CASH AMERICA INTERNATIONAL INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _______________

Commission File Number 1-9733

CASH AMERICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

TEXAS 75-2018239
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)

1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102
(Address of principal executive offices) (Zip Code)

(817) 335-1100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal
year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

24,300,784 common shares, $.10 par value, were outstanding as of June 30, 2003

CASH AMERICA INTERNATIONAL, INC.

INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

See notes to consolidated financial statements.

1

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

See notes to consolidated financial statements.

2

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

See notes to consolidated financial statements.

3

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

See notes to consolidated financial statements.

4

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Cash America
International, Inc. (the "Company") and its majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

In September 2001, the Company announced plans to exit the rent-to-own
business in order to focus on its core business of lending activities. In June
2002, the Company sold the remaining assets of its rent-to-own business. See
Note 3.

The financial statements as of June 30, 2003 and 2002, and for the
three and six month periods then ended are unaudited but, in management's
opinion, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such interim
periods. Operating results for the three and six month periods are not
necessarily indicative of the results that may be expected for the full fiscal
year.

Certain amounts in the consolidated financial statements for the three
and six month periods ended June 30, 2002, have been reclassified to conform to
the presentation format adopted in 2003. These reclassifications have no effect
on the net income previously reported.

These financial statements and related notes should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 2002 Annual Report to Stockholders.

2. REVENUE RECOGNITION

Lending Operations -- Pawn loans ("loans") are made on the pledge of tangible
personal property. The Company accrues finance and service charges revenue on
all loans that the Company deems collectible, based on historical loan
redemption statistics. For loans not repaid, the carrying value of the forfeited
collateral ("merchandise held for disposition") is stated at the lower of cost
(cash amount loaned) or market. Revenue is recognized at the time that
merchandise is sold. Interim customer payments for layaway sales are recorded as
customer deposits and subsequently recognized as revenue during the period in
which final payment is received.

Small consumer cash advances ("cash advances") provide customers with
cash in exchange for a promissory note or other repayment agreement supported by
that customer's personal check for the aggregate amount of the cash advanced
plus a service fee. To repay the cash advance, customers may redeem their check
by paying cash or they may allow the check to be presented for collection. The
Company accrues fees and interest on cash advances on a constant yield basis
ratably over their terms. For those locations that offer cash advances from a
third-party financial institution, the Company receives administrative service
fees for services provided on the institutions' behalf. These fees are recorded
in revenue when earned.

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Check Cashing Operations -- The Company records fees derived from its owned
check cashing locations in the period in which the service is provided.
Royalties derived from franchise locations are recorded on the accrual basis.

3. DISCONTINUED OPERATIONS

In September 2001, the Company adopted a formal plan (the "Plan") to exit the
rent-to-own business conducted by the Company's subsidiary, Rent-A-Tire, Inc.
("Rent-A-Tire"), in order to focus on its core business of lending activities.
The Company closed 21 Rent-A-Tire operating locations and held the remaining 22
locations for sale. In conjunction with the Plan, a pre-tax charge of
$10,961,000 ($7,553,000 after income tax benefit) was recorded in the quarter
ended September 30, 2001, to establish a reserve for the estimated loss on
disposal of the rent-to-own business segment.

On June 14, 2002, the Company sold the assets of 22 Rent-A-Tire stores
for proceeds of approximately $3,000,000 in cash. During the quarter ended June
30, 2002, the Company recorded a $1,214,000 ($800,000 after income tax)
reduction in the original charge to the reserve, due to both a decrease in the
Company's expected future operating lease obligations (net of expected sublease
income) for closed stores and proceeds from the sale of assets in excess of the
original estimate. The remaining balance of the reserve of $439,000 at June 30,
2003, consists primarily of expected future operating lease obligations (net of
expected sublease income) for closed stores. The reserve is included in
"Accounts payable and accrued expenses" in the accompanying consolidated balance
sheets.

The Company guarantees obligations under certain operating leases for
the premises related to the 22 Rent-A-Tire stores included in the asset sale
agreement. In the event the buyer is unable to perform under the operating
leases, the Company's maximum aggregate contingent obligation under these
guarantees was approximately $1,189,000 at June 30, 2003. This amount will be
reduced dollar-for-dollar by future amounts paid on these operating leases by
the buyer. In the event that the buyer fails to perform and the Company is
required to make payments under these leases, the Company will seek to mitigate
its losses by subleasing the properties or buying out of the leases.

4. SMALL CONSUMER CASH ADVANCES AND ALLOWANCE FOR LOSSES

Cash advances are generally offered for a term of 7 to 45 days, depending on the
customer's next payday. The Company originates cash advances in some of its
locations and markets and services cash advances made by a third-party bank in
other Company locations. During the first quarter of 2003, the Company
terminated its relationship with a national bank that had offered this product
in many of its stores. The Company entered into an agreement with a state
chartered bank to offer the product in those stores.

Under the current bank program, the Company purchases a participation
interest in the bank originated cash advances, and receives an administrative
fee for its services. In order to benefit from the use of the Company's
collection resources and proficiency, all cash advances unpaid after maturity
are assigned to the Company at a discount from the amount owed by the borrower.
Losses on cash advances assigned to the Company that prove uncollectible are the
responsibility of the Company. To the extent that the Company collects an amount
owed by the customer in excess of the amount assigned by the bank, the Company
is entitled to the excess

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and recognizes it in income when collected. Since the Company may not be
successful in the collection of the assigned accounts, the Company's provision
for loan losses includes amounts estimated to be adequate to absorb credit
losses from cash advances in the aggregate portfolio including those expected to
be assigned from the third-party bank's outstanding portfolio.

