint venture with a third-party lender where the third-party lender makes loans in accordance with applicable laws. In addition, in July 2014, the Company launched Headway Capital, a pilot program for a new line of credit product in the United States that serves the needs of small businesses.
 

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 included in the table below, especially those included in “Adjusted net income and adjusted diluted net income per share attributable to the Company,” are useful to investors in order to allow them to compare the Company’s financial results for the current quarter and current nine-month period with the prior year quarter and prior year nine-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 nine months ended September 30, 2014 and 2013, respectively, between net income attributable to the Company and diluted net income per share attributable to the Company 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 September 30, Nine Months Ended September 30,
2014 2013 2014 2013
$

Per Diluted Share(a)
$

Per Diluted Share(a)
$

Per Diluted Share(a)
$

Per Diluted Share(a)
Net income and diluted net income per share attributable to the Company $ 9,916 $ 0.34 $ 46,186 $ 1.52 $ 76,624 $ 2.61 $ 115,244 $ 3.73
Adjustments (net of tax):
Loss on divestitures (b) 6,444 0.22 6,444 0.22
Corporate Reorganization (c) 3,870 0.13 3,870 0.13
Loss on early extinguishment of debt (d) 3,774 0.13 14,208 0.48
2013 Litigation Settlement (e) 11,340 0.37 400 0.01 11,340 0.37
Tax benefit related to Creazione Deduction (f)             (33,201 )     (1.09 )             (33,201 )     (1.08 )
Adjusted net income and adjusted diluted net income per share attributable to the Company     24,004     0.82     24,325       0.80       101,546     3.45     93,383       3.02  
Other adjustments (net of tax):
Intangible asset amortization 1,043 0.04 1,014 0.03 3,134 0.11 2,675 0.09
Non-cash equity-based compensation 1,058 0.04 698 0.03 3,040 0.11 2,456 0.08
Non-cash interest and debt issuance cost amortization 869 0.02 1,014 0.03 2,423 0.08 2,939 0.10
Foreign currency transaction loss (gain)     100         467       0.02       277     0.01     663       0.02  
Adjusted earnings and adjusted earnings per share   $ 27,074   $ 0.92   $ 27,518     $ 0.91     $ 110,420   $ 3.76   $ 102,116     $ 3.31  
 
(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 and nine months ended September 30, 2014, represents a loss on the sale of the Mexico-based pawn operations of $2.8 million and tax provision of $1.7 million, a $2.1 million expense, net of tax benefit of $0.3 million recognized related to an uncollectible receivable as a result of the Company’s discontinuation of its Mexico-based pawn operations, and a loss on the sale of Colorado pawn lending locations of $0.3 million, net of tax benefit of $0.1 million.
(c) For the three and nine months ended September 30, 2014, represents charges of $6.1 million, net of tax benefit of $2.3 million related to a reorganization of the Company’s corporate functions (the “Corporate Reorganization”).
(d) For the three months ended September 30, 2014, represents charges of $6.0 million, net of tax benefit of $2.2 million. For the nine months ended September 30, 2014, represents $22.6 million of charges, net of tax benefit of $8.3 million.
(e) Represents charges related to settlement of a litigation matter in 2013 (the “2013 Litigation Settlement”). For the nine months ended September 30, 2014, represents charges of $0.6 million of charges, net of tax benefit of $0.2 million. For the three and nine months ended September 30, 2013, represents $18.0 million of charges, net of a tax benefit of $6.7 million.
(f) In connection with the liquidation of Creazione, represents a recognized income tax benefit related to a tax deduction included on the Company’s 2013 federal income tax return for its tax basis in the stock of Creazione (the “Creazione Deduction”).
 

 

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 early 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 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
September 30,
2014   2013
Net income attributable to Cash America International, Inc. $ 103,908 $ 139,724
Net loss attributable to the noncontrolling interest (181 )
Provision for income taxes (a) 68,685 29,896
Equity in loss of unconsolidated subsidiary 222
Loss on early extinguishment of debt (b) 22,814 346
Foreign currency transaction loss 591 1,294
Interest expense, net 51,041 33,540
Depreciation and amortization expenses (c) 77,980 71,377
Adjustments:
Corporate Reorganization (d) 6,143
Loss on divestitures (e) 5,176
Texas Consumer Loan Store Closures (f) 1,373
Regulatory Penalty (g) 5,000
2013 Litigation settlement (h) 635 18,000
Charges related to Mexico Reorganization (i) 6,965
Charges related to Ohio Adjustment and Ohio Reimbursement Program (j)     (5,000 )     13,400  
Adjusted EBITDA   $ 338,346     $ 314,583  
Adjusted EBITDA margin calculated as follows:
Total revenue $ 1,900,714 $ 1,807,913
Adjusted EBITDA   $ 338,346     $ 314,583  
Adjusted EBITDA as a percentage of total revenue     17.8 %     17.4 %
 
