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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102-2599
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 335-1100
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.10 par value per share New York Stock Exchange
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. Yes [X] No [ ]
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 [ ].
The aggregate market value of 23,755,626 shares of the registrant's common
stock held by non-affiliates on March 3, 1998 was approximately $293,975,870.
At March 3, 1998 there were 24,445,218 shares of the registrant's Common
Stock, $.10 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Annual Report to Shareholders for the year ended December 31,
1997 and the definitive Proxy Statement pertaining to the 1998 Annual Meeting of
Shareholders are incorporated herein by reference into Parts II and IV, and Part
III, respectively.
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CASH AMERICA INTERNATIONAL, INC.
YEAR ENDED DECEMBER 31, 1997
INDEX TO FORM 10-K
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . 15
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . 16
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . . 16
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . 16
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . 17
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . 17
SIGNATURES
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INTRODUCTION
Cash America International, Inc. (the "Company") was incorporated in
Texas on October 4, 1984, to succeed to the business, assets and liabilities of
a predecessor corporation formed one year earlier to engage in the pawnshop
business. As of December 31, 1997, the Company owns pawnshops through
wholly-owned subsidiaries in fifteen states and the United Kingdom and Sweden.
The Company also provides check cashing services in twenty-one states through
its wholly-owned subsidiary Mr. Payroll Corporation. The Company's principal
executive offices are located at 1600 West Seventh Street, Fort Worth, Texas
76102, and its telephone number is (817) 335-1100. As used herein, the
"Company" includes Cash America International, Inc. and its subsidiaries.
PART I
ITEM 1. BUSINESS
GENERAL
The Company is a specialty financial services enterprise principally
engaged in acquiring, establishing and operating pawnshops which advance money
on the security of pledged tangible personal property. 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. One convenient aspect of a pawn transaction is that the customer has no
legal obligation to repay the amount advanced. 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 "loans" for convenience.)
The Company contracts for a pawn service charge to compensate it for
the use of the funds advanced. The pawn 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. The pledged property is held through the term of the
transaction, which, in the Company's domestic operations, is generally one
month with an automatic sixty-day redemption period unless otherwise earlier
repaid, renewed or extended. (For pawn service charges and transaction periods
applicable to the Company's foreign operations, see "Business--Regulation." ).
A majority of the amounts advanced by the Company are paid in full, together
with accrued service charges, or are renewed or extended through payment of
accrued service charges. For the years 1995, 1996, and 1997, loans repaid or
renewed as a percentage of loans made were 71.0%, 68.5%, and 67.2%
respectively. In the event that the borrower does not redeem his pawned goods,
the unredeemed collateral is forfeited and becomes merchandise available for
disposition by the Company.
The Company's growth has been the result of its business strategy of
acquiring existing pawnshops and establishing new pawnshops that can benefit
from the Company's centralized management and standardized operations. The
Company intends to continue its business strategy of acquiring and establishing
pawnshops, increasing its share of consumer loan business, and concentrating
multiple pawnshops in regional and local markets in order to expand market
penetration, enhance name recognition and reinforce marketing programs. 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, John P. Caskey, Fringe Banking - Check
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Cashing Outlets, Pawnshops and the Poor, 1994.) These generally are persons
who may not have checking accounts and conduct as many of their transactions as
possible on a cash basis.
Pursuant to the Company's business expansion strategy, the Company
added a net 33 locations in 1995, 9 locations in 1996, and 19 locations in
1997. Of these net 61 locations added, 20 were acquisitions in individual
purchase transactions and 53 were start-ups, while 12 locations were either
closed or combined. As of December 31, 1997, the Company had 352 domestic and
49 foreign operating locations. The Company plans to continue to expand its
operating locations through new start-ups and acquisitions.
While the Company's primary business involves the acquisition,
establishment and operation of pawnshops, it also provides check cashing
services through its wholly-owned subsidiary Mr. Payroll Corporation ("Mr.
