Back to GetFilings.com

Table of Contents

For the fiscal year ended December 31, 2003

OR

For the transition period from                 to                

Commission File Number 1-9733

CASH AMERICA INTERNATIONAL, INC.

Registrant’s telephone number, including area code:
(817) 335-1100

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock Purchase Rights

     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.

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.      

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

     The aggregate market value of 23,642,000 shares of the registrant’s Common Stock held by nonaffiliates on June 30, 2003 was approximately $311,601,560.

     At February 4, 2004 there were 28,276,826 shares of the registrant’s Common Stock, $.10 par value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant’s definitive Proxy Statement pertaining to the 2004 Annual Meeting of Shareholders are incorporated herein by reference into PART III of this Form 10-K.

Table of Contents

CASH AMERICA INTERNATIONAL, INC.

YEAR ENDED DECEMBER 31, 2003

INDEX TO FORM 10-K

Table of Contents

PART I

ITEM 1. BUSINESS

General

     Cash America International, Inc. (the “Company”) was incorporated in 1984 to engage in the business of owning and operating pawnshops. Since that time, the Company has significantly broadened the geographic scope of its operations and expanded its offering of financial services to its customers. As of December 31, 2003, the Company provided specialty financial services to individuals in the United States, United Kingdom and Sweden, through 763 total locations. The Company is the largest provider of secured non-recourse loans, commonly referred to as pawn loans, to individuals through 474 locations in 17 states and two foreign countries. It also offers unsecured cash advances in many of its U.S. locations including 19 locations that offer only this service. In addition, the Company provides cash advances and check cashing through the 135 consumer finance centers of Cashland Financial Services, Inc. (“Cashland”) and check cashing services through the 135 franchised and company-owned check cashing centers of Mr. Payroll Corporation (“Mr. Payroll”). Both Cashland and Mr. Payroll are wholly-owned subsidiaries of the Company. The Company’s principal executive offices are located at 1600 West 7th Street, Fort Worth, Texas 76102-2599, and its telephone number is (817) 335-1100. As used in this report, the term “Company” includes Cash America International, Inc. and its subsidiaries.

     The Company’s growth over the years has been the result of its business strategy of acquiring existing pawnshop locations and establishing new pawnshop locations that can benefit from the Company’s centralized management and standardized operations. In 2003, the Company expanded this strategy to include acquiring existing cash advance locations and establishing new cash advance locations. The Company intends to continue its business strategy of acquiring and establishing pawnshop and cash advance locations (collectively referred to as “lending locations”), increasing its share of consumer loan business, and concentrating multiple lending locations in regional and local markets in order to expand market penetration, enhance name recognition and reinforce marketing programs. The Company also intends to offer new products and services in its lending locations in order to meet the growing financial services needs of its customers. Studies indicate to the Company that a large portion of its customers consists of individuals who do not regularly transact loan business with banks. (See, for example, Dr. Robert W. Johnson and Dr. Dixie P. Johnson, Pawnbroking in the U.S.: A Profile of Customers, Credit Research Center, Georgetown University, 1998.)

     The Company added 19 pawnshop locations in 2003, and 7 locations were either combined or closed. As of December 31, 2003, the Company owned 398 domestic and 69 foreign pawnshop locations.

     In addition to its owned pawnshops, the Company offers and sells franchises to third parties for their independent ownership and operation of “Cash America” pawnshops in the United States. The Company terminated 5 franchises and purchased 1 for its company-owned operations in 2003. As of December 31, 2003, there were 7 franchised lending locations in operation. The Company plans to expand its franchise locations through new franchise sales.

     Website Access to Reports. Through our home page at www.cashamerica.com, we provide free access to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC.

Pawn Lending Activities

     Pawnshops function as convenient sources of consumer loans and as sellers primarily of previously owned merchandise acquired when customers do not redeem their pawned goods. The pledged goods in the Company’s U.S. pawn operations are generally tangible personal property other than securities

1

Table of Contents

or printed evidence of indebtedness and generally consist of jewelry, tools, televisions and stereos, musical instruments, firearms, and other miscellaneous items. In the Company’s foreign pawn operations, the pledged goods predominately consist of jewelry. One convenient aspect of the pawn transaction is that the customer has no legal obligation to repay the amount loaned. Instead, the Company relies on the value of the pawned property as security. As a result, the creditworthiness of the customer is not a factor, and a decision not to redeem pawned property has no effect on the customer’s personal credit status. (Although pawn transactions can take the form of an advance of funds secured by the pledge of property or a “buy-sell agreement” involving the actual sale of the property with an option to repurchase it, the transactions are referred to throughout this report as “pawn loans” for convenience.)

     In a pawn transaction, the Company contracts for a finance and service charge to compensate it for the use of the funds loaned. Finance and service charges contributed approximately 29.5% in 2003 of the Company’s revenue, 30.5% in 2002 and 32.0% in 2001. The finance and service charge is typically calculated as a percentage of the loan amount based on the size and duration of the transaction, in a manner similar to which interest is charged on a loan, and has generally ranged from 12% to 300% annually, as permitted by applicable state pawnshop laws.

     At the time a pawn transaction is entered into, a pawn transaction agreement, commonly referred to as a pawn ticket, is delivered to the borrower (pledgor) that sets forth, among other items: the name and address of the pawnshop and the pledgor; the pledgor’s identification number from his or her driver’s license or other approved identification; the date; the identification and description of the pledged goods, including applicable serial numbers; the amount financed; the finance and service charge; the maturity date; the total amount that must be paid to redeem the pledged goods on the maturity date; and the annual percentage rate.

