Cash America 2010 Annual Report Download - page 87

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LIQUIDITY AND CAPITAL RESOURCES
Capital Funding Strategy
The Company manages its liquidity and capital positions 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 the Company’s loan products. 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 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 historically has generated significant cash flow through normal operating activities for funding
both long-term and short-term needs. 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.
The significant growth in earnings and the issuance of $25.0 million aggregate principal amount of the
Company’s 7.26% senior unsecured notes, which mature in 2017, contributed to improving the Company’s long-term
liquidity position during 2010. 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. In addition, the Company maintains a $300 million domestic line of credit that matures
in March 2012. The Company is in the process of negotiating a new credit facility to replace this facility, which
remains subject to negotiation, execution and delivery of definitive documentation. 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.
As of December 31, 2010, 2009 and 2008, the Company was in compliance with all financial ratios,
covenants and other requirements set forth in 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 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. Additional alternatives may include the sale of assets, reductions in capital
spending and changes to its current assets and/or the issuance of debt or equity securities, all of which could be
expected to generate additional liquidity.