Cash America : Announces Increase In First Quarter Earnings

Microsoft Word - Cash America Q1 16 Earnings Release.docx

Additional Information: For Immediate Release‌

Thomas A. Bessant, Jr. (817)335-1100

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CASH AMERICA ANNOUNCES INCREASE IN FIRST QUARTER EARNINGS AND DECLARES DIVIDEND ******************************************************************************************************

Fort Worth, Texas (April 28, 2016) - - Cash America International, Inc. (NYSE: CSH), a leading provider of pawn lending and related services in the United States, announced today that net income and net income per share for the first quarter of 2016 increased 36% and 56%, respectively to $10,633,000 (42 cents per share) compared to net income of $7,845,000

(27 cents per share) for the first quarter of 2015. The prior year first quarter included reorganization expenses and a gain on disposition of equity securities, which in aggregate would increase prior year earnings when added back, to create adjusted net income, a non-GAAP measure, of $8.3 million (29 cents per share) for the first quarter of 2015. Cash America's earnings per share for the first quarter of 2016 of 42 cents was an increase of 45%, compared to adjusted net income per share of

29 cents for the first quarter of 2015 and exceeded Cash America's published guidance range of between $0.35 and $0.41 from its press release dated January 28, 2016.

Commenting on the first quarter results, T. Brent Stuart, President and Chief Executive Officer of Cash America, said, "We are very pleased with our success in the first quarter, and we are also very excited about the important announcement made this morning regarding Cash America's proposed merger with First Cash Financial Services. We believe that the merger of equals will provide great benefit to our shareholders by combining two leaders in the pawn industry. We look forward to providing additional details about the merger as it progresses."

Consolidated total revenue increased 2% to $277.2 million for the three-month period ended March 31, 2016, compared to

$271.8 million in the same period in 2015. Consolidated net revenue was $144.0 million for the first quarter of 2016 compared to $147.1 million for the first quarter of 2015. While net revenue for the first quarter of 2016 was slightly below the prior year's first quarter results, management's emphasis on improvement in marginal profitability produced a 22% increase in income from operations, which was $19.7 million for the first quarter of 2016, compared to $16.2 million for the first quarter of 2015.

Mr. Stuart further commented on the first quarter results and said, "Our operations team placed significant emphasis on improving our operating margin and executing a strategy of in store retail sales activities. I am pleased to report that we were able to successfully achieve both objectives in the first quarter of 2016. Our in store retail sales activities posted a year- over-year increase of 1.7% with a higher retail gross profit margin of 32.9% compared to 31.7% last year, which generated an increase in retail gross profit dollars of 5.6%. We were also very excited to see that same store pawn loan balances turned the corner and finished the first quarter up 1.2% above the prior year."

Additionally, Cash America International, Inc. (the "Company" or "Cash America") announced that its Board of Directors, at a regularly scheduled quarterly meeting, declared a $0.08 (8 cents) per share cash dividend on common shares outstanding. The dividend will be paid at the close of business on May 25, 2016 to shareholders of record on May 11, 2016.

The Company will host a conference call to discuss the first quarter results as well as the proposed merger of equals with First Cash Financial Services, Inc. ("First Cash") on Thursday, April 28, 2016, at 7:00 AM CDT (8:00 AM EDT). A live webcast of the call will be available on the Investor Relations section of the Company's corporate website http://www.cashamerica.com. The dial-in number is (212) 231-2930. Participants should dial in 10 minutes prior to the scheduled start time.

A link to the live webcast of the conference call will be available on the Investor Relations section of the Company's website at www.cashamerica.com.

A webcast replay will be available shortly after the call concludes and will be available on the Company's website. A replay may also be accessed by dialing toll-free: (800) 633-8284. The replay confirmation code is 21776991.

An additional audio commentary on the financial results for the quarter will also be available on the Investor Relations section of the Company's corporate website at www.cashamerica.com and a transcript for the audio commentary has been filed with the Securities and Exchange Commission (the "SEC").

First Quarter of 2016 Results

The Company's financial results for the three months ended March 31, 2016 (the "current quarter") compared to the three months ended March 31, 2015 (the "prior year quarter") are summarized below.

Highlights

• Total revenue was $277.2 million for the current quarter, representing an increase of $5.4 million, or 2.0%, compared to the prior year quarter. Net revenue decreased $3.0 million, or 2.1%, to $144.0 million for the current quarter compared to the prior year quarter.