     In the United States, the amount that the Company is willing to finance is typically based on a percentage of the pledged personal property’s estimated disposition value. The sources for the Company’s determination of the estimated disposition value are numerous and include the Company’s automated product valuation system as well as catalogues, “blue books”, newspapers, internet research and previous disposition experience with similar items. These sources, together with the employees’ experience in disposing of similar items of merchandise in particular pawnshops, influence the determination of the estimated disposition value of such items. The Company does not utilize a standard or mandated percentage of estimated disposition value in determining the amount to be financed. Instead, employees have the authority to set the percentage for a particular item and determine the ratio of loan amount to estimated disposition value with the expectation that, if the item is forfeited to the pawnshop, its subsequent disposition would yield a profit margin consistent with the Company’s historical experience. The pledged property is held through the term of the transaction, which generally is one month with an automatic sixty-day redemption period (see “Regulation” for exceptions in certain states), unless earlier repaid, renewed or extended. A majority of the amounts advanced by the Company are paid in full with accrued finance and service charges or are renewed or extended through payment of accrued finance and service charges. In the event the pledgor does not repay, renew or extend his loan, the unredeemed collateral is forfeited to the Company and then becomes merchandise available for disposition through the Company’s pawnshops, or through a major gold bullion bank. The Company does not record pawn loan losses or charge-offs because the amount advanced becomes the carrying cost of the forfeited collateral that is to be recovered through the merchandise disposition function described below.

     With regard to the Company’s foreign operations, the amount that the pawnshop is willing to finance in a pledge of jewelry is typically based on a fixed amount per gram of the gold content of the pledged property plus additional amounts for diamonds or other features which, in the unit management’s assessment, enhance the market value of the pledged property. Similar to domestic operations, fluctuations in gold prices historically have affected the amount that the pawnshop is willing to lend against an item. A sustained increase or decrease in the market price of gold can cause a related increase or decrease in the amount of the pawnshop’s loan portfolio and related finance and service charge revenue. Pawn loans are made for a term of six months with an approximate annual blended yield on average foreign pawn loans

2

Table of Contents

outstanding in 2003 of 52.2%. The collateral is held through the term of the loan, and, in the event that the loan is not repaid or renewed on or before maturity, the unredeemed collateral is disposed of at auction, through merchandise disposition activities in the pawnshops, or through a third-party gold refinery.

     For domestic and foreign pawn operations, the recovery of the amount advanced, as well as realization of a profit on disposition of merchandise, is dependent on the Company’s initial assessment of the property’s estimated disposition value. Improper assessment of the disposition value of the collateral in the lending function could result in the disposition of the merchandise for an amount less than the amount advanced. However, the Company historically has experienced profits from the disposition of such merchandise. Declines in gold prices generally will also reduce the disposition value of jewelry items acquired in pawn transactions and could adversely affect the Company’s ability to recover the carrying cost of the acquired collateral. For 2003, 2002 and 2001, the Company experienced profit margins on disposition of merchandise of 37.2%, 34.6% and 34.9%, respectively.

     At December 31, 2003, the Company had approximately 1,209,000 outstanding pawn loans totaling $141,871,000, with an average balance of approximately $117 per loan.

     Presented below is information with respect to pawn loans made, acquired, and forfeited for the U.S. and foreign pawn lending operations for the years ended December 31, 2003, 2002 and 2001:

Merchandise Disposition Activities

     The Company engages in the disposition of merchandise acquired when a pawn loan is not repaid, when used goods are purchased from the general public and when new merchandise is acquired from vendors. New goods consist primarily of accessory merchandise which enhances the marketability of existing merchandise, such as tools, consumer electronics and jewelry. For the year ended December 31, 2003, $161,078,000 of merchandise was added to merchandise held for disposition, of which $126,409,000 was from loans not repaid, and $34,669,000 was purchased from customers and vendors and through acquisitions of pawnshops. Proceeds from disposition of merchandise contributed 58.2% of the Company’s revenue in 2003, 63.4% in 2002 and 65.1% in 2001.

     The Company offers a refund/exchange policy with respect to certain items of merchandise but otherwise does not provide its customers with warranties on used merchandise purchased from the Company. The Company permits its customers to purchase merchandise on a layaway plan whereby the customer agrees to purchase an item by making an initial cash deposit representing a small portion of the disposition price and making additional, non-interest bearing payments on the balance of the disposition price in accordance with a specified schedule. The Company then segregates the item and holds it until the

3

Table of Contents

disposition price is paid in full. Should the customer fail to make a required payment, the item is placed with the other merchandise held for disposition. At December 31, 2003, the Company held approximately $4,102,000 in customer layaway deposits.

     The Company provides an allowance for valuation and shrinkage of its merchandise based on management’s evaluation. Management’s evaluation takes into consideration historical shrinkage, the quantity and age of slow-moving merchandise on hand and markdowns necessary to liquidate slow-moving merchandise. At December 31, 2003, total pawn operations merchandise on hand was $56,120,000, after deducting an allowance for valuation and shrinkage of merchandise of $1,416,000.

Cash Advance Activities

     In 2000, the Company began offering a cash advance product through most of its Cash America pawnshops and has recently expanded the offering of this product through its Cash America cash advance centers. Effective August 1, 2003, the Company purchased substantially all of the assets of Cashland, Inc., a privately-owned consumer finance company based in Dayton, Ohio. Cashland’s locations offer cash advances, check cashing and related money services.

