Cash America 2009 Annual Report Download - page 93

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LIQUIDITY AND CAPITAL RESOURCES
Capital Funding Strategy
The Company manages the liquidity and capital positions of the Company to satisfy three primary
objectives. First, near-term liquidity is managed to ensure that adequate resources are available to fund the
Company’s seasonal working capital growth which is driven by demand for short-term consumer loans. Second,
longer-term refinancing strategies are used to manage the Company’s debt refinancing risk, and third, long-term
capital strategies are used to provide the capital necessary to fund the Company’s long-term strategic growth
objectives. Near-term liquidity is provided through operating cash flows and the utilization of borrowings under
the Company’s long-term committed unsecured bank line of credit. Longer-term refinancing risk is managed by
staggering the Company’s debt maturities and issuing new long-term debt securities from time to time as market
conditions permit. Long-term capital needs are managed by assessing the growth capital needs of the Company
over time and balancing those needs against the internal and external capital resources available.
The Company has historically demonstrated a higher degree of internally generated cash flow through
normal operating activities for funding both long-term and short-term needs than many financial services
companies. As a result, operating cash flow is expected to meet the needs of near-term operating objectives
without reliance on short-term credit instruments such as warehouse lines of credit, asset backed securities or
commercial paper. To the extent the Company determines that strategic transactions, such as large scale
acquisitions, are necessary, management will consider additional sources of long-term funding. Historically,
funding for long-term strategic transactions has been supplemented by the Company’s long-term unsecured bank
line of credit or other long-term security issuances.
As of December 31, 2009, 2008 and 2007, the Company was in compliance with all financial ratios
covenants and other requirements set forth in some of its debt agreements. A significant decline in demand for the
Company’s products and services or other unexpected changes in financial condition may result in a violation of the
Company’s debt agreements that could result in an acceleration of the Company’s debt, increase the Company’s
borrowing costs, and possibly adversely affect the Company’s ability to renew its existing credit facilities or obtain
new credit on favorable terms in the future. The Company does not anticipate a significant decline in demand for its
services and has historically been successful in maintaining compliance with and renewing its debt agreements. To
the extent the Company experiences short-term or long-term funding disruptions, the Company has the ability to
address these risks through a variety of adjustments related to the primary current assets of the business, which all
have short durations. Such actions could include the immediate liquidation of jewelry inventory which is
comprised primarily of gold items that would be refined into pure gold and sold on the open market and
adjustments to short-term lending to consumers that would reduce cash outflow requirements while increasing cash
inflows through repayments of consumer loans, many of which are secured by gold jewelry.
The significant growth in earnings and the completion of the offering of the 2009 Convertible Notes
significantly improved the Company’s long-term liquidity position during 2009. Additionally, the Company filed
an automatic shelf registration statement on Form S-3 (the “Shelf Registration Statement”) on August 14, 2009 that
management believes will provide the Company with additional financing flexibility. Management will continue to
closely monitor the Company’s liquidity needs and review alternatives for additional capital based on its view that
the current uncertainty regarding the credit markets may continue for the foreseeable future.
The Company had outstanding letters of credit of $15.9 million at December 31, 2009, which are
considered outstanding indebtedness under the Company’s long-term unsecured line of credit for purposes of
determining available borrowings under that line of credit. Management believes that the borrowings available
($94.5 million at December 31, 2009) under the credit facilities, cash generated from operations and current
working capital of $414.5 million is sufficient to meet the Company’s anticipated capital requirements for its
businesses. Should the Company experience a significant decline in demand for the Company’s products and
services or other unexpected changes in financial condition, management would evaluate several alternatives to