Cash America 2011 Annual Report Download - page 103

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LIQUIDITY AND CAPITAL RESOURCES
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 or desirable 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 entry into a new $380.0 million line of credit agreement contributed
to improving the Company’s long-term liquidity position during 2011. Additionally, the Company filed an automatic
shelf registration statement on Form S-3 on August 14, 2009 that could provide the Company with additional financing
flexibility. Management will continue to closely monitor the Company’s liquidity needs and review alternatives
for additional capital as needed.
On November 15, 2011, Enova, a wholly-owned subsidiary of the Company that comprises the Company’s e-
commerce segment, filed a registration statement on Form S-1with the Securities and Exchange Commission in
connection with a proposed IPO of its common stock. At the date of this report, the registration statement is not
effective. Upon completion of the proposed IPO, the Company intends to use the proceeds it receives in the offering and
from the repayment of Enova’s intercompany indebtedness to the Company, which was $410.8 million as of December
31, 2011, net of applicable taxes, to repay a portion of the amounts outstanding under its domestic line of credit and for
other general corporate purposes, which may include, among other potential uses, funding its strategy of expanding its
storefront business and products in the United States and Latin America and possibly repurchases of the Company’s
common stock. See “Item 8. Financial Statements and Supplementary Data—Note 22.”
As of December 31, 2011, 2010 and 2009, 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 predominately 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.