Cash advances outstanding at June 30, 2003 and 2002, were as follows
(in thousands):

Changes in the allowance for losses on cash advances for the three and
six month periods ended June 30, 2003 and 2002, were as follows (in thousands):

Cash advances assigned by the bank to the Company for collection were
$13,448,000 and $9,804,000, for the six months ended June 30, 2003 and 2002,
respectively. The Company's participation interest in bank originated cash
advances at June 30, 2003, was $6,551,000.

7

5. WEIGHTED AVERAGE SHARES

The reconciliation of basic and diluted weighted average common shares
outstanding for the three and six month periods ended June 30, 2003 and 2002,
was as follows (in thousands):

6. ACQUISITIONS

During the six months ended June 30, 2003, the Company acquired three pawnshops,
one check cashing franchise and other earning assets in purchase transactions
for an aggregate cash consideration of $1,937,000. The excess of the aggregate
purchase price over the aggregate fair market value of net assets acquired was
approximately $945,000.

On June 30, 2003, the Company entered into a definitive agreement to
purchase substantially all of the assets of Cashland, Inc. ("Cashland"), a
private consumer finance company based in Dayton, Ohio. The Company estimated
the initial purchase price as of that date to be approximately $53,000,000 in
cash and stock. Cashland operates 118 consumer finance centers that offer
short-term cash advances, check cashing and money transfer services. The
purchase is expected to close within 60 days.

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets having an indefinite useful life are tested
for impairment annually at June 30, or more frequently if events or changes in
circumstances indicate that the assets might be impaired. Based on the results
of the test, management determined there was no impairment as of June 30, 2003
as the respective fair value of the Company's reporting units exceeds their
respective carrying amounts.

8

Goodwill -- The changes in the carrying value of goodwill for the six month
periods ended June 30, 2003 and 2002, were as follows (in thousands):

Acquired Intangible Assets -- Acquired intangible assets subject to amortization
as of June 30, 2003 and 2002, were as follows (in thousands):

Noncompetition agreements are amortized over the terms of the
contracts. Net acquired intangible assets are included in "Other assets" in the
accompanying consolidated balance sheets.

9

8. LONG-TERM DEBT

The Company's long-term debt instruments and balances outstanding at June 30,
2003 and 2002, were as follows (in thousands):

The Company also has an SEK 15,000,000 line of credit (approximately
$1,880,000 at June 30, 2003) that matures on May 30, 2004. There were no amounts
outstanding on this line of credit as of June 30, 2003 and 2002, respectively.

9. STOCK OPTIONS

Under various plans (the "Plans") it sponsors, the Company is authorized to
issue 8,300,000 shares of common stock pursuant to "Awards" granted as incentive
stock options (intended to qualify under Section 422 of the Internal Revenue
Code of 1986, as amended) and nonqualified stock options. Stock options granted
under the Plans have contractual terms of 5 to 15 years and have an exercise
price equal to or greater than the fair market value of the stock at grant date.
Stock options granted vest equally over periods ranging from 1 to 7 years and
certain option awards issued since 1997 have a provision to accelerate the
vesting if specified share price appreciation criteria are met. During the six
months ended June 30, 2003, 100,475 shares vested due to the acceleration
provision. No such accelerated vesting of stock options occurred during the six
months ended June 30, 2002.

The Company applies the intrinsic value based method of accounting for
the Plans and, accordingly, no compensation costs have been recognized. Had
compensation costs for the Company's stock options been determined using the
fair value accounting provisions of Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation", the Company's net income and
related amounts per share, basic and diluted, for each of the three and six
month periods ended June 30, 2003 and 2002 would have been reported as follows
(in thousands, except per share amounts):

10

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(a) Determined under fair value based method for all awards, net of related tax
effects. "All awards" refers to awards granted, modified, or settled in
fiscal periods beginning after December 15, 1994, that is, awards for which
the fair value was required to be measured under SFAS 123.

The fair value of each stock option is estimated on the date of grant
using the Black-Scholes option-pricing model. For options granted during the
three and six month periods ended June 30, 2003 and 2002, the following weighted
average assumptions were used:

10. OPERATING SEGMENT INFORMATION

The Company has two reportable operating segments in the lending industry and
one in the check cashing industry. While the United States and foreign lending
segments offer the same services, each is managed separately due to the
different operational strategies required. The check cashing operation offers
different services and products, requiring its own technical, marketing and
operational strategy. The segment data included below excludes amounts related
to discontinued operations. See Note 3.

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Information concerning the segments is set forth below (in thousands):

11. LITIGATION

The Company is party to a number of lawsuits arising in the normal course of
business. In the opinion of management, the resolution of these matters will not
have a material adverse effect on the Company's financial position, results of
operations or liquidity.

13

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

The Company is a provider of specialty financial services to individuals in the
United States, United Kingdom and Sweden. The Company offers secured
non-recourse loans, commonly referred to as pawn loans, to individuals through
its lending operations. The pawn loan portfolio generates finance and service
charges revenue. As an alternative to a pawn loan, the Company offers unsecured
small consumer cash advances in selected lending locations and on behalf of a
third-party financial institution in other locations. A related activity of the
lending operations is the disposition of merchandise, primarily collateral from
unredeemed pawn loans. The Company also provides check cashing services through
its franchised and company owned Mr. Payroll(R) check cashing centers.