     As of December 31, 2003, the cash advance product was available in 544 U.S. lending locations, which included 390 Cash America pawnshops, 19 Cash America cash advance centers and 135 Cashland consumer finance centers. This included 304 units that offer the product on behalf of a third-party bank that underwrites the advance to the customer and pays the Company a fee for its marketing and administrative services. Cash advances are generally offered for a term of 7 to 45 days, depending on state law and the customer’s next payday. The product offered by the Company in 240 locations provides 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. The Company holds the check for the predetermined period of the cash advance, typically less than 17 days. To repay the advance, customers may redeem their checks by paying cash or they may allow the checks to be presented for collection. (Although these cash advance transactions may take the form of loans or deferred check deposit transactions, the transactions are referred to throughout this report as “cash advances” for convenience.) Cash advance fees earned by the Company contributed approximately 10.7% of the Company’s revenue in 2003, 4.9% in 2002 and 1.7% in 2001.

     In certain markets the cash advance product is offered in the Company’s locations by a bank. During the first quarter of 2003, the Company terminated its relationship with a national bank and 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 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 portfolio. As of December 31, 2003, $33,658,000 of gross cash advances was outstanding, including a $1,335,000 non-participated interest owned by the bank that is not included in the Company’s consolidated balance sheet. An allowance for losses of $3,448,000 has been provided in the consolidated financial statements. See Note 4 of “Notes to Consolidated Financial Statements.”

4

Table of Contents

     Presented below is information with respect to the cash advance product for the years ended December 31, 2003, 2002 and 2001:

Check Cashing Activities

     While the Company’s primary business involves the acquisition, establishment and operation of pawn and cash advance lending locations, it also provides check cashing services through its subsidiaries, Mr. Payroll and Cashland. As of December 31, 2003, Mr. Payroll’s operations consisted of 129 franchised and 6 company-owned check cashing centers in 20 states. Check cashing is provided in all 135 of the Cashland consumer finance centers. Aggregate check cashing fees were 1.6% of the Company’s revenue in 2003 and 1.2% in 2002 and 2001.

Financial Information on Segments and Areas

     Additional financial information regarding the Company’s revenues and assets by each of its four operating segments and by geographic area is provided in Note 18 of “Notes to Consolidated Financial Statements.”

Operations

     Unit Management. Each location has a unit manager who is responsible for supervising its personnel and assuring that it is managed in accordance with Company guidelines and established policies and procedures. Each unit manager reports to a Market Manager who typically oversees approximately ten unit managers. As of December 31, 2003, the Company had one pawn lending operating division in the United States, which is managed by an Executive Vice President. This operating division consists of four geographic operating regions, each of which is managed by a Region Vice President. Each Market Manager reports to a Region Vice President. The Harvey & Thompson and Svensk Pantbelåning chains follow a similar management organization, with a Managing Director overseeing each of these operations. Two Cashland supervisors oversee its two geographic operating regions and report to its Chief Operating Officer. Within each of the two Cashland regions there are market supervisors that manage a group of Cashland locations.

     Trade Names. The Company operates its locations under the trade names “Cash America,” “Cashland,” and “Mr. Payroll,” in the U.S., “Harvey & Thompson Pawnbrokers” in the U.K., and “Svensk Pantbelåning” in Sweden. The Company’s marks “Cash America,” “Cashland,” and “Mr. Payroll” are registered with the United States Patent and Trademark Office.

     Personnel. At December 31, 2003, the Company employed 3,828 persons in its operations in 16 states, the United Kingdom and Sweden. Of the total employees, approximately 314 were in executive and administrative functions.

5

Table of Contents

     The Company has an established training program that provides a combination of classroom instruction, video presentation and on-the-job loan and merchandise disposition experience. The new employee is introduced to the business through an orientation program and through a three-month training program that includes classroom and on-the-job training in loans, layaways, merchandise and general administration of unit operations.

     The experienced employee receives training and an introduction to the fundamentals of management to acquire the skills necessary to move into management positions within the organization. Manager training involves a twelve-month program that includes additional management principles and more extensive training in income maximization, recruitment, merchandise control and cost efficiency.

Future Expansion

     The Company’s objective is to continue to expand the number of pawnshops and cash advance locations (collectively referred to as “lending locations”) it owns and operates through acquisitions and by establishing new units. Management believes that such anticipated expansion will continue to provide economies of scale in supervision, purchasing, administration and marketing by decreasing the overall average cost of such functions per unit owned. By concentrating multiple lending units in regional and local markets, the Company seeks to expand market penetration, enhance name recognition and reinforce marketing programs. The Company also intends to offer new products and services in its lending units in order to meet the growing financial services needs of its customers.

     The primary lending location acquisition criteria include evaluation of the volume of annual loan transactions, outstanding loan balances, and location and condition of the facility, including lease terms or fair market value of the facility if it is to be purchased. The primary lending location start-up criteria include the facility-related items noted above and conditions in the surrounding community indicating a sufficient level of potential customers. The Company’s business strategy is to continue expanding its lending business within its existing geographic markets and into other markets which meet the risk/reward considerations of the Company.

     The Company’s expansion has not only been in acquiring previously owned lending locations, but also in establishing new locations. After a suitable location has been found and a lease and license are obtained, the new location can be ready for business within four to six weeks, with completion of counters, vaults and security system and the transfer of merchandise from other locations. The approximate start-up costs, defined as the investment in property and equipment, for recently established pawnshops have ranged from $186,000 to $206,000, with an average estimated cost per location of approximately $201,000 in 2003. This amount does not include merchandise transferred from other locations, funds to advance on pawn loans and cash advances and operating expenses. The average start-up costs for recently established Cash America cash advance centers and Cashland consumer finance centers have ranged from $50,000 to $107,000, with an average estimated cost per location of approximately $79,000.