(a) For the trailing 12 months ended September 30, 2013, includes income benefit of $33.2 million related to the Creazione Deduction.
(b) For the trailing 12 months ended September 30, 2014, represents charges of $22.8 million, before tax benefit of $8.4 million. For the trailing 12 months ended September 30, 2013, represents charges of $0.3 million, before tax benefit of $0.1 million.
(c) For the trailing 12 months ended September 30, 2014, excludes $0.2 million of depreciation and amortization expenses, which are included in Texas Consumer Loan Store Closures related to the closure of 36 consumer lending-only retail services locations in Texas in 2013 (“Texas Consumer Loan Store Closures”). For the trailing 12 months ended September 30, 2013, excludes $1.5 million of depreciation and amortization expenses which are included in “Charges related to the Mexico Reorganization.”
(d) Represents charges of $6.1 million, before tax benefit of $2.3 million.
(e) Represents a loss on the sale of the Mexico-based pawn operations of $2.8 million and tax provision of $1.7 million, a $2.1 million expense, before tax benefit of $0.3 million recognized related to an uncollectible receivable as a result of the Company’s discontinuation of its Mexico-based pawn operations, and a loss on the sale of Colorado pawn lending locations of $0.3 million, before tax benefit of $0.1 million.
(f) Represents charges of $1.4 million, before tax benefit of $0.5 million, related to the Texas Consumer Loan Store Closures.
(g) Represents charges that are nondeductible for tax purposes related to a penalty paid to the Consumer Financial Protection Bureau “CFPB” in connection with the issuance of a consent order by the CFPB.
(h) For the trailing 12 months ended September 30, 2014, represents charges of $0.6 million, before tax benefit of $0.2 million. For the trailing 12 months ended September 30, 2013, represents charges of $18.0 million, before tax benefit of $6.7 million.
(i) Includes $1.5 million of depreciation and amortization expenses, as noted in (c) above.
(j) For the trailing 12 months ended September 30, 2014, represents the decrease in the Company's remaining liability related to the Ohio Reimbursement Program (defined below) during 2013 after the assessment of the claims made to date and related matters (the “Ohio Adjustment”) of $5.0 million, before tax provision of $1.8 million. For the trailing 12 months ended September 30, 2013, represents charges related a voluntary program to reimburse Ohio customers in connection with legal collections proceedings initiated by the Company in Ohio (the “Ohio Reimbursement Program”), before tax benefit of $5.0 million.
 

 

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 September 30,
2014   2013
Retail Services   E-Commerce   Corporate   Consolidated Retail Services   E-Commerce   Corporate   Consolidated
Income (loss) from operations $ 132,539 $ 210,469 $ (95,969 ) $ 247,039 $ 136,157 $ 148,051 $ (79,367 ) $ 204,841
Depreciation and amortization expenses(a) 41,750 17,929 18,301 77,980 38,334 16,977 16,066 71,377
Adjustments:
Corporate Reorganization 1,708 4,435 6,143
Loss on divestitures 5,176 5,176
Texas Consumer Loan Store Closures(b) 1,373 1,373
Regulatory Penalty 2,500 2,500 5,000
2013 Litigation Settlement 635 635 18,000 18,000
Charges related to the Mexico Reorganization(c) 6,965 6,965
Charges related to Ohio Adjustment and Ohio Reimbursement(d)   $ (5,000 )   $   $     $ (5,000 )   $ 13,400   $   $     $ 13,400
Adjusted EBITDA     180,681       230,898     (73,233 )     338,346       212,856     165,028     (63,301 )     314,583
 
(a) For the trailing 12 months ended September 30, 2014, excludes $0.2 million of depreciation and amortization expenses, which are included in Texas Consumer Loan Store Closures. For the trailing 12 months ended September 30, 2013, excludes $1.5 million of depreciation and amortization expenses which are included in “Charges related to the Mexico Reorganization.”
(b) Includes $0.2 million of depreciation and amortization expenses as noted in (a) above.
(c) Includes $1.5 million of depreciation and amortization expenses as noted in (a) above.
(d) For the trailing 12 months ended September 30, 2014, represents the Ohio Adjustment. For the trailing 12 months ended September 30, 2013, represents charges related to the Ohio Reimbursement Program.
 
  Nine Months Ended September 30,
2014   2013
Retail Services   E-Commerce   Corporate   Consolidated Retail Services   E-Commerce   Corporate   Consolidated
Income (loss) from operations $ 90,836 $ 173,955 $ (74,182 ) $ 190,609 $ 102,551 $ 114,101 $ (61,299 ) $ 155,353
Depreciation and amortization expenses 31,461 13,772 13,969 59,202 29,172 12,986 12,156 54,314
Adjustments:
Corporate Reorganization 1,708 4,435 6,143
Loss on divestitures 5,176 5,176
2013 Litigation Settlement     635               635     18,000               18,000
Adjusted EBITDA   $ 129,816   $ 187,727   $ (55,778 )   $ 261,765   $ 149,723   $ 127,087   $ (49,143 )   $ 227,667
 

   
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NON-GAAP DISCLOSURE
ESTIMATED ADJUSTED EBITDA FOR 2015
 

The following table reconciles estimated Income from operations to Adjusted EBITDA, a non-GAAP measure, for each of the Company's retail services and e-commerce segments (dollars in thousands):
 

Retail services segment (including corporate services):
Estimated Results
Year ended December 31, 2015
Low   High
Unaudited
 
Income from operations $ 50,000 $ 72,000
Depreciation and amortization     60,000     63,000
Adjusted EBITDA   $ 110,000   $ 135,000
 
 

E-commerce segment:
Estimated Results
Year ended December 31, 2015
Low   High
Unaudited
 
Income from operations $ 160,000 $ 217,000
Depreciation and amortization     20,000     23,000
Adjusted EBITDA   $ 180,000   $ 240,000

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