As of June 30, 2003, the Company's lending operations consisted of 462
pawnshops, including 390 owned units and 9 franchised units in 17 states in the
United States, 51 units in the United Kingdom, and 12 units in Sweden. The
foreign operations consist primarily of jewelry-only lending units. The number
of owned pawnshops declined by 7 during the 18 months ended June 30, 2003, as
the Company acquired 7 operating units, established 3 locations, and combined or
closed 17 locations. In addition, 4 franchise units were either closed or
terminated. As of June 30, 2003, the Company also owned and operated 11
locations in the United States that offer only the cash advance product.

As of June 30, 2003, Mr. Payroll operated 132 franchised and 7
company-owned manned check cashing centers in 20 states.

In September 2001, the Company announced plans to exit the rent-to-own
business in order to focus on its core business of lending activities. In June
2002, the Company sold the remaining assets of its rent-to-own business. See
Note 3 of Notes to Consolidated Financial Statements.

14

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the components of
consolidated statements of operations as a percentage of total revenue.

15

The following table sets forth certain selected consolidated financial and
non-financial data as of June 30, 2003 and 2002, and for the three and six
months then ended (dollars in thousands).

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(a) Includes cash advances made by the Company and cash advances made by
third-party financial institutions.

(b) Amounts recorded in the Company's consolidated financial statements.

(c) Information presented in this section relates to Mr. Payroll. "Check
cashing royalties and fees" in the consolidated statements of
operations also includes United Kingdom check cashing fees.

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SECOND QUARTER ENDED JUNE 30, 2003, COMPARED TO THE
SECOND QUARTER ENDED JUNE 30, 2002

CONSOLIDATED NET REVENUE. Consolidated net revenue increased $7.2 million, or
13.9%, to $59.0 million during the second quarter ended June 30, 2003 (the
"current quarter") from $51.8 million during the second quarter ended June 30,
2002 (the "prior year quarter"). The following table sets forth net revenue
results by operating segment for the three month periods ended June 30 (in
millions):

The Company's domestic lending operations generated the majority of the
increase in consolidated net revenue. Higher revenue from the Company's small
consumer cash advance product, higher finance and service charges on pawn loans,
and higher gross profit from disposition of merchandise accounted for the
increase in net revenue.

The components of net revenue are finance and service charges from pawn
loans, which increased $3.1 million; gross profit from disposition of
merchandise, which increased $1.7 million; cash advance fees, which increased
$2.2 million; and check cashing royalties and fees, which increased $0.2
million. Management believes that the trend of higher cash advance fees and
higher finance and service charges on pawn loans will continue during the
remainder of 2003 as a result of the expected continuation of increased demand
for these products and due to the higher balances of cash advances and pawn
loans at the end of the second quarter of 2003 compared to the prior year.

FINANCE AND SERVICE CHARGES. The following is a summary of finance and service
charges related to pawn loans by operating segment for the three months ended
June 30, 2003 and 2002 (in millions):

Variations in finance and service charges on pawn loans are caused by
changes in the average balance of pawn loans outstanding, the annualized yield
of the pawn loan portfolio, and the effects of translation of foreign currency
amounts into United States dollars. The following table demonstrates how each of
these factors affected the total change in finance and service charges for the
current quarter as compared to the prior year quarter (in millions):

17

Excluding the favorable impact of foreign currency translation, the
company-wide average balance of pawn loans outstanding was 8.8% higher during
the current quarter than the prior year quarter. On a segment basis, the average
balances of pawn loans were 7.1% and 11.7% higher for the domestic and foreign
lending operations, respectively. The increase in the average balance of
domestic pawn loans outstanding was driven by a 6.0% increase in the average
number of pawn loans outstanding during the current quarter coupled with a 1.1%
increase in the average amount per loan. Management believes the higher average
domestic loan balance outstanding is partially attributable to adverse trends in
the U.S. economy, which were conducive to an increase in loan demand. Domestic
pawn loan balances at June 30, 2003, were $5.7 million, or 7.6%, higher than at
June 30, 2002. Management expects this trend of higher demand for pawn loans to
continue throughout the remainder of 2003. However, the year-over-year increase
may decline slightly during the third quarter due to the advance child tax
credit payments to be issued by the Internal Revenue Service to some pawn loan
customers in the period. The average balances of pawn loans outstanding
denominated in their local currencies increased 13.3% and 9.0% in the United
Kingdom and Sweden, respectively. The average number of pawn loans outstanding
in the United Kingdom and Sweden increased 7.5% and 1.5%, respectively. Average
amounts per loan were higher for both the United Kingdom and Sweden by 5.4% and
7.3%, respectively.

Excluding the favorable impact of foreign currency translation, the
consolidated annualized loan yield, which represents the blended result derived
from the distinctive loan yields realized from operations in the three
countries, was 96.7% in the current year quarter, compared to 97.4% in the prior
year quarter. There was an increase in the domestic annualized loan yield to
123.9% for the current year quarter, compared to 122.8% for the prior year
quarter. Improved performance of the pawn loan portfolio, including higher
redemption rates and a slightly higher concentration of extended loans in the
portfolio, contributed to the higher domestic yield. The blended yield on
average foreign pawn loans outstanding decreased to 53.0% in the current year
quarter compared to 54.7% in the prior year quarter. The decrease in the blended
foreign yield was caused by a decrease in loan redemption rates and lower yield
on the disposition of unredeemed collateral at auction.