     The Company’s expansion program is subject to numerous factors which cannot be predicted, such as the availability of attractive acquisition candidates or sites on suitable terms and general economic conditions. Further, there can be no assurance that future expansion can be continued on a profitable basis. Among other factors, the following factors will impact the Company’s future planned expansion.

     Statutory Requirements. The Company’s ability to add newly-established pawnshop locations in Texas counties having a population of more than 250,000 is limited by a law that became effective September 1, 1999, which restricts the establishment of new pawnshops within a certain distance of existing pawnshops. In addition, the present statutory and regulatory environment of some states renders expansion into those states impractical. See “Business – Regulation.”

     Competition. The Company faces competition in its expansion program. Several competing pawnshop and cash advance companies have implemented expansion and acquisition programs. A number

6

Table of Contents

of smaller companies have also entered the market. While the Company believes that it is the largest pawnshop operator in the United States, and one of the largest cash advance operators, there can be no assurance that the Company will be more successful than its competitors in pursuing acquisition opportunities and leases for attractive start-up locations. Increased competition could also increase prices for attractive acquisition candidates.

     Capital Requirements. In some states, the Company is required by law to maintain a minimum amount of certain unencumbered net assets (currently $150,000 in Texas) for each pawnshop location. The Company’s expansion plans will therefore be limited in these states to the extent the Company is unable to maintain these required levels of unencumbered net assets. At present, these requirements do not limit the Company’s growth opportunities.

     Availability of Qualified Unit Management Personnel. The Company’s ability to expand may also be limited by the availability of qualified unit management personnel. While the Company seeks to train its existing personnel to enable those capable to assume management positions, there can be no assurance that sufficient qualified personnel will be available to satisfy the Company’s needs with respect to its planned expansion.

Competition

     While pawnbroking is a time-honored American industry, it remains very fragmented with approximately 12,000 stores nationwide. The three largest publicly traded pawnshop companies operate approximately 850 total pawnshops in the United States. Management continues to believe that the Company can achieve economies of scale and increased operating efficiencies by increasing the number of stores under operation and utilizing modern point-of-sale systems and proven operating methods.

     The less fragmented cash advance industry is growing at a faster rate. According to the investment firm Stephens Inc., the number of cash advance transactions is estimated to be growing nationwide at a rate of 15% to 20% per year, and the three largest operators service approximately one-quarter of the market. Despite the concentration of major competitors in the cash advance industry, management believes that significant opportunities for growth remain in this business.

     The Company encounters significant competition in connection with its lending and merchandise disposition operations. In connection with the lending of money, the Company competes with other pawnshops and cash advance shops and other forms of financial institutions such as consumer finance companies, which generally lend on an unsecured as well as a secured basis. Other lenders may lend money on terms more favorable than the Company. Some competitors (such as certain commercial banks and consumer finance companies) may have greater financial resources than the Company. Several competing pawnshop and cash advance companies have implemented expansion and acquisition programs. See “Business – Future Expansion.” These competitive conditions may adversely affect the Company’s revenues and profitability.

Regulation

     The Company’s pawnshop operations are subject to extensive regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations in the 17 states and two foreign countries in which it operates. (For a geographic breakdown of operating locations, see “Properties.”) Set forth below is a summary of the state pawnshop regulations in those states containing a preponderance of the Company’s domestic operating locations.

     Texas Pawnshop Regulations. Under the Texas Pawnshop Act, the Texas Consumer Credit Commissioner has primary responsibility for the regulation of pawnshops and enforcement of laws relating to pawnshops in Texas. The Company is required to furnish the Texas Consumer Credit Commissioner with

7

Table of Contents

copies of information, documents and reports which are required to be filed by it with the Securities and Exchange Commission.

     The Texas Pawnshop Act prescribes the stratified loan amounts and the maximum allowable rates of pawn service charge that pawnbrokers in Texas may charge for the lending of money within each stratified range of loan amounts. That is, the Texas law establishes the maximum allowable pawn service charge rates based on the amount financed per pawn loan. The maximum allowable rates under the Texas Pawnshop Act for the various stratified loan amounts for the fiscal years ended June 30, 2004, 2003 and 2002, are as follows:

     These rates are reviewed and established annually by the Texas Consumer Credit Commissioner. The maximum allowable service charge rates were established and have not been revised since 1971, when the Texas Pawnshop Act was enacted. Since 1981, the ceiling amounts for stratification of the loan amounts to which these rates apply have been revised each July 1 in relation to the Consumer Price Index. In 2003, the Texas legislature amended the Texas Pawnshop Act to establish the ceiling amounts reflected above for the year ending June 30, 2004. The Texas Pawnshop Act also prescribes the maximum allowable pawn loan. Under current Texas law, a pawn loan may not exceed $12,750. In addition to establishing maximum allowable service charge rates and loan ceilings, the Texas Pawnshop Act also provides for the licensing of pawnshops and pawnshop employees. To be eligible for a pawnshop license in Texas, an applicant must (i) be of good moral character; (ii) have net assets of at least $150,000 readily available for use in conducting the business of each licensed pawnshop; (iii) show that the pawnshop will be operated lawfully and fairly in accordance with the Texas Pawnshop Act; (iv) show that the applicant has the financial responsibility, experience, character, and general fitness to command the confidence of the public in its operations; and, (v) in the case of a business entity, the good moral character requirement shall apply to each officer, director and holder of 5% or more of the entity’s outstanding shares.

     As part of the license application process, any existing pawnshop licensee who would be affected by the granting of the proposed application may request a public hearing at which to appear and present evidence for or against the application. For an application for a new license in a county with a population of 250,000 or more, the proposed facility must not be located within two miles of an existing licensed pawnshop.