Payroll"). At December 31, 1997, Mr. Payroll's system of manned check cashing
centers consists of 145 units operated by independent franchisees in twenty-one
states. Mr. Payroll earns franchise fees from the sale of check cashing
franchises and royalties from franchisees based on a percentage of the gross
revenue from a franchisee's check cashing business. In addition, Mr. Payroll
has recently developed an automated check cashing system, and it deployed its
first check cashing machine ("CCM") in June 1997. At December 31, 1997, it had
deployed twenty-one CCM's. Mr. Payroll markets and sells CCM's to a variety of
end users, including financial institutions and retailers. It contracts with
the end user to provide check cashing services and in consideration receives
payments from the end user equal to a portion of the fees associated with such
activities. Mr. Payroll employs 47 employees as of December 31, 1997. For
additional information concerning Mr. Payroll and the relation of its financial
condition and results of operations to that of the Company, see Note 4 and Note
14 of Notes to Consolidated Financial Statements in the Annual Report which is
incorporated herein by reference.
LENDING FUNCTION
The Company is engaged primarily in the business of lending money on
the security of pledged goods. The pledged goods are generally tangible
personal property other than securities or printed evidences of indebtedness
and generally consist of jewelry, tools, televisions and stereos, musical
instruments, firearms, and other miscellaneous items. (In the Company's
foreign operations, the pledged goods predominately consist of jewelry.) The
pledged tangible personal property is intended to provide security to the
Company for the repayment of the amount advanced plus accrued pawn service
charges. Pawn loans are made without personal liability to the borrower.
Because the loan is made without the borrower's personal liability, the Company
does not investigate the creditworthiness of the borrower, but relies on the
pledged personal property, and the possibility of its forfeiture, as a basis
for its lending decision. The Company contracts for a pawn service charge as
compensation for the use of the funds advanced. Pawn service charges
contributed approximately 52% of the Company's net revenues (total revenues
less cost of disposed merchandise) in 1995, 57% in 1996 and 59% in 1997.
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 pawn 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.
With regard to domestic operations, 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
catalogues, blue books, newspapers and previous similar pawn loan transactions.
These sources, together with the employees'
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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. Rather,
the 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 gross 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 service charges or are renewed or
extended through payment of accrued 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. The Company does not record loan losses or charge-offs inasmuch
as, if the pledged goods are not redeemed, 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 or silver content of the pledged property
plus additional amounts for diamonds and other features which, in the unit
management's assessment, enhance the market value of the pledged property.
Declines in gold and silver prices historically have resulted in a reduction of
the amount that the pawnshop is willing to lend against an item, which reduces
the amount of the pawnshop's loan portfolio and related pawn service charge
revenue. The pawn loans are made for a term of six months with an approximate
annual yield in 1997 of 52%. 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 or privately.
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 can result
in reduced marketability of the property and 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
and silver 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 1995,
1996 and 1997, the Company experienced gross profit margins on dispositions of
such merchandise of 42%, 38%, and 36% respectively.
At December 31, 1997, the Company had approximately 1,137,000
outstanding loans totaling $112,240,000, for an average of $99 per loan.
Presented below is information with respect to pawn loans made,
acquired, repaid and forfeited for the years ended December 31, 1995, 1996 and
1997:
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Year Ended December 31,
---------------------------------------
1995 1996 1997
-------- -------- --------
($ in thousands)
Loans made . . . . . . . . . . . . . . . . . . . . . $319,733 $365,852 $391,216
Loans acquired . . . . . . . . . . . . . . . . . . . 362 1,020 1,520
Loans repaid . . . . . . . . . . . . . . . . . . . . (180,726) (207,297) (227,114)
Loans renewed. . . . . . . . . . . . . . . . . . . . (46,130) (43,141) (38,548)
Loans forfeited:
Available for disposition . . . . . . . . . . . (79,542) (91,501) (109,318)
Disposed of at auction . . . . . . . . . . . . . (5,966) (6,402) (8,945)
Effect of exchange rate translation . . . . . . . . . 1,956 1,366 (4,250)
-------- -------- --------
Net increase in pawn loans outstanding at end of $9,687 $19,897 $4,561
======== ======= ========
Loans repaid or renewed as a percent of loans made . 71.0% 68.5% 67.2%
======== ======= ========
MERCHANDISE DISPOSITION FUNCTION
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 new jewelry items
purchased during the Christmas selling season. For the year ended December 31,
1997, $129,975,000 of merchandise was added to merchandise held for
disposition, of which $109,318,000 was from loans not repaid and $17,870,000
was purchased from vendors, customers and through acquisitions of pawnshops.