Favorable currency translation adjustments contributed $0.9 million to
the increase in foreign source finance and service charges in the current
quarter as compared to the prior year quarter, as the British pound and Swedish
kronor were stronger relative to the United States dollar. The weighted average
exchange rates used to translate local currency earnings into dollars for the
pound and kronor were 10.9% and 23.9% higher, respectively, during the current
quarter compared to the prior year quarter.

PROFIT FROM DISPOSITION OF MERCHANDISE. Profit from disposition of merchandise
represents the proceeds received from disposition of merchandise in excess of
the cost of disposed

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merchandise. The following table summarizes, by operating segment, the proceeds
from disposition of merchandise and the related profit for the current quarter
compared to the prior year quarter (in millions):

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*Excluding refined gold.

Total proceeds from disposition of merchandise in the current quarter
were $2.1 million, or 3.6%, lower than in the prior year quarter. The decrease
was predominately the result of the Company entering the quarter with lower
levels of merchandise available for sale. Proceeds from disposition of
merchandise, excluding refined gold, decreased $2.4 million, or 5.0%. Proceeds
from disposition of refined gold increased $0.3 million, or 3.6% due to higher
market prices for gold. The consolidated merchandise turnover rate decreased to
2.9 times during the current quarter as compared to 3.0 times during the prior
year quarter, and the gross profit on disposition of merchandise increased to
37.0% in the current quarter as compared to 32.8% in the prior year quarter.
Excluding the effect of disposition of refined gold, the gross profit on
disposition of merchandise increased to 39.7% in the current quarter from 36.7%
in the prior year quarter due predominately to lower average cost of merchandise
sold. The gross profit on disposition of refined gold was 23.9% in the current
quarter compared to 11.8% in the prior year quarter due to the prevailing higher
market price of gold.

CASH ADVANCE FEES. Cash advance fees increased $2.2 million, or 52.3%, to $6.4
million in the current quarter as compared to $4.2 million in the prior year
quarter. The increase resulted from significantly higher cash advance balances
at the beginning of the period related to the continued increase in demand for
the small consumer cash advance product. While management expects demand for the
cash advance product to remain strong throughout the remainder of 2003, the
advance child tax credit payments to be issued by the Internal Revenue Service
during the third quarter to some cash advance customers may moderate demand for
the product in the quarter. While this could slow the growth in cash advance
balances, management still anticipates positive year-over-year comparisons to
the 2002 balances. The product was available in 394 domestic lending units at
June 30, 2003, including 303 units that offer the product on behalf of a
third-party bank, for which the Company performs administrative services. Cash
advance fees include revenue from the cash advance portfolio owned by the
Company and fees for administrative services performed for the bank. (Although
small consumer cash advance transactions may take the form of loans or deferred
check deposit transactions, the transactions are referred to throughout this
discussion as "cash advances" for convenience.)

The amount of cash advances written increased $17.2 million, or 65.4%,
to $43.5 million in the current quarter from $26.3 million in the prior year
quarter. The $43.5 million in cash advances written in the current quarter
includes $37.9 million extended to customers by the bank. The average amount per
cash advance increased to $293 from $280. The combined Company

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and bank portfolio of cash advances generated $7.5 million in revenue during the
current quarter compared to $4.6 million in the prior year quarter. The
outstanding combined portfolio of small consumer cash advances increased $4.2
million to $11.7 million at June 30, 2003, from $7.5 million at June 30, 2002.
Included in these amounts are $10.4 million and $2.7 million for 2003 and 2002,
respectively, that are included in the Company's consolidated balance sheets. An
allowance for losses of $1.9 million and $1.3 million has been provided in the
consolidated financial statements as of June 30, 2003 and 2002, respectively,
which offsets the outstanding cash advance amounts.

During the first quarter of 2003, the Company terminated its
relationship with the national bank that had offered this product in many of its
stores. The Company entered into an agreement with a state chartered bank to
offer the product in those stores. See further discussion in Note 4 of Notes to
Consolidated Financial Statements.

CHECK CASHING ROYALTIES AND FEES. Check cashing fees for the United Kingdom
operations increased 72.7% to $0.4 million, in the current quarter. Check
cashing revenue for the Mr. Payroll operations was unchanged at $0.8 million.

OPERATIONS AND ADMINISTRATION EXPENSES. Consolidated operations and
administration expenses, as a percentage of total revenue, was 47.3% in the
current quarter compared to 44.2% in the prior year quarter. These expenses
increased $4.4 million, or 10.9%, in the current quarter compared to the prior
year quarter. Domestic lending expenses increased $3.0 million, as a result of
higher expenses related to the cash advance product including advertising and
new locations. In addition there were increased incentive expenses associated
with the improvement in operating results and higher personnel costs. The
current quarter operating expenses also included a write-off of $0.3 million in
uncollectable receivables from a third party collector of past due cash
advances. Foreign lending operations expenses increased $1.3 million primarily
due to an increase in the number of locations in the United Kingdom. Mr.
Payroll's expenses increased slightly from $0.5 million for the prior year
quarter to $0.6 million for the current quarter.

