Cash America 2014 Annual Report Download - page 84

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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 financing 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 Domestic and Multi-currency
Line of Credit. Long-term liquidity is provided through long-term debt financing and the issuance of debt securities.
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. Longer-term financing 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.
The Company has historically generated significant cash flow through normal operating activities for
funding both short-term and long-term needs. As a result, operating cash flow, which may be supplemented with
borrowings under the Company’s Domestic and Multi-currency Line of Credit 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.
Management considers additional sources of long-term funding when strategic transactions, such as large
scale acquisitions, are necessary or desirable. 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 debt securities.
As of December 31, 2014, 2013 and 2012, the Company believes it was in compliance with all financial
ratios, covenants and other requirements set forth in its debt agreements. Representatives of a small number of
holders of the 2018 Senior Notes, which the Company believes own less than a majority of the aggregate principal
amount of the 2018 Senior Notes, have indicated that they believe the Enova Spin-off was not permitted by the
2018 Senior Notes Indenture. These noteholders have taken the position that the Company is in default under the
Indenture and that a make-whole premium is payable, in addition to principal and accrued interest. The Company
disagrees with the assertion that a default exists under the 2018 Senior Notes Indenture and also disagrees that a
make-whole premium would be due in the event of a default because, among other things, the 2018 Senior Notes
Indenture provides that upon acceleration of the 2018 Senior Notes due to a default, the repayment remedy is the
repayment of principal and accrued interest with no provision for a make-whole premium. The Company believes
the position taken by these noteholders is without merit and the Company intends to vigorously defend its position
on these issues if formally asserted. This claim could be costly to defend, could be damaging to the Company’s
reputation, could be time consuming for management and could affect the Company’s ability to obtain capital in the
future. As of the date of this Annual Report, the Company has ample liquidity and capital resources, including
availability under the Company’s Domestic and Multi-Currency Line of Credit, to repay the 2018 Senior Notes
regardless of the outcome of this claim.
In the event of a significant decline in demand for the Company’s products and services or other unexpected
changes in financial condition, the Company could experience a violation of its 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 bank line of credit 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 its lending practices to consumers that
would reduce cash outflow requirements while increasing cash inflows through repayments of loans. Additional
alternatives may include the sale of assets, including the Enova shares held by the Company, reductions in capital
spending and/or the issuance of debt or equity securities, all of which could be expected to generate additional
liquidity.