     The Texas Consumer Credit Commissioner may, after notice and hearing, suspend or revoke any license for a Texas pawnshop upon finding, among other things, that (i) any fees or charges have not been paid; (ii) the licensee violates (whether knowingly or unknowingly without due care) any provisions of the Texas Pawnshop Act or any regulation or order thereunder; or (iii) any fact or condition exists which, if it had existed at the time the original application was filed for a license, would have justified the Commissioner in refusing such license.

     Under the Texas Pawnshop Act, a pawnbroker may not accept a pledge from a person under the age of 18 years; make any agreement requiring the personal liability of the borrower; accept any waiver of any right or protection accorded to a pledgor under the Texas Pawnshop Act; fail to exercise reasonable care to protect pledged goods from loss or damage; fail to return pledged goods to a pledgor upon payment of the

8

Table of Contents

full amount due; make any charge for insurance in connection with a pawn transaction; enter into any pawn transaction that has a maturity date of more than one month; display for disposition in storefront windows or sidewalk display cases, pistols, swords, canes, blackjacks and similar weapons; operate a pawnshop between the hours of 9:00 p.m. and 7:00 a.m.; or purchase used or secondhand personal property or certain building construction materials unless a record is established containing the name, address and identification of the seller, a complete description of the property, including serial number, and a signed statement that the seller has the right to sell the property.

     Florida Pawnshop Regulations. The Florida Pawnbroking Act, adopted in 1996, provides for the licensing and bonding of pawnbrokers in Florida and for the Department of Agriculture and Consumer Services’ Division of Consumer Services to investigate the general fitness of applicants and generally to regulate pawnshops in the state. The statute limits the pawn service charge that a pawnbroker may collect to a maximum of 25% of the amount advanced in the pawn for each 30-day period of the transaction. The law also requires pawnbrokers to maintain detailed records of all transactions and to deliver such records to the appropriate local law enforcement officials. Among other things, the statute prohibits pawnbrokers from falsifying or failing to make entries in pawn transaction forms, refusing to allow appropriate law enforcement officials to inspect their records, failing to maintain records of pawn transactions for at least two years, making any agreement requiring the personal liability of a pledgor, failing to return pledged goods upon payment in full of the amount due (unless the pledged goods had been taken into custody by a court or law enforcement officer or otherwise lost or damaged), or engaging in title loan transactions at licensed pawnshop locations. It also prohibits pawnbrokers from entering into pawn transactions with a person who is under the influence of alcohol or controlled substances, a person who is under the age of eighteen, or a person using a name other than his own name or the registered name of his business.

     Tennessee Pawnshop Regulations. Tennessee state law provides for the licensing of pawnbrokers in that state. It also (i) requires that pawn transactions be reported to local law enforcement agencies; (ii) requires pawnbrokers to maintain insurance coverage on the property held on pledge for the benefit of the pledgor; (iii) establishes certain hours during which pawnshops may be open for business; and (iv) requires that certain bookkeeping records be maintained. Tennessee law prohibits pawnbrokers from selling, redeeming or disposing of any goods pledged or pawned to or with them within 48 hours after making their report to local law enforcement agencies. The Tennessee statute establishes a maximum allowable interest rate of 24% per annum; however, the pawnshop operator may charge an additional fee of up to one-fifth of the amount of the loan per month for investigating the title, storing and insuring the security and various other expenses.

     Georgia Pawnshop Regulations. Georgia state law requires pawnbrokers to maintain detailed permanent records concerning pawn transactions and to keep them available for inspection by duly authorized law enforcement authorities. The Georgia statute prohibits pawnbrokers from failing to make entries of material matters in their permanent records; making false entries in their records; falsifying, obliterating, destroying, or removing permanent records from their places of business; refusing to allow duly authorized law enforcement officers to inspect their records; failing to maintain records of each pawn transaction for at least four years; accepting a pledge or purchase from a person under the age of eighteen or who the pawnbroker knows is not the true owner of the property; making any agreement requiring the personal liability of the pledgor or seller or waiving any of the provisions of the Georgia statute; or failing to return or replace pledged goods upon payment of the full amount due (unless pledged goods have been taken into custody by a court or a law enforcement officer). In the event pledged goods are lost or damaged while in the possession of the pawnbroker, the pawnbroker must replace the lost or damaged goods with like kinds of merchandise. Under Georgia law, total interest and service charges may not, during each 30-day period of the loan, exceed 25% of the principal amount advanced in the pawn transaction (except that after ninety days from the original date of the loan, the maximum rate declines to 12.5% for each subsequent 30-day period). The statute provides that municipal authorities may license pawnbrokers, define their powers and privileges by ordinance, impose taxes upon them, revoke their licenses, and exercise such general supervision as will ensure fair dealing between the pawnbroker and his customers.

9

Table of Contents

     Oklahoma Pawnshop Regulations. The Company’s Oklahoma operations are subject to the Oklahoma Pawnshop Act. Following substantially the same statutory scheme as the Texas Pawnshop Act, the Oklahoma Pawnshop Act provides for the licensing and bonding of pawnbrokers in Oklahoma and provides for the Oklahoma Administrator of Consumer Credit to investigate the general fitness of the applicant and generally regulate pawnshops in that state. The Administrator has broad rule-making authority with respect to Oklahoma pawnshops.