CASH ADVANCE LOSS PROVISION. The Company maintains an allowance for losses on
cash advances at a level projected to be adequate to absorb credit losses
inherent in the outstanding cash advance portfolio. The cash advance loss
provision is utilized to increase the allowance carried against the outstanding
portfolio. The cash advance loss provision increased $0.1 million to $1.7
million in the current quarter as compared to $1.6 million in the prior year
quarter due to the increase in the size of the portfolio. Loss provision as a
percentage of cash advance fees was 26.5% in the current quarter as compared to
37.5% in the prior year quarter. The decrease in the loss provision as a
percentage of cash advance fees is due to lower loss rates experienced by the
Company in the current quarter compared to the prior year quarter.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense as a
percentage of total revenue was 3.8% in the current quarter compared to 4.1% in
the prior year quarter.

INTEREST EXPENSE. Net interest expense as a percentage of total revenue remained
at 2.3%. Interest expense for both current and prior year quarters was $2.1
million. The effective blended borrowing cost increased to 6.0% in the current
quarter as compared to 5.2% in the prior year quarter due primarily to the
Company's decision to issue $42.5 million of long-term fixed rate notes in July
2002 that replaced lower floating interest rate debt and the elimination of
interest

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income from a note receivable repaid in the first quarter of 2003. The average
amount of debt outstanding decreased during the current quarter to $142.3
million from $159.4 million during the prior year quarter.

LOSS FROM DERIVATIVE VALUATION FLUCTUATIONS. There were no adjustments to fair
values of interest rate cap agreements during the current quarter compared to a
loss of $36,000 in the prior year quarter.

GAIN FROM DISPOSAL OF ASSET. During the current quarter, the Company sold real
estate that was being held for investment purposes following the reconstruction
of the corporate headquarters. The Company received cash proceeds of $1.6
million and realized a gain of $1.0 million.

INCOME TAXES. The Company's effective tax rate for the current quarter was 29.0%
as compared to 35.7% for the prior year quarter. The decrease in the current
quarter is primarily attributable to a reduction in the deferred tax valuation
allowance for capital losses. The valuation allowance was reduced as a result of
the recognition of capital gain from the sale of real estate held for
investment. The effective tax rate for the current quarter would have been 35.2%
excluding the gain and the related tax effect.

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OTHER DATA. The following table sets forth certain selected financial and
non-financial data for the Company's domestic and foreign lending operations,
presented in U.S. dollars, as of June 30, 2003 and 2002, and for the three
months then ended (dollars in thousands).

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SIX MONTHS ENDED JUNE 30, 2003, COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 2002

CONSOLIDATED NET REVENUE. Consolidated net revenue increased $14.4 million, or
13.3%, to $123.0 million during the six months ended June 30, 2003, (the
"current period") from $108.6 million during the second quarter ended June 30,
2002 (the "prior year period"). The following table sets forth net revenue
results by operating segment for the three month periods ended June 30, 2003 and
2002 (in millions):

The following table demonstrates how the key factors affected the total
change in finance and service charges for the current period as compared to the
prior year period (in millions):

Excluding the favorable impact of foreign currency translation, the
company-wide average balance of pawn loans outstanding was 7.1% higher during
the current period than the

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prior year period. On a segment basis, the average balances of pawn loans were
5.2% and 10.3% higher for the domestic and foreign lending operations,
respectively. The increase in the average balance of domestic pawn loans
outstanding was driven by a 3.3% increase in the average number of pawn loans
outstanding during the current period coupled with a 1.8% increase in the
average amount per loan. The average balances of foreign pawn loans outstanding
denominated in their local currencies increased 12.5% and 6.8% in the United
Kingdom and Sweden, respectively. Foreign loan demand was mixed as the average
number of pawn loans outstanding in the United Kingdom and Sweden increased 6.6%
and decreased 0.8%, respectively. Average amounts per loan were higher for both
the United Kingdom and Sweden by 5.5% and 7.7%, respectively.

Excluding the favorable impact of foreign currency translation, the
consolidated annualized loan yield was 100.7% for both current and prior year
periods. There was an increase in the domestic annualized loan yield to 129.4%
for the current year period, compared to 127.2% for the prior year period.
Improved performance of the pawn loan portfolio, demonstrated by higher
redemption rates and a slightly higher concentration of extended loans in the
portfolio, contributed to the higher domestic yield. The blended yield on
average foreign pawn loans outstanding decreased to 53.4% in the current year
period compared to 55.0% in the prior year period. The decrease in the blended
foreign yield was caused by a decrease in loan redemption rates and lower yield
on the disposition of unredeemed collateral at auction.

Favorable currency translation adjustments contributed $1.8 million to
the increase in foreign source finance and service charges in the current period
as compared to the prior year period, as the British pound and Swedish kronor
were stronger relative to the United States dollar. The weighted average
exchange rates used for translating earnings into dollars for the pound and
kronor were 10.8% and 22.8% higher, respectively, during the current period
compared to the prior year period.

PROFIT FROM DISPOSITION OF MERCHANDISE. The following table summarizes, by
operating segment, the proceeds from disposition of merchandise and the related
profit for the current period compared to the prior year period (in millions):

- ----------

*Excluding refined gold.

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Total proceeds from disposition of merchandise in the current period
were $3.0 million, or 2.4%, lower than in the prior year period. The decrease
was predominately the result of the Company entering the current period with
lower levels of merchandise available for sale. Proceeds from disposition of
merchandise, excluding refined gold, decreased $5.6 million, or 5.1%. Proceeds
from disposition of refined gold increased $2.6 million, or 17.4% due to higher
market prices for gold. The consolidated merchandise turnover rate increased to
3.1 times during the current period as compared to 3.0 times during the prior
year period, and the gross profit on disposition of merchandise increased to
37.1% in the current period as compared to 33.7% in the prior year period.
Excluding the effect of the disposition of refined gold, the gross profit on
disposition of merchandise increased to 39.2% in the current period from 36.3%
in the prior year period due predominately to lower average cost of merchandise
sold. The gross profit on disposition of refined gold was 24.6% in the current
period compared to 14.1% in the prior year period due to the prevailing higher
market price of gold.