The Company 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 part of the
disposition price and making additional, non-interest bearing payments of the
balance of the disposition price in accordance with a specified schedule. The
Company then segregates the item and holds it until the 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, 1997,
the Company held approximately $3,740,000 in customer layaway deposits.
The Company provides an allowance for shrinkage and valuation 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, 1997, total merchandise on hand was $53,468,000,
after deducting an allowance for shrinkage and valuation of merchandise of
$2,158,000.
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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, 1997, the Company has three geographic operating divisions
in the United States, each of which is managed by a Division Senior Vice
President. Each Market Manager reports to a Division Vice President. The
Harvey & Thompson and Svensk Pantbelaning chains follow a similar management
organization, with a Managing Director overseeing each of these operations.
Trade Name
The Company operates its pawnshops under the trade name "Cash America
Pawn" in the U.S., "Harvey & Thompson Pawnbrokers" in the U.K., and "Svensk
Pantbelaning" in Sweden. The Company has registered the "Cash America" mark
and descriptive logos and phrases with the United States Patent and Trademark
Office.
Personnel
The Company employs approximately 2,787 employees as of December 31,
1997. Of the total employees, approximately 233 were in executive,
administrative, clerical and accounting functions.
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 and 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 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. The primary pawnshop acquisition criteria include evaluation of the
volume of annual loan transactions, outstanding loan balances, merchandise on
hand, disposition history, 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 pawnshop 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 pawnshop
business within its existing geographic markets and into other markets which
meet the risk/reward considerations of the Company.
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The Company's expansion has not only been in acquiring previously
owned pawnshops, 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 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
$130,000 to $250,000, with an average cost per location of approximately
$180,000 in 1997. This amount does not include merchandise transferred from
other locations, funds to advance on pawn loans and operating expenses.
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 locations in Texas counties having a population of more than
250,000 is limited by a law that became effective September 1, 1991, which
requires a finding of public need and probable profitability by the Texas
Consumer Credit Commissioner as a condition to the issuance of any new pawnshop
license. 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 companies have completed public securities offerings
and have announced active expansion and acquisition programs. A number of
smaller companies have also entered the market. While the Company believes
that it is the largest pawnshop operator in the United States, 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.
Access to Capital. 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. These
requirements also make it difficult for the Company to rely on secured
financing for expansion purposes due to the requirement that expansion capital
be unencumbered, which would reduce the availability of capital for expansion
purposes.
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 of doing so to assume management positions and to
create attractive compensation packages to retain existing management
personnel, 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
The Company encounters significant competition in connection with its
lending and merchandise disposition operations. Some competitors may have
greater financial resources than the Company. Several competing pawnshop
companies have completed securities offerings in recent years. See "Business
- -- Future Expansion." These competitive conditions may adversely affect the
Company's revenues and profitability.
The Company, in connection with the lending of money, competes with
other pawnshops and other forms of financial institutions such as consumer
finance companies, which generally lend on an unsecured as
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well as a secured basis. Other lenders may lend money on terms more favorable
than the Company. The pawnshop industry is characterized by a large number of
independent owner-operators, some of whom own and operate multiple pawnshops.