• Same-store net revenue decreased 1.8% for the current quarter compared to the prior year quarter. Same-store net revenue, excluding net revenue from commercial disposition activities and net revenue from consumer loans, increased 3.9% for the current quarter compared to the prior year quarter. In comparison to pawn lending and the retail disposition of merchandise, commercial disposition activities and consumer lending activities represent sources of net revenue that are much less central to the Company's core operations and strategy.

• Income from operations was $19.7 million for the current quarter, representing an increase of $3.5 million, or 21.6%, compared to the prior year quarter, primarily due to a $5.5 million decrease in operations and administration expenses.

• Net income was $10.6 million for the current quarter, representing an increase of $2.8 million, or 35.5%, compared to the prior year quarter. Diluted net income per share was $0.42 for the current quarter compared to $0.27 for the prior year quarter. Net income and net income per share were affected by certain income and expense items in the current quarter and prior year quarter. See the Non-GAAP Disclosure section for Adjusted Earnings and Adjusted Earnings Per Share included in the attachments to this press release for additional information regarding these items.

  Pawn Lending Activities

• Average pawn loan balances outstanding increased $2.1 million, or 0.9%, in the current quarter compared to the prior year quarter, primarily due to higher average pawn loan balances in same-store pawn locations. Partially offsetting this increase, average pawn loan balances outstanding decreased due to a decrease in the number of stores offering pawn loans following the closure or sale of certain less profitable store locations. Same-store pawn loan balances were 1.2% higher at March 31, 2016 compared to March 31, 2015.

• Pawn loan fees and service charges increased by $2.4 million, or 3.1%, in the current quarter compared to the prior year quarter. This increase was primarily driven by higher average pawn loan balances in the current quarter compared to the prior year quarter, as well as a higher pawn loan yield of 138.1% in the current quarter compared to 136.4% in the prior year quarter, primarily due to a shift in the geographic concentrations of pawn loans into states with higher statutory pawn loan yields and, to a lesser extent, an increase in the permitted statutory loan fees in some markets.

  Merchandise Disposition Activities

• Proceeds from disposition for pawn operations increased $6.1 million, or 3.5%, from the prior year quarter to the current quarter. Retail proceeds from disposition comprised $2.6 million of the total increase, primarily due to an increase in jewelry sales in the Company's storefront locations. The Company's merchandise turnover ratio remained relatively stable at 2.2 times in the current quarter compared to 2.3 times in the prior year quarter.

• Total gross profit on disposition for pawn operations decreased $3.3 million, or 6.2%, from the prior year quarter to the current quarter, due to a $5.9 million decrease in gross profit on commercial dispositions mainly as a result of lower gold and diamond yields, which produced a negative gross profit margin on commercial dispositions in the current quarter. Partially offsetting the loss on commercial dispositions was a $2.6 million, or 5.6%, increase in gross profit on retail dispositions, primarily due to the Company's emphasis on retail jewelry sales in storefront locations. The gross profit margin on retail dispositions increased to 32.9% in the current quarter, compared to 31.7% in the prior year quarter.

• Merchandise held for disposition, net of allowance, increased $27.6 million, or 14.1%, from March 31, 2015 to March 31, 2016. The increase was primarily due to an increase in jewelry inventory as a result of the Company's continued emphasis on retail disposition of jewelry in stores and efforts to place less reliance on the commercial disposition of jewelry. Inventory held for over one year decreased to 4.9% of total merchandise compared to 5.3% in the prior year quarter, and included a greater mix of jewelry inventory to general merchandise inventory in the current quarter compared to the prior year quarter.

  Consumer Loan Activities

• Consumer loan fees represented only 7% of consolidated total revenue for the current quarter, compared to 8% of consolidated total revenue for the prior year quarter, due to the continuation of the Company's strategy to eliminate consumer lending activities in many of its locations. Consumer loan fees, net of the loss provision, decreased $1.4 million, or 8.8%, in the current quarter compared to the prior year quarter, primarily due to a $2.2 million, or 10.9%, decrease in consumer loan fees. The decrease in consumer loan fees was primarily due to a decrease in short-term consumer loan fees of $5.4 million, or 31.8%, as a result of the closure and sale of certain store locations and the Company's strategic decision to deemphasize and eliminate short-term consumer lending activities in many of its locations.

• The consumer loan loss provision as a percentage of consumer loan fees decreased to 21.8% in the current quarter compared to 23.6% in the prior year quarter.

  Expenses

• Consolidated operations and administration expenses decreased $5.5 million, or 4.8%, in the current quarter compared to the prior year quarter. This overall decline in expenses is consistent with management's strategy and related initiatives to improve marginal profitability by optimizing the Company's overall cost structure.