CASH ADVANCE FEES. Cash advance fees increased $5.1 million, or 66.2%, to $12.8
million in the current period as compared to $7.7 million in the prior year
period. The increase resulted from significantly higher cash advance balances at
the beginning of the period related to the continued increase in demand for the
small consumer cash advance product.

The amount of cash advances written increased $33.7 million, or 70.2%,
to $81.8 million in the current period from $48.0 million in the prior year
period. The $81.8 million in cash advances written in the current period
includes $71.2 million extended to customers by the banks. The average amount
per cash advance increased to $294 from $282. The combined Company and bank
portfolio of cash advances generated $14.6 million in revenue during the current
period compared to $8.5 million in the prior year period.

CHECK CASHING ROYALTIES AND FEES. Check cashing fees for the United Kingdom
operations increased 87.8% to $0.8 million, in the current period. Check cashing
revenue for the Mr. Payroll operations remained unchanged at $1.9 million.

OPERATIONS AND ADMINISTRATION EXPENSES. Consolidated operations and
administration expenses, as a percentage of total revenue, was 45.3% in the
current period compared to 42.9% in the prior year period. These expenses
increased $8.4 million, or 10.2%, in the current period compared to the prior
year period. Domestic lending expenses increased $6.0 million, as a result of
higher expenses related to the cash advance product including advertising and
new locations. In addition, there were increased incentive expenses associated
with the improvement in operating results and higher personnel costs. The
current period operating expenses included a write-off of $0.3 million in
uncollectable receivables from a third party collector of past due cash
advances. Foreign lending operations expenses increased $2.3 million primarily
due to an increase in the number of locations in the United Kingdom. Mr.
Payroll's expenses increased slightly from $1.1 million for the prior year
period to $1.2 million for the current period.

CASH ADVANCE LOSS PROVISION. The cash advance loss provision for domestic
lending operations increased $0.5 million to $3.0 million in the current period
as compared to $2.5 million in the prior year period due to the significant
increase in the size of the portfolio. Loss provision as a percentage of cash
advance fees was 23.5% in the current period as compared to 31.9% in the prior
year period. The decrease in the loss provision as a percentage of cash advance
fees is due to lower loss rates experienced by the Company in the current period
compared to the prior year.

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DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense as a
percentage of total revenue was 3.7% in the current period compared to 3.8% in
the prior year period. Total depreciation and amortization expense was $7.3
million for both periods.

INTEREST EXPENSE. Net interest expense as a percentage of total revenue was 2.2%
for both periods at $4.3 million. The Company's average debt balance decreased
13.4% during the current period compared to the prior year period. The aggregate
blended borrowing cost increased to 6.1% in current period as compared to 5.3%
in the prior year period due primarily to the Company's decision to issue $42.5
million of long-term fixed rate notes in July 2002 that replaced lower floating
rate debt and the elimination of interest income from a note receivable repaid
early in the current period. The average amount of debt outstanding decreased
during the current period to $142.3 million from $164.4 million during the prior
year period.

LOSS FROM DERIVATIVE VALUATION FLUCTUATIONS. There were no adjustments to fair
values of interest rate cap agreements during the current period compared to a
loss of $72,000 in the prior year period.

GAIN FROM DISPOSAL OF ASSET. During the current period, the Company sold real
estate that was being held for investment purposes following the reconstruction
of the corporate headquarters. The Company received cash proceeds of $1.6
million and realized a gain of $1.0 million.

INCOME TAXES. The Company's effective tax rate for the current period ended June
30, 2003, was 33.8% as compared to 35.9% for the prior year period ended June
30, 2002. The decrease in the current period is primarily attributable to a
reduction in the deferred tax valuation allowance for capital losses. The
valuation allowance was reduced as a result of the recognition of capital gain
from the sale of real estate held for investment. The effective tax rate for the
current quarter would have been 36.4% excluding the gain and the related tax
effect.

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OTHER DATA. The following table sets forth certain selected financial and
non-financial data for the Company's domestic and foreign lending operations,
presented in U.S. dollars, for the six months ended June 30, 2003 and 2002
(dollars in thousands).

27

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash flows and other key indicators of liquidity are summarized as
follows ($ in millions):

CASH FLOWS FROM OPERATING ACTIVITIES. Net cash provided by operating activities
of continuing operations was $27.7 million for the six months ended June 30,
2003 ("current period").

CASH FLOWS FROM INVESTING ACTIVITIES. An increase in the Company's investment in
pawn loans during the current period required $6.3 million of cash. The
Company's transition from a national bank to a state chartered bank program in
early 2003 and increases in balances for its cash advance product required an
investment of $8.3 million in cash during the current period. The Company
invested $7.3 million in purchases of property and equipment during the current
period for property improvements, the remodeling of selected operating units and
additions to computer systems for lending operations. During the current period,
the Company acquired three lending locations, one check cashing franchise and
other earning assets for $1.9 million. During the current period, the Company
sold real estate that was being held for investment purposes following the
reconstruction of the corporate headquarters for cash proceeds of $1.6 million.