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 sixteen 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. Pursuant to the terms of 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 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 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 service charge rates based
on the amount financed per pawn loan. The maximum allowable pawn service
charges under the Texas Pawnshop Act for the various stratified loan amounts
for the fiscal years ended June 30, 1996, 1997 and 1998 are as follows:
Year Ended June 30, 1996 Year Ended June 30, 1997 Year Ended June 30, 1998
- ------------------------------------ ------------------------------------ ----------------------------------------
Maximum Maximum Maximum
Amount Allowable Amount Allowable Amount Allowable
Financed Annual Financed Annual Financed Annual
Per Pawn Percentage Per Pawn Percentage Per Pawn Percentage
Loan Rate Loan Rate Loan Rate
---- ---- ---- ---- ---- ----
$ 1 to $ 129 . . . . . 240% $1 to $ 132 . . . . . . 240% $1 to $ 135 . . . . . . 240%
130 to 430 . . . . . 180 133 to 440 . . . . . . 180 136 to 450 . . . . . . 180
431 to 1,290 . . . . . 30 441 to 1,320 . . . . . . 30 451 to 1,350 . . . . . . 30
1,291 to 10,750 . . . . . 12 1,321 to 11,000 . . . . . . 12 1,351 to 11,250 . . . . . . 12
These rates are reviewed and established annually. 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. The Texas Pawnshop Act
also prescribes the maximum allowable pawn loan. Under current Texas law, a
pawn loan may not exceed $11,250. 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)
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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 Consumer Credit Commissioner must find not
only that the applicant meets the other requirements for a license, but also
that (i) there is a public need for the proposed pawnshop and (ii) the volume
of business in the community in which the pawnshop will conduct business
indicates a profitable operation is probable.
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 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.
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
8
11
material matters in the 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 the 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 thirty-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 thirty-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.
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.
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. The maximum allowable pawn service charges
for the various stratified loan amounts under the Oklahoma statute are as
follows:
9
12
Maximum
Amount Allowable
Financed Annual
Per Pawn Percentage
Loan Rate
--------------- -------------
$ 1 to $ 150 ............... 240%
151 to 250 ............... 180
251 to 500 ............... 120
501 to 1,000 ............... 60
1,001 to 25,000 ............... 36
A pawn loan in Oklahoma may not exceed $25,000.
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. Under the Louisiana statute, no
pawnbroker may sell any jewelry pledged as collateral until the lapse of six
months from the time the loan was made or extended by payment of accrued
interest. All other unredeemed collateral from loans can be sold after the
lapse of three months. 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 also charge a one-time fee not to exceed 10%
for all other services. Various municipalities and parishes in the state of
Louisiana have promulgated 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 and silver items. The Consumer Credit Act 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 are generally sold at auction nine months
after the initial pledge date. For loans exceeding L.25, any amounts received
on the auction sale in excess of the principal amount of the loan, accrued pawn
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 reclaims the merchandise for later disposition from its pawnshop
premises and may realize gross profit on resale. For loans of L.25 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.
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 a rate of six percent (6%) per month.
Sweden Regulations. The regulatory environment for pawnshops in
Sweden is very similar to that in the United Kingdom. Sweden's 1949 statute
governing pawnbroking was repealed and replaced with a new
10
13
pawnbroking act effective January 1, 1996. The new 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. The disposition must take place at a public auction, and
the original customer is entitled to any excess disposition proceeds.
Like Sweden's previous pawnbroking statute, the new act provides for
licensing and supervision of pawnshops by the local County Administrative
Boards. The act does not specify a maximum allowable interest rate for pawn
loans, and, unlike the previous statute, it does not authorize the local County
Administrative Boards to regulate the rates that pawnbrokers may charge. Also,
the act grants Swedish pawnbrokers the new authority to purchase unredeemed
merchandise at the public auction and then dispose of the merchandise to the
public from the pawnshop premises.
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
waiting period/background check requirement in connection with the disposition
of handguns 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.
In addition to the 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 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.
A copy of the transaction ticket is provided to local law enforcement
agencies for processing by the National Crime Investigative Computer to
determine rightful ownership. Goods held to secure pawn loans or goods
purchased which 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 sort, 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 pawnshops, 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.
11
14
EXECUTIVE OFFICERS
The following sets forth, as of February 23, 1998, 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.
