Cash America International, Inc. (CSH)

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Cash America International Inc. (CSH)

Q4 2009 Earnings Call

January 28, 2010


Daniel Feehan – President, Chief Executive Officer

Thomas Bessant – Chief Financial Officer


David Burtzlaff – Stephens Inc.

William Armstrong – C.L. King & Associates

Joshua Elving – Feltl & Company

Richard Shane – Jefferies & Co.

Elizabeth Pierce – Roth Capital Partners

[William Kakish – Macquarie Research]

John Hecht – JMP Securities

Henry Coffey – Stern Agee

Isabel Sterk – C.K. Cooper



Welcome to the Cash America International Inc. quarterly 2010 earnings release conference call. (Operator Instructions) I now have the pleasure of turning the conference over to Dan Feehan, President and Chief Executive Officer at Cash American International Incorporated.

Daniel Feehan

Good morning ladies and gentlemen and welcome to our call for the fourth quarter and year end 2009. Joining me this morning is Thom Bessant our Chief Financial Officer who will lead off with a review of our financial performance. I will then rejoin the call to provide me perspective on the quarter and full year of 2009 and an updated outlook for 2010. I will then open the call for questions following my remarks.

Before beginning our comments, please bear with me while I read our Safe Harbor disclosure. While on this call comments made by Tom or me may contain forward-looking statements about the business, financial condition and prospects of Cash America International Inc. and its subsidiaries. The actual results of the company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including without limitation, the risks and uncertainties contained in the company’s filing with the Securities and Exchange Commission.

These risks and uncertainties are beyond the ability of the company to control nor can the company predict in many cases all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this call, terms such as believe, estimates, plans, expects, anticipates and similar expressions or variations as they relate to the company and its management are intended to identity forward-looking statements. The company disclaims any intention or obligation to update or revise these forward-looking statements.

I also want to mention before we proceed that a reconciliation of any non-GAAP information provided on this call to the most directly comparable GAAP information is included in the financial statements issued with the earnings release today is available on the investor relations section of our website at

Non-GAAP financial information is not meant as a substitute for GAAP results but it is included solely for informational and comparative purposes.

Now I’ll turn the call over to Tom for his update.

Tomas Bessant

Thank Dan. Good morning ladies and gentlemen. Welcome to our fourth quarter earnings release conference call.

We entered the final quarter of 2009 with concerns about potential for rising loss rates on our unsecured loan product and uncertainty about the retail selling environment given the economic characteristics confronting our customers.

We’re pleased to report to you today that loss rates on our unsecured product continue to be lower year over year as they have been throughout 2009 and that our pawn loan balances continue to perform well during the quarter.

These dynamics allowed us to leverage strong Q4 demand for both products into earnings increases in the quarter. In addition we were able to emphasize our retail sales value proposition with lower cost merchandise in our storefront locations while being assisted by stronger prices for gold during the quarter, both of which contributed to a higher level of sales and gross profit generation year over year.

As a result, you’ll see in the press release provided to you earlier this morning, that earnings per share exceeded our top end guidance range of $1.02 and reach $1.09 per share for the fourth quarter of 2009. These results of $1.09 per share are over 100% higher than the $0.54 per share reported in the final quarter of 2008.

As we mentioned in our earnings release details, the final quarter of 2008 was burdened by one time costs associated with the closure of Payday Advance locations as well as management realignment expenses and referendum expenses associated with the election in Ohio during the final quarter of 2008.

Excluding these one time costs which totaled approximately $6 million after taxes, were $0.20 per share, Cash America would post a 51% increase in year over year earnings per share in the fourth quarter of 2009.

As many of you know this 51% increase is a significant accomplishment given the headwinds that the company faced entering 2009. It’s been an outstanding year for the financial fundamentals of the company and for achievements on a variety of operational goals, and it’s very satisfying to conclude 2009 on such a strong quarter.

As I recap the results of the quarter, I would like to start with the components contributing to the fundamentally strong 24% increase in the metric of net revenue reduced by loan loss provision. Lending fees and service charges on pawn loans and cash advance products were the dominant contributor in year over year revenue levels.

Pawn service charges on pawn loans were up 25% with the benefit of higher levels at both our U.S. and Mexico based pawn operations. Cash advance fees net of losses rose 34% year over year as loss rates fell in both our store front and online business.

Our storefront cash advance business continued its 2009 march toward recovery and posted a financially successful quarter compared to its prior year disappointing result. Cash advance loss provision as a percentage of total advance fees fell 14% declining from 42.1% in the fourth quarter of 2008 to 36% in the fourth quarter of 2009.

Gross profit dollars rose 15% during the quarter as the company benefited from both positive retail sales at storefront locations as well as higher year over year gold prices.

Consolidated gross profit margin was 36.02%, up 177 basis points from 34.25% in the prior year. Consolidated inventory turnover was flat at 3.2 times in both periods.

These components led to a 24% increase in net revenue net of loan losses, driving an 82% increase in income from operations in year over year in fourth quarter of 2009. Excluding the unusual expense items during the fourth quarter of 2008, operating income was up 44% on a 24% increase in net revenue net of loan losses.

As demonstrated by the above metrics, the overall business was hitting on all cylinders during the final quarter of 2009 leading to the $1.09 per share in earnings on income attributable to the company of $33.7 million which was up 107% from Q4 2008.

Moving on to the individual segments of the business, Loan Lending segment continued its run of strong quarters during 2009 posting a 41% increase in operating income contribution or $41.3 million compared to $29.3 million last year.

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