Management anticipates that capital expenditures for the remainder of
2003 will be approximately $5 to $10 million. These expenditures will primarily
relate to the establishment of new lending locations, the remodeling of selected
operating units and enhancements to information systems. The Company may add up
to 15 new lending locations, including cash advance only locations. The new
locations will be added primarily through the acquisition of existing pawnshop
locations and the establishment of both new pawnshop and new cash advance
locations.

On June 30, 2003, the Company entered into a definitive agreement to
purchase substantially all of the assets of Cashland, Inc. ("Cashland"), a
private consumer finance company based in Dayton, Ohio. The Company estimated
the initial purchase price as of that date to be approximately $53.0 million in
cash and stock. Cashland operates 118 consumer finance centers that offer
short-term cash advances, check cashing and money transfer services. The
purchase is

28

expected to close within 60 days. The Company expects to increase its U.S. line
of credit from $90.0 million to $135.0 million to facilitate payment of the cash
portion of the purchase price and to continue to provide for working capital
needs.

CASH FLOWS FROM FINANCING ACTIVITIES. The Company had net borrowings of $8.1
million on bank lines of credit and used cash for payments of $8.6 million on
other debt obligations; $0.7 million for dividends; and $1.4 million for the
purchase of treasury shares. On July 24, 2002, the Company's Board of Directors
authorized management to purchase up to one million shares of its common stock
in the open market and terminated the open market purchase authorization
established in 2000. During the current period, the Company purchased 152,900
shares for an aggregate amount of $1.4 million under this authorization.
Additional purchases may be made from time to time in the open market, and it is
expected that funding will come from operating cash flow.

At June 30, 2003, $49.4 million was outstanding on the Company's $90
million U.S. line of credit. The Company extended its multi-currency line of
credit to April 30, 2006 and increased the maximum amount to (pound)20 million
(approximately $33.1 million at June 30, 2003) from (pound)15 million
(approximately $24.8 million at June 30, 2003). The Company's foreign
subsidiaries are co-borrowers on this multi-currency line of credit. Funds may
be drawn in British pounds, bearing interest at the Bank's cost of funds plus a
margin of 75 basis points. Funds up to the equivalent of (pound)10 million may
be drawn in Swedish kronor, bearing interest at the Bank's cost of funds plus a
margin of 75 basis points. In the aggregate, the British pound and Swedish
kronor drawings may not exceed the equivalent of (pound)20 million. The Company
pays a fee of 0.25% per annum on the unused portion of this line of credit. As
of June 30, 2003, amounts outstanding under this line of credit were (pound)6.0
million (approximately $9.9 million) and SEK 44.5 million (approximately $5.6
million). The Company also extended its SEK 15 million line of credit
(approximately $1.9 million as of June 30, 2003) with a commercial bank to
mature on May 30, 2004. Interest on this line of credit is charged at the Bank's
base funding rate plus 1%. There were no amounts outstanding on this line of
credit as of June 30, 2003.

Management believes that borrowings available under these credit
facilities, cash generated from operations and current working capital of $200.8
million should be sufficient to meet the Company's anticipated future capital
requirements.

CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
RESULTS

This quarterly report, including management's discussion and analysis, contains
statements that are forward-looking, as that term is defined by the Private
Securities Litigation Reform Act of 1995 or by the Securities and Exchange
Commission in its rules. The Company intends that all forward-looking statements
be subject to the safe harbors created by these laws and rules. When used in
this quarterly report, the words "believes", "estimates", "plans", "expects",
"anticipates", and similar expressions as they relate to the Company or its
management are intended to identify forward-looking statements. All
forward-looking statements are based on current expectations regarding important
risk factors. These risks and uncertainties are beyond the ability of the
Company to control, and, in many cases, the Company cannot predict all of the
risks and uncertainties that could cause its actual results to differ materially
from those expressed in the forward-looking statements. Accordingly, actual
results may differ materially from those

29

expressed in the forward-looking statements, and such statements should not be
regarded as a representation by the Company or any other person that the results
expressed in the statements will be achieved. Important risk factors that could
cause results or events to differ from current expectations are described below.
These factors are not intended to be an all-encompassing list of risks and
uncertainties that may affect the operations, performance, development and
results of the Company's business.

RISK FACTORS

o CHANGES IN CUSTOMER DEMAND FOR THE COMPANY'S PRODUCTS AND
SPECIALTY FINANCIAL SERVICES. Although the Company's products
and services are a staple of its customer base, a significant
change in the needs or wants of customers and the Company's
failure to adapt to those needs or wants could result in a
significant decrease in the revenues of the Company.

o THE ACTIONS OF THIRD PARTIES WHO OFFER PRODUCTS AND SERVICES
AT THE COMPANY'S LOCATIONS. The Company offers products and
services to its customers made available by various third
parties. A failure of a third party provider to provide its
product or service or to maintain the quality and consistency
of its product or service could result in a loss of customers
and a related loss in revenue from those products or services.

o THE ABILITY OF THE COMPANY TO OPEN AND ACQUIRE NEW OPERATING
UNITS IN ACCORDANCE WITH ITS PLANS. The Company's expansion
program is subject to numerous factors which cannot be
predicted or controlled, such as the availability of
attractive acquisition candidates or sites with suitable terms
and general economic conditions.