     In general, the Oklahoma Pawnshop Act prescribes the stratified loan amounts and the maximum rates of service charges which pawnbrokers in Oklahoma may charge for lending money in Oklahoma within each stratified range of loan amounts. The regulations provide for a graduated rate structure similar to that utilized in federal income tax computations. For example, under this method of calculation a $500 pawn loan earns interest as follows: (a) the first $150 at 240%, annually, (b) the next $100 at 180%, annually and (c) the remaining $250 at 120%, annually. A pawn loan in Oklahoma may not exceed $25,000. The maximum allowable pawn service charges for the various stratified loan amounts under the Oklahoma statute are as follows:

     Louisiana Pawnshop Regulations. Louisiana law provides for the licensing and bonding of pawnbrokers in that state. In addition, the act requires that pawn transactions be reported to local law enforcement agencies, establishes hours during which pawnbrokers may be open for business and requires certain bookkeeping practices. Louisiana state law establishes maximum allowable rates of interest on pawn loans of 10% per month. In addition, Louisiana law provides that the pawnbroker may charge a fee not to exceed 10% for all other services. Under the Louisiana statute, no pawnbroker may sell any pledged collateral until the lapse of three months from the time the loan was made, except that in parishes having a population of less than 75,000, no pledged jewelry collateral may be sold until the lapse of six months from the time the loan was made. Various municipalities and parishes in the state of Louisiana have adopted additional ordinances and regulations pertaining to pawnshops.

     Although pawnshop regulations vary from state to state to a considerable degree, the regulations summarized above are representative of the regulatory frameworks affecting the Company in the various states in which its operating units are located.

     United Kingdom Regulations. Pawnshops in the United Kingdom conduct pawn operations in a manner that is similar to the Company’s domestic operations, except that pawnshops generally lend money only on the security of jewelry and gold items. The Consumer Credit Act of 1974 in the United Kingdom requires that the pawnbroker notify the customer following the expiration of the six-month loan term and before the pledged items are sold by the pawnbroker. Unredeemed items over 75 British pounds are generally sold at auction. For these loans, any amounts received on the auction sale in excess of the principal amount of the loan, accrued finance and service charge and disposition expenses must be held by the pawnbroker to be reclaimed by the customer. If the pawnbroker is the highest bidder at the auction, it claims the merchandise for later disposition from its pawnshop premises, or through a third-party gold refinery, and may realize profit on resale. For loans of 75 British pounds or less, unredeemed merchandise is automatically forfeited to the pawnbroker, and the pawnbroker may dispose of such merchandise to the public from the pawnshop premises and retain any excess sales proceeds.

10

Table of Contents

     Pawnbrokers in the United Kingdom are licensed and regulated by the Office of Fair Trading (the “OFT”) pursuant to the Consumer Credit Act 1974. Licenses are valid for five years, subject to possible revocation, suspension, or variance by the OFT. Unlike most state statutes in the United States governing pawnbrokers, the Consumer Credit Act 1974 and the regulations promulgated thereunder do not specify a maximum allowable interest rate chargeable by pawnbrokers in the United Kingdom. Rather, the statute prohibits pawnbrokers from entering into “extortionate credit bargains” with customers. Currently, the Company typically charges rates of between 6% and 8% per month.

     Sweden Regulations. The regulatory environment for pawnshops in Sweden is very similar to that in the United Kingdom. Sweden’s current pawnbroking act provides that the loan term may not exceed one year, that the pawnbroker is entitled to default interest on arrears for a maximum of four months from the due date, and that the pawnbroker may not dispose of unredeemed merchandise less than two months after the due date unless the customer accepts otherwise. The disposition must take place at a public auction, and the customer is entitled to any excess disposition proceeds after deduction for principal, interest and other fees and charges.

     Swedish law provides for licensing and supervision of pawnshops by the local County Administrative Boards. The law does not specify a maximum allowable interest rate for pawn loans, and it does not authorize the local County Administrative Boards to regulate the rates that pawnbrokers may charge. Currently, the Company typically charges a rate of between 3.25% and 3.75% per month. Also, the act grants Swedish pawnbrokers the authority to purchase unredeemed merchandise at the public auction and then dispose of the merchandise to the public from the pawnshop premises or through a third-party gold refinery.

     Cash Advances. The Company offers a cash advance product referred to as “cash advances” through many of its Cash America pawnshops and Cashland consumer finance centers. Each state in which the Company offers the product has specific laws dealing with the conduct of this business. Typically, the applicable regulations restrict the amount of finance and service charges that may be assessed and limit customers’ ability to renew or extend these transactions. In many instances, the regulations also limit the aggregate amount that a provider may advance (and, in some cases, the number of cash advances the provider may make) to any one customer at one time. Providers typically must obtain a separate license from the state licensing authority in order to offer this product. The Company must also comply with the various disclosure requirements under the federal Truth in Lending Act (and Federal Reserve Regulation Z under that Act) in connection with these cash advance transactions.

     As previously noted, these cash advances are offered by a third-party bank in 304 of the Company’s 544 U.S. lending locations (at December 31, 2003). The federal banking regulators who supervise the bank’s activities closely scrutinize all aspects of the bank’s cash advance program. Further, certain state regulators have asserted that the Company must have a license under state law in order to perform the administrative services that it performs for the bank. In addition to a number of federal and state regulators, certain consumer advocacy groups and federal and state legislators have asserted that laws and regulations should be tightened so as to severely limit, if not eliminate, the availability of this cash advance product to consumers, despite the significant demand for it. Along with the leadership of the cash advance industry, the Company opposes such overly restrictive regulation and legislation. Nevertheless, the possibility exists that some combination of federal and state regulation and legislation could come to pass, which could restrict, or even eliminate, the availability of this cash advance product at some or all of the Company’s locations.

