Cash America beats on revenues, adjusts earnings

Fort Worth-based Cash America International Inc. reported July 24 its net income for the second quarter ended June 30, 2014, was $20,971,000, or 72 cents per share, compared to second quarter 2013 net income of $25,132,000, or 81 cents per share. Net income per share adjusted for debt expenses in the second quarter exceeded the payday lender and pawnshop’s guidance range of 85 cents per share to 95 cents per share announced in April. Total revenue for the second quarter rose 10.9 percent to $455.1 million from $410.4 million in the year ago quarter. Net revenue, which is total revenue less cost of merchandise sold and loan loss provision expense, was up 13 percent to $275.9 million for the three-month period ended June 30, primarily due to the growth in the company’s E-Commerce Segment.

The E-Commerce Segment posted higher total revenue levels and lower loan losses as a percentage of revenue leading to a 27 percent increase in net revenue, or $134.6 million in the second quarter, compared with $106 million in second quarter 2013. The E-Commerce Segment generated income from operations of $58.1 million in the second quarter of 2014, marking an increase of 60 percent from 2013. The company’s Retail Services Segment posted its first year-over-year increase in net revenue in two years as net revenue rose 3 percent to $141.1 million in the second quarter. The increase was supported by an 11 percent increase in revenue from pawn loans, which ended the month of June 2014 with a balance outstanding of $263.7 million, up 14.9 percent from the same period last year. As of June 30, Cash America International operated 1,004 locations, including 869 lending locations in 22 states in the United States; 47 pawn lending locations in central and southern Mexico; and 88 check cashing centers operating in 14 states in the U.S. Additionally, the company offered consumer loans via the Internet to customers in 33 states in the U.S., in the United Kingdom, Australia and Canada.

“The second quarter’s results exceeded our expectations due to much lower loan loss rates in our unsecured consumer loan products during the period, which led to strong gains in operating income from our E-Commerce Segment,” commented President and CEO Daniel R. Feehan in a news release. “In addition, our pawn lending activities experienced renewed demand leading to a healthy increase in overall pawn loans and the first domestic same store pawn loan balance since early 2012.” The company expects that changes to new regulatory requirements in the United Kingdom will significantly reduce loan volumes, balances and revenue levels in that market for the remainder of the year and potentially into 2015, although the decrease could be offset by higher balances from domestic consumer loan products, among other things. Other elements that could affect the growth in revenue include the regulatory governance of the consumer loan products and the continued development and growth of new lending products offered by the Cash America’s E-Commerce Segment. In addition, the company’s wholly-owned subsidiary, Enova International, completed a $500 million long-term note offering during the second quarter of 2014 that has significantly increased the company’s interest expense as the proceeds were used to pay-off long-term notes at lower interest rates.

Management estimates that the after tax additional interest expense burden will amount to 13 cents per share per quarter. The company expects third quarter 2014 net income per share to be between 70 cents and 80 cents per share compared with $1.52 per share in third quarter 2013. S&P Capital IQ estimates third quarter net income per share of 82 cents per share. Cash America expects its fiscal year 2014 earnings per share to be in a range of between $4.20 and $4.40 per share. Capital IQ consensus estimate is $4.33 per share. On July 23, Feehan announced his retirement effective April 30, 2015. Feehan, 63, will remain on the company’s board of directors and will assume the role of chairman of the board following his retirement. Jack Daugherty, the current board chairman, will step down as chairman at that time but will continue to serve on the board. The specific details of Feehan’s retirement, including the details of any retirement package, are expected to be finalized early next year. The board has appointed a special committee to search for a new CEO. Cash America International Inc. trades on the New York Stock Exchange under the symbol CSH. Betty Dillard

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