Name Age Position
----------------------- --- -----------------------------------------------------------
Jack R. Daugherty 50 Chairman of the Board and Chief Executive Officer
Daniel R. Feehan 47 President, Chief Operating Officer and Director
James H. Kauffman 53 President - Cash America Pawn
Michael C. Stinson 51 President - Mr. Payroll Corporation
Robert D. Brockman 43 Executive Vice President - Administration
Michael D. Gaston 53 Executive Vice President - Business Development
Thomas A. Bessant, Jr. 39 Senior Vice President - Chief Financial Officer and Treasurer
William R. Horne 54 Senior Vice President - Information Technology
Hugh A. Simpson 38 Senior Vice President - General Counsel and Secretary
William J. White 57 Senior Vice President - Public and Governmental Relations
Jack R. Daugherty has been Chairman of the Board and Chief Executive
Officer of the Company since its founding in 1984. Mr. Daugherty has owned and
operated pawnshops since 1971.
Daniel R. Feehan has been President and Chief Operating Officer since
January 1990.
James H. Kauffman joined the Company in July 1996 as Executive Vice
President - Chief Financial Officer and has served as President-Cash America
Pawn since July 1997. Prior to that, he served as President of Keystone Steel
& Wire Company, a wire products manufacturer, from July 1991 to June 1996.
Michael C. Stinson has served as President of Mr. Payroll Corporation
since 1990. Mr. Payroll Corporation became a wholly-owned subsidiary of the
Company effective December 31, 1996, and Mr. Stinson became an executive
officer of the Company in July 1997.
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.
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 Barclay & Evergreen, an
advertising and consulting agency, from 1991 to April 1997.
Thomas A. Bessant, Jr. joined the Company in May 1993 as Vice
President-Finance and Treasurer and has served as Senior Vice President, Chief
Financial Officer and Treasurer since July 1997. 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. Prior
to that time, Mr. Bessant was Vice President in the Corporate Banking Division
of NCNB Texas, N.A., and its predecessor banking corporations, beginning in
1981.
William R. Horne joined the Company in February 1991 as Vice
President-MIS and has served as Senior Vice President-Information Technology
since July 1997.
12
15
Hugh A. Simpson joined the Company in December 1990 as Vice President
and General Counsel. In April 1991, Mr. Simpson was elected Vice President -
General Counsel and Secretary, and he has served as Senior Vice President,
General Counsel and Secretary since July 1997.
William J. White joined the Company in March 1988. In April 1993, Mr.
White was elected Vice President-Public and Governmental Relations and he has
served as Senior Vice President, Public and Governmental Relations since July
1997.
ITEM 2. PROPERTIES
As of March 10, 1998 the Company owns the real estate and buildings
for 16 of its pawnshop locations. 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 from unaffiliated parties under
non-cancelable operating leases.
The following table sets forth, as of March 10, 1998, the geographic
markets served by the Company and the number of locations in such markets in
which it presently operates.
Number of Locations
in Area
------------------------------
TEXAS:
Houston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Central/South Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Dallas/Fort Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
West Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Rio Grande Valley . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
----
Total Texas . . . . . . . . . . . . . . . . . . . . . . . . . . 146
---
FLORIDA:
Tampa/St. Petersburg . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Orlando . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Jacksonville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---
Total Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
---
GEORGIA:
Atlanta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Savannah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
---
Total Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
---
TENNESSEE:
Memphis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Nashville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
---
Total Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--
13
16
OKLAHOMA:
Oklahoma City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Tulsa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
Total Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
---
LOUISIANA:
New Orleans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Baton Rouge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---
Total Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---
INDIANA:
Indianapolis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fort Wayne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
Total Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
---
MISSOURI:
Kansas City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
St. Louis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
---
Total Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
---
KENTUCKY:
Louisville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
---
ALABAMA:
Mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Birmingham . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
Total Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
---
NORTH CAROLINA:
Charlotte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Greensboro/Winston Salem . . . . . . . . . . . . . . . . . . . . . . . . . 4
---
Total North Carolina . . . . . . . . . . . . . . . . . . . . . . . . 10
----
SOUTH CAROLINA:
Charleston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Greenville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
---
Total South Carolina . . . . . . . . . . . . . . . . . . . . . . . . 7
---
COLORADO:
Denver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
OHIO:
Cincinnati . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---
14
17
UTAH:
Salt Lake City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---
ILLINOIS:
Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
---
Total United States . . . . . . . . . . . . . . . . . . . . . . . . . 365
---
UNITED KINGDOM:
London . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
---
Total United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . 40
---
SWEDEN:
Stockholm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---
Total Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---
GRAND TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416
===
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 pawnshop 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 15 of Notes to
Consolidated Financial Statements in the Annual Report which is incorporated
herein by reference.