     In 2003, Federal Deposit Insurance Corporation (“FDIC”) adopted guidelines for cash advance programs that apply to all financial institutions under the FDIC’s supervision that offer these programs. The bank that offers cash advances in the Company’s locations is a state chartered bank which is supervised by the FDIC. The guidelines describe the FDIC’s expectations for prudent risk management practices for cash advance activities, particularly with regard to capital, allowance for loan losses, and loan classifications. The guidelines also address recovery practices, income recognition, and managing risks associated with

11

Table of Contents

third-party relationships, as well as compliance with consumer protection laws. The guidelines form the basis for sound and appropriate regulation of cash advance programs conducted by FDIC-supervised financial institutions.

     Other Regulatory Matters, Etc. With respect to firearm sales, each of the pawnshops must comply with the Brady Handgun Violence Prevention Act (the “Brady Act”), which took effect on February 28, 1994. The Brady Act imposes a background check requirement in connection with the disposition of firearms by federally licensed firearms dealers. In addition, the Company must continue to comply with the longstanding regulations promulgated by the Department of the Treasury, Bureau of Alcohol, Tobacco and Firearms which require each pawnshop dealing in guns to maintain a permanent written record of all receipts and dispositions of firearms.

     Under the federal Gramm-Leach-Bliley Act that took effect in 2001 and the federal regulations adopted to implement it, the Company is required to disclose to its customers its privacy policy and practices, including those relating to the sharing of customers’ nonpublic personal information with third parties. The disclosure must be made to customers at the time that the customer relationship is established and at least annually thereafter. Under these regulations, the Company is also required to ensure that its systems are designed to protect the confidentiality of customers’ nonpublic personal information.

     Under the USA PATRIOT Act passed by Congress in 2001, the Company is required to maintain an anti-money laundering compliance program covering certain of its business activities. The program must include (1) the development of internal policies, procedures, and controls; (2) designation of a compliance officer; (3) an ongoing employee training program; and (4) an independent audit function to test the program. The United States Department of the Treasury is expected to issue regulations clarifying the requirements for anti-money laundering compliance programs for the pawnbroking and cash advance industries.

     In addition to the federal and state statutes and regulations described above, many of the Company’s pawnshops are subject to municipal ordinances, which may require, for example, local licenses or permits and specified recordkeeping procedures, among other things. Each of the Company’s pawnshops voluntarily or pursuant to municipal ordinance provides to the police department having jurisdiction paper or electronic copies of all daily transactions involving pawn loans and over-the-counter purchases. These daily transaction reports are designed to provide the local police with a detailed description of the goods involved, including serial numbers (if any) and the name and address of the owner obtained from a valid identification card. This information is provided to local law enforcement agencies for processing to determine conflicting claims of rightful ownership. Goods held to secure pawn loans or goods purchased that are determined to belong to an owner other than the borrower or seller are subject to recovery by the rightful owner. However, the Company historically has not experienced a material number of claims of this nature, and the claims experienced have not had a material adverse effect on the Company’s results of operations.

     Casualty insurance, including burglary coverage, is maintained for each of the Company’s locations, and fidelity coverage is maintained on each of the Company’s employees.

     Management of the Company believes its operations are conducted in material compliance with all federal, state and local laws and ordinances applicable to its business.

     The Company’s franchising activities may be subject to various state regulations that, among other things, mandate disclosures to prospective franchisees and other requirements.

12

Table of Contents

Executive Officers

     The following sets forth, as of February 23, 2004, certain data concerning the executive officers of the Company, all of whom are elected on an annual basis. There is no family relationship between any of the executive officers.

     Daniel R. Feehan has been Chief Executive Officer and President since February 2000. He has served as President and Chief Operating Officer since January 1990. He served as Chairman and Co-Chief Executive Officer of Mr. Payroll Corporation from February 1998 to February 1999 before returning to the position of President and Chief Operating Officer of the Company.

     Thomas A. Bessant, Jr. joined the Company in May 1993 as Vice President – Finance and Treasurer. He was elected Senior Vice President – Chief Financial Officer in July 1997 and has served as Executive Vice President – Chief Financial Officer since July 1998. Prior to joining the Company, Mr. Bessant was a Senior Manager in the Corporate Finance Consulting Services Group of Arthur Andersen & Co., S.C. in Dallas, Texas from June 1989 to April 1993. Prior to that time, Mr. Bessant was a Vice President in the Corporate Banking Division of NCNB Texas, N.A., and its predecessor banking corporations, beginning in 1981.

     Robert D. Brockman joined the Company in July 1995 as Executive Vice President – Administration. Prior to that, he served as Vice President – Human Resources of THORN Americas, Inc., the operator of the Rent-A-Center chain of rent-to-own stores, from December 1986 to June 1995.

     Jerry D. Finn joined the Company in August 1994 and has served in various operations management positions since then, including Division Vice President from January 1995 to July 1997, Division Senior Vice President from July 1997 to April 1998, and Executive Vice President – Domestic Pawn Operations since April 1998. Prior to joining the Company, he served as District Supervisor for Kelly-Moore Paint Co. from March 1981 to August 1994.

     Michael D. Gaston joined the Company in April 1997 as Executive Vice President – Business Development. Prior to joining the Company, Mr. Gaston served as President of The Gaston Corporation, a private consulting firm, from 1984 to April 1997, and Executive Vice President of Barkley & Evergreen, an advertising and consulting agency, from 1991 to April 1997.

     William R. Horne joined the Company in February 1991 as Vice President – MIS. He was elected Senior Vice President – Information Technology in July 1997 and has served as Executive Vice President – Information Technology since October 1999.