o CHANGES IN COMPETITION FROM VARIOUS SOURCES SUCH AS BANKS,
SAVINGS AND LOANS, SHORT-TERM CONSUMER LENDERS, AND OTHER
SIMILAR FINANCIAL SERVICES ENTITIES, AS WELL AS RETAIL
BUSINESSES THAT OFFER PRODUCTS AND SERVICES OFFERED BY THE
COMPANY. The Company encounters significant competition in
connection with its lending and merchandise disposition
operations from other pawnshops and other forms of financial
institutions such as consumer finance companies. Significant
increases in these competitive influences could adversely
affect the Company's operations through a decrease in the
number of cash advances and pawn loans originated, resulting
in lower levels of earning assets in these categories.

o CHANGES IN ECONOMIC CONDITIONS. While the credit risk for most
of the Company's consumer lending is mitigated by the
collateralized nature of pawn lending, a protracted
deterioration in the economic environment could adversely
affect the Company's operations through a deterioration in
performance of its pawn loan or cash advance portfolios, or by
reducing consumer demand for the purchase of pre-owned
merchandise.

o REAL ESTATE MARKET FLUCTUATIONS. A significant rise in real
estate prices could result in an increase in the cost of store
leases as the Company opens new locations and renews leases
for existing locations.

o INTEREST RATE FLUCTUATIONS. Although the weakness in the U.S.
economy over the past several quarters has resulted in
relatively low interest rates offered by lending institutions,
an eventual economic recovery could result in a rise in
interest rates which would, in turn, increase the cost of
borrowing to the Company.

o CHANGES IN THE CAPITAL MARKETS. The Company regularly accesses
the debt capital markets to refinance existing debt
obligations, and to obtain capital to finance growth.
Efficient access to these markets is critical to the Company's
ongoing financial success; however, the Company's future
access to the debt capital markets could become

30

restricted should the Company experience deterioration of its
cash flows, balance sheet quality, or overall business or
industry prospects.

o CHANGES IN TAX AND OTHER LAWS AND GOVERNMENTAL RULES AND
REGULATIONS APPLICABLE TO THE SPECIALTY FINANCIAL SERVICES
INDUSTRY. The Company's lending activities are subject to
extensive regulation and supervision under various federal,
state and local laws, ordinances and regulations. The Company
faces the risk that new laws and regulations could be enacted
that could have a negative impact on the Company's domestic or
international lending activities.

o OTHER FACTORS DISCUSSED UNDER QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK IN ITEM 3 OF THIS FORM 10-Q AND
IN THE COMPANY'S 2002 ANNUAL REPORT TO STOCKHOLDERS.

o OTHER RISKS INDICATED IN THE COMPANY'S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company's operations result primarily from
changes in interest rates, foreign exchange rates, and gold prices. The Company
does not engage in speculative or leveraged transactions, nor does it hold or
issue financial instruments for trading purposes. There have been no material
changes to the Company's exposure to market risks since December 31, 2002.

ITEM 4. CONTROLS AND PROCEDURES

(a) Under the supervision and with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, management of the
Company has evaluated the effectiveness of the design and operation of
the Company's disclosure controls and procedures (as defined in Rule
13a-14(c) under the Securities Exchange Act of 1934) as of the last day
of the period covered by this report (the "Evaluation Date"). Based
upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures are effective in timely alerting
them to the material information relating to the Company required to be
included in its periodic filings with the Securities and Exchange
Commission.

(b) During the period covered by this report, there was no change in the
Company's internal control over financial reporting that was identified
in connection with management's evaluation described in Item 4(a) above
and has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.

31

PART II

Item 1. LEGAL PROCEEDINGS

See Note 11 of Notes to Consolidated Financial Statements

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On April 23, 2003, the Company's Annual Meeting of Shareholders was
held. All of the nominees for director identified in the Company's Proxy
Statement, filed pursuant to Regulation 14A under the Securities Exchange Act of
1934, were elected at the meeting to hold office until the next Annual Meeting
or until their successors are duly elected and qualified. The shareholders
ratified the Company's selection of independent auditors. There was no other
business brought before the meeting that required shareholder approval. Votes
were cast in the matters described below as follows (there were no broker
non-votes or abstentions other than those listed below):

(a) Election of directors

(b) Ratification of Independent Auditors

For - 20,350,982
Against - 429,347
Abstain - 5,024

32

Item 5. OTHER INFORMATION

Not Applicable

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

99.1 Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) or 15d-14(a) promulgated under the
Securities Exchange Act of 1934

99.2 Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) or 15d-14(a) promulgated under the
Securities Exchange Act of 1934

99.3 Certification of Chief Executive Officer pursuant to
18 U.S.C. Section 1350

99.4 Certification of Chief Financial Officer pursuant to
18 U.S. C. Section 1350

(b) Reports on Form 8-K

On April 8, 2003, the Company filed a Report on Form 8-K that
it had issued a press release announcing that it expected
earnings for the first quarter of 2003 to exceed the Company's
previously released guidance and be higher than security
analysts' published estimates. In the release the Company also
confirmed that it had completed the transition of providers
for its short-term cash advance product in all planned
locations. A copy of the press release was filed with the
Report as an Exhibit.

On April 24, 2003, the Company filed a Report on Form 8-K that
it had issued a press release announcing its earnings for the
first quarter of 2003. A copy of the press release was filed
with the Report as an Exhibit.

33

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

CASH AMERICA INTERNATIONAL, INC.
--------------------------------------
(Registrant)

By: /s/ Thomas A. Bessant, Jr.
--------------------------
Thomas A. Bessant, Jr.
Executive Vice President and
Chief Financial Officer

Date: July 25, 2003

34