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, 1997.
15
18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information contained under the caption "Common Stock Data" in the
Annual Report is incorporated herein by reference in response to this Item 5.
ITEM 6. SELECTED FINANCIAL DATA
Information contained under the caption "Six Year Summary of Selected
Financial Data" in the Annual Report is incorporated herein by reference in
response to this Item 6.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Information contained under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" in the Annual Report
is incorporated herein by reference in response to this Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements including Notes To Consolidated Financial
Statements and Income Statement Quarterly Data for the Company are contained in
the Annual Report and are incorporated herein by reference in response to this
Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company had no disagreements on accounting or financial disclosure
matters with its independent public accountants to report under this Item 9.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained under the caption "Election of Directors" in the
Company's Proxy Statement is incorporated herein by reference in response to
this Item 10. See Item 1, "Executive Officers" for information concerning
executive officers.
ITEM 11. EXECUTIVE COMPENSATION
Information contained under the caption "Executive Compensation" in
the Company's Proxy Statement is incorporated herein by reference in response
to this Item 11.
16
19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement is
incorporated herein by reference in response to this Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information contained under the caption "Executive Compensation" in
the Company's Proxy Statement is incorporated herein by reference in response
to this Item 13.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(1) The following financial statements of the Company and Report of
Independent Accountants are contained in the Annual Report and are
incorporated herein by reference.
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Income for the years ended December
31, 1997, 1996 and 1995.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
(2) The following financial statement schedule of the Company, as
listed below, is included herein.
Schedule II -- Allowance for Valuation of Inventory.
Report of Independent Accountants on Financial Statement Schedule.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions, are inapplicable,
or the required information is included elsewhere in the financial
statements.
(3) The exhibits filed in response to Item 601 of Regulation S-K are
listed in the Exhibit Index on pages 22 through 24.
(4) During the fourth quarter ended December 31, 1997, the Company did
not file any reports on Form 8-K.
17
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 27, 1998.
CASH AMERICA INTERNATIONAL, INC.
By: /s/ JACK R. DAUGHERTY
------------------------------------------
Jack R. Daugherty
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on March 27, 1998 on
behalf of the registrant and in the capacities indicated.
Signature Title Date
--------- ----- ----
/s/ JACK R. DAUGHERTY Chairman of the Board and March 27, 1998
- -------------------------------------------
Jack R. Daugherty Chief Executive Officer
(Principal Executive Officer)
/s/ DANIEL R. FEEHAN President, Chief Operating March 27, 1998
- ---------------------------------------------
Daniel R. Feehan Officer and Director
/s/ THOMAS A. BESSANT, JR. Senior Vice President - March 27, 1998
- -------------------------------------------
Thomas A. Bessant, Jr. Chief Financial Officer
and Treasurer
(Principal Financial and
Accounting Officer)
/s/ A. R. DIKE Director March 27, 1998
- --------------------------------------------
A. R. Dike
18
21
/s/ JAMES H. GRAVES Director March 27, 1998
- --------------------------------------------
James H. Graves
/s/ B. D. HUNTER Director March 27, 1998
- ---------------------------------------------------
B. D. Hunter
/s/TIMOTHY J. McKIBBEN Director March 27, 1998
- ----------------------------------------
Timothy J. McKibben
/s/ ALFRED M. MICALLEF Director March 27, 1998
- -------------------------------------
Alfred M. Micallef
/s/ CARL P. MOTHERAL Director March 27, 1998
- -------------------------------------------
Carl P. Motheral
/s/ SAMUEL W. RIZZO Director March 27, 1998
- ---------------------------------------------
Samuel W. Rizzo
/s/ ROSALIN ROGERS Director March 27, 1998
- --------------------------------------------
Rosalin Rogers
19
22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Cash America International, Inc.