• Depreciation and amortization expenses decreased $1.0 million for the current quarter compared to the prior year quarter, primarily due to a reduced number of pawn and consumer lending locations as a result of store closures and sales and a reduced level of capital investment related to the remodeling of stores.

• Interest expense, net of interest income, increased $0.3 million, or 7.1%, in the current quarter compared to the prior year quarter, primarily due to interest expense accrued as part of a settlement of an income tax matter related to the 2011 and 2012 tax years.

• The Company's effective tax rate was 33.4% in the current quarter as compared to the effective tax rate of 38.5% in the prior year quarter. The effective tax rate in the current quarter was lower due to lower state income taxes and a $0.6 million excess income tax benefit from stock compensation that reduced the income tax provision as a result of the prospective adoption of Accounting Standards Update 2016-09.

  Liquidity

• During the first quarter of 2016, the Company repurchased 844,000 shares under its 3.0 million share repurchase authorization announced on October 29, 2015. These repurchased shares represented approximately 3.3% of the fully diluted shares as of the end of December 31, 2015.

• Net cash provided by operating activities was $45.4 million for the current quarter, which represented an increase of $5.6 million, or 14.0%, from $39.8 million in the prior year quarter.

• The Company finished the quarter with $48.3 million in cash and had no borrowings under its $280 million line of credit.

• The net debt balance, defined as total debt less cash, as of March 31, 2016 was $131 million resulting in a net debt to capital ratio of 11% and a net debt to Adjusted EBITDA ratio for the trailing 12 months ended March 31, 2016 of 1.1 times.

• With respect to the Enova shares retained by the Company in connection with the spin-off of Enova International, Inc. ("Enova") that occurred in November 2014, the Company has agreed, pursuant to a private letter ruling and a supplemental request, which was approved by the Internal Revenue Service during the quarter and extended the date for the required sale of Enova shares, to dispose of its Enova shares (other than shares retained for delivery under the Company's long-term incentive plans) before September 15, 2017. The sale of the Enova shares will generate additional cash flows. The Company's investment in Enova common stock was $40.4 million as of March 31, 2016 based on a quoted market price per share of $6.31.

  Locations

• The Company ended the first quarter with 819 lending locations in 20 states in the United States. During the twelve months ended March 31, 2016, the Company closed or sold 30 locations. Consistent with the Company's strategy to deemphasize its consumer lending activities, 21 of the locations closed or sold were locations that offered consumer loans, of which 19 of those locations offered consumer loans as their primary product. The closed or sold locations also included nine less profitable, pawn-lending-only locations that were closed during the twelve months ended March 31, 2016. In addition, the Company eliminated the consumer loan product in 36 of its pawn lending locations during the twelve months ended

  March 31, 2016. Including consumer-loan-lending locations closed or sold and locations where the consumer loan product was eliminated, consumer lending activities were discontinued in 57 of the Company's locations during the twelve months ended March 31, 2016.

• During the current quarter, the Company closed three locations, of which one location offered consumer loans. In addition, the Company eliminated the consumer loan product in 28 of its pawn lending locations during the current quarter. The Company expects to eliminate consumer lending activities in approximately 18 locations in the second quarter of 2016 as it continues to deemphasize the consumer loan product and continue its focus on pawn lending.

Outlook for the Second Quarter of 2016 and the 2016 Fiscal Year

Management believes that the opportunities for growth in revenue and earnings will be largely associated with customer demand for the products and services provided by the Company, which primarily take the form of pawn loans, and its ability to profitably liquidate merchandise obtained primarily from unredeemed pawn loans. During the first quarter of 2016, the typical seasonal decline in loan balances was consistent with what the Company experienced during the first quarter of 2015, even though management believes that the Federal Income Tax refund season began a few weeks later than the Company anticipated. Typically, customers use a portion of these refunds to pay back existing loans and for the purchase of merchandise. At the outset of the second quarter the Company expects loan balances to begin to recover, consistent with routine seasonal business trends. The rate of this increase and the timing of the increase in pawn loan balances has a significant influence on future financial results.

Based on management's views and on the preceding factors, management expects net income for the second quarter of 2016 to be between 12 cents to 18 cents per share, compared to net income of 8 cents per share for the second quarter of 2015. Net income for the second quarter of 2015 of $2.1 million ($0.08 per share) included a $1.1 million (before taxes) gain on disposition of equity securities and a $0.6 million (before taxes) loss on the early extinguishment of debt. Excluding these non-