     James H. Kauffman joined the Company in July 1996 as Executive Vice President – Chief Financial Officer. He served as President – Cash America Pawn from July 1997 to July 1998, and served as Chief Executive Officer of Rent-A-Tire, Inc. from July 1998 until August 2002. He has also served as Executive Vice President – International Operations since October 1999. Prior to joining the Company, Mr. Kauffman served as President of Keystone Steel & Wire Company, a wire products manufacturer, from July 1991 to June 1996.

13

Table of Contents

     Hugh A. Simpson joined the Company in December 1990 as Vice President and General Counsel and was elected Vice President – General Counsel and Secretary in April 1991. He was elected Senior Vice President – General Counsel and Secretary in July 1997 and has served as Executive Vice President – General Counsel and Secretary since July 1998.

ITEM 2. PROPERTIES

     As of February 18, 2004, the Company owned the real estate and building for six of its domestic pawnshop locations and four of its pawnshop locations in the United Kingdom. Since May 1992, the Company’s headquarters have been located in a nine-story building adjacent to downtown Fort Worth, Texas. The Company purchased the building in January 1992. All of the Company’s other locations are leased under non-cancelable operating leases with terms ranging from 3 to 15 years.

     The following table sets forth, as of February 18, 2004, the geographic markets served by the Company and the number of “Cash America” pawn and cash advance locations and Cashland consumer finance centers in each market in which it presently operates. In addition to the locations listed below, the Company operates 6 owned “Mr. Payroll” check cashing locations in the Dallas/Fort Worth area.

(Continued on Next Page)

14

Table of Contents

(Continued on Next Page)

15

Table of Contents

     The Company considers its equipment, furniture and fixtures and owned buildings to be in good condition. The Company has its own construction supervisors who engage local contractors to selectively remodel and upgrade its domestic lending facilities throughout the year.

     The Company’s leases typically require the Company to pay all maintenance costs, insurance costs and property taxes. For additional information concerning the Company’s leases, see Note 10 of “Notes to Consolidated Financial Statements.”

ITEM 3. LEGAL PROCEEDINGS

     The Company is a defendant in certain lawsuits encountered in the ordinary course of its business. Certain of these matters are covered to an extent by insurance. 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.

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

     There were no matters submitted to the Company’s security holders during the fourth quarter ended December 31, 2003.

16

Table of Contents

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The New York Stock Exchange is the principal exchange on which Cash America International, Inc. common stock is traded. There were 510 stockholders of record (not including individual participants in security listings) as of February 4, 2004. The high, low and closing sales prices of common stock as quoted on the composite tape of the New York Stock Exchange and cash dividend declared per share during 2003 and 2002 were as follows:

17

Table of Contents

ITEM 6. SELECTED FINANCIAL DATA

Five-Year Summary of Selected Financial Data (Unaudited)

(Dollars in thousands, except per share data)

18

Table of Contents

ITEM 7. 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 pawn lending operations. The pawn loan portfolio generates finance and service charges revenue. A related activity of the pawn lending operations is the disposition of merchandise, primarily collateral from unredeemed pawn loans. As an alternative to a pawn loan, the Company offers unsecured cash advances in selected lending locations and on behalf of a third-party bank in other locations. The Company also provides check cashing and related money services through its consumer finance centers and its franchised and company-owned check cashing centers.

     Effective August 1, 2003, the Company, through its wholly-owned subsidiary, Cashland Financial Services, Inc. (“Cashland”), completed the purchase of substantially all of the assets of Cashland, Inc., a privately-owned consumer finance company based in Dayton, Ohio. The aggregate purchase consideration and costs totaled $50.5 million, which consisted of $32.0 million in cash, 1.5 million shares of the Company’s stock valued at $16.8 million and acquisition costs of $1.7 million. The terms of the purchase included the potential for additional consideration to be paid based on the earnings performance of Cashland during the twelve months ending June 30, 2004. On February 2, 2004, the parties amended the purchase agreement to eliminate that provision and to provide instead for the Company to make a final payment of additional consideration in the amount of $5.4 million. The payment consisted of $2.9 million in cash and a subordinated note for $2.5 million. See Notes 3 and 22 of Notes to Consolidated Financial Statements.

     As of December 31, 2003, the Company’s pawn lending operations consisted of 474 pawnshops, including 398 owned units and 7 unconsolidated franchised units in 17 states in the United States, 57 units in the United Kingdom, and 12 units in Sweden. The foreign operations consist primarily of jewelry-only lending units. For the three years ended December 31, 2003, the Company acquired 24 operating units, established 7 locations, and combined or closed 27 locations for a net increase in owned pawn lending units of 4. In addition, 1 franchise unit was opened and 10 were either terminated or converted to Company-owned locations. At December 31, 2003, the Company’s U.S. pawn lending operations also owned and operated 19 locations that offer only the cash advance product under the brand name Cash America Payday Advance.

     As of December 31, 2003, Cashland owned and operated 135 consumer finance centers that offer cash advances, check cashing and related money services in 2 states, including 14 locations that Cashland established since its acquisition.

     As of December 31, 2003, Mr. Payroll operated 129 franchised and 6 company owned 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-A-Tire” rent-to-own business. Accordingly, the revenues, costs and expenses, assets, and cash flows of Rent-A-Tire have been segregated in the Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Cash Flows. The net operating results, net assets and net cash flows of this business segment have been reported as “Discontinued Operations” in the accompanying consolidated financial statements. See Note 17 of Notes to Consolidated Financial Statements.

19

Table of Contents

CRITICAL ACCOUNTING POLICIES AND ESTIMATES