Our report on the consolidated financial statements of Cash America
International, Inc. and Subsidiaries, which includes an explanatory paragraph
related to a change in accounting principle, has been incorporated by reference
in this Form 10-K from page 30 of the 1997 Annual Report to Stockholders of
Cash America International, Inc. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
January 20, 1998
20
23
CASH AMERICA INTERNATIONAL, INC.
SCHEDULE II--ALLOWANCE FOR VALUATION OF INVENTORY
For the Three Years Ended December 31, 1997
Additions
------------------------------
Balance Balance
at Charged Charged at End
Beginning to to of
Description of Period Expense Other Deductions(a) Period
----------- --------- ------- ----- ------------- ------
($ in
thousands)
Year Ended:
December 31, 1997........................ $2,078 $1,359 $ -0- $1,279 $ 2,158
====== ====== ===== ====== =======
December 31, 1996........................ $2,372 $1,701 $ -0- $1,995 $ 2,078
====== ====== ===== ====== =======
December 31, 1995........................ $2,514 $1,394 $ -0- $1,536 $ 2,372
====== ====== ===== ====== =======
_______________________________
(a) Deducted from allowance for write-off or other disposition of inventory.
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EXHIBIT INDEX
The following documents are filed as a part of this report. Those
exhibits previously filed and incorporated herein by reference are identified
below. Exhibits not required for this report have been omitted.
EXHIBIT
- -------
DESCRIPTION
-----------
3.1 --Articles of Incorporation of Cash America Investments, Inc. filed in the office of the Secretary of State of
Texas on October 4, 1984.(a) (Exhibit 3.1)
3.2 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office
of the Secretary of State of Texas on October 26, 1984.(a) (Exhibits 3.2)
3.3 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office
of the Secretary of State of Texas on September 24, 1986.(a) (Exhibit 3.3)
3.4 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office
of the Secretary of State of Texas on September 30, 1987.(b) (Exhibit 3.4)
3.5 --Articles of Amendment to the Articles of Incorporation of Cash America Investments, Inc. filed in the office
of the Secretary of State of Texas on April 23, 1992 to change the Company's name to "Cash America
International, Inc." (c) (Exhibit 3.5)
3.6 --Articles of Amendment to the Articles of Incorporation of Cash America International, Inc. filed in Office
of the Secretary of State of Texas on May 21, 1993. (d) (Exhibit 3.6)
3.7 --Bylaws of Cash America International, Inc.(e) (Exhibit 3.5)
3.8 --Amendment to Bylaws of Cash America International, Inc. dated effective September 26, 1990.(f) (Exhibit 3.6)
3.9 --Amendment to Bylaws of Cash America International, Inc. dated effective April 22, 1992.(c) (Exhibit 3.8)
4.1 --Form of Stock Certificate.(a) (Exhibit 4.1)
4.1a --Form of Stock Certificate.(f) (Exhibit 4.1a)
4.1b --Form of Stock Certificate.(c) (Exhibit 4.1b)
10.1 --1987 Stock Option Plan (with Stock Appreciation Rights) for Cash America International, Inc.(g) (Exhibit
4.1)
10.2 --Amendment to 1987 Stock Option Plan (with Stock Appreciation Rights) dated February 27, 1997.(h) (Exhibit
10.2)
10.3 --Amendment to 1987 Stock Option Plan (with Stock Appreciation Rights) dated April 22, 1997. (i) (Exhibit
10.1)
10.4 --1989 Non-Employee Director Stock Option Plan.(j) (Exhibit 10.47)
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10.5 --Amendment to 1989 Non-Employee Director Stock Option Plan dated April 24, 1996. (h) (Exhibit 10.4)
10.6 --1989 Key Employee Stock Option Plan.(j) (Exhibit 10.48)
10.7 --Amendment to 1989 Key Employee Stock Option Plan dated January 21, 1997. (h) (Exhibit 10.6)
10.8 --1994 Long-Term Incentive Plan.(k) (Exhibit 10.5)
10.9 --Amendment to 1994 Long-Term Incentive Plan dated July 22, 1997. (l) (Exhibit 10.1)
10.10 --Amended and Restated Executive Employment Agreements between the Company and Messrs. Daugherty and Feehan,
each dated as of August 1, 1997. (l) (Exhibit 10.2)
10.11 --Consultation Agreements between the Company and Messrs. Dike, Hunter, Motheral, and Rizzo, each dated April
25, 1990.(m) (Exhibit 10.49)
10.12 --Note Agreement between the Company and Teachers Insurance and Annuity Association of America dated as of May
6, 1993.(n) (Exhibit 10.1)
10.13 --First Supplement to Note Agreement between the Company and Teachers Insurance and Annuity Association of
America dated as of September 20, 1994.(k) (Exhibit 10.11)
10.14 --Second Supplement (May 12, 1995), Third Supplement (July 7, 1995), and Fourth Supplement (November 10, 1995)
to 1993 Note Agreement between the Company and Teachers Insurance and Annuity Association of America.(o)
(Exhibit 10.1)
10.15 --Fifth Supplement (December 30, 1996) to 1993 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America. (h) (Exhibit 10.13)
10.16 --Sixth Supplement (December 30, 1997) to 1993 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America.
10.17 --Note Agreement between the Company and Teachers Insurance and Annuity Association of America dated as of
July 7, 1995.(p) (Exhibit 10.1)
10.18 --First Supplement (November 10, 1995) to 1995 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America.(o) (Exhibit 10.2)
10.19 --Second Supplement (December 30, 1996) to 1995 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America. (h) (Exhibit 10.16)
10.20 --Third Supplement (December 30, 1997) to 1995 Note Agreement between the Company and Teachers Insurance and
Annuity Association of America.
10.21 --Amended and Restated Senior Revolving Credit Facility Agreement among the Company, certain lenders named
therein, and NationsBank of Texas, N.A., as Administrative Agent dated as of June 19, 1996 (q) (Exhibit 10.1)
10.22 First Amendment (December 11, 1997) to Amended and Restated Senior Revolving Credit Facility Agreement dated
as of June 19, 1996.
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10.23 Note Agreement dated as of December 1, 1997 among the Company and the Purchasers named therein for the
issuance of the Company's 7.10% Senior Notes due January 2, 2008 in the aggregate principal amount of
$30,000,000.
13 --1997 Annual Report to Stockholders of the Company and 1998 Proxy Statement.
21 --Subsidiaries of Cash America International, Inc.
23 --Consent of Coopers & Lybrand L.L.P.
27 --Financial Data Schedule.
________________________
Certain Exhibits are incorporated by reference to the Exhibits shown in
parenthesis contained in the Company's following filings with the Securities
and Exchange Commission:
(a) Registration Statement Form S-1, File No. 33-10752.
(b) Amendment No. 1 to its Registration Statement on Form S-4, File No.
33-17275.
(c) Annual Report on Form 10-K for the year ended December 31, 1992.
(d) Annual Report on Form 10-K for the year ended December 31, 1993.
(e) Post-Effective Amendment No. 1 to its Registration Statement on Form S-4,
File No. 33-17275.
(f) Annual Report on Form 10-K for the year ended December 31, 1990.
(g) Registration Statement on Form S-8, File No. 33-29658.
(h) Annual Report on Form 10-K for the year ended December 31, 1996.
(i) Quarterly Report on Form 10-K for the quarter ended June 30, 1997.
(j) Annual Report on Form 10-K for the year ended December 31, 1989.
(k) Annual Report on Form 10-K for the year ended December 31, 1994.
(l) Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.
(m) Post-Effective Amendment No. 4 to its Registration Statement on Form S-4,
File No. 33-17275.
(n) Quarterly Report on Form 10-Q for the quarter ended March 31, 1993.
(o) Quarterly Report on Form 10-Q for the quarter ended September 30,1995.
(p) Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
(q) Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
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