Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Dan Feehan - President and CEO

Tom Bessant - Chief Financial Officer

Analysts

David Burtzlaff - Stephens, Inc.

Bill Armstrong - CL King & Associates

John Rowan - Sidoti & Company

Rick Shane – Jefferies & Company

John Hecht - JMP Securities

Henry Coffey - Sterne Agee

Jason Arnold – RBC Capital Markets

Gregg Hillman - First Wilshire Securities

Jordan Hymowitz - Philadelphia Financial

Ted Hillenmeyer – Northstar Partners

Liz Pierce - Roth Capital Partners

Cash America International, Inc. (CSH) Q2 2009 Earnings Call July 23, 2009 8:45 AM ET

Operator

(Operator Instructions) Welcome to the Q2 Quarterly 2009 Earnings Release Conference Call. I would now like to turn the conference over to Dan Feehan, President and CEO, Cash America International.

Dan Feehan

Welcome to our call for the second quarter call 2009. Joining me this morning is Tom Bessant our Chief Financial Officer, who will lead off the review of our financial performance for the quarter and provide updated earnings guidance for the balance of the year. I will then rejoin the call to provide my perspective on the condition of our business. We 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 filings 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 believes, estimates, plans, expects, anticipates and similar expressions as they relate to the company or its management are intended to identify forward looking statements.

Now I’ll turn the call over to Tom.

Tom Bessant

As you’ve seen in our press release the company reported $0.54 per share on $252 million in revenue during the second quarter. This earnings per share of $0.54 exceeded the top end of our guidance by $0.01 per share as overall the second quarter played out much as anticipated.

Recapping the second quarter, we expected and experienced soft over the counter retail sales, excluding refined gold, due to the economic environment and the fact that our customers would not have economic stimulus checks as they did in the second quarter of 2008. Refined gold volume was not as high due to the slower recovery of pawn loans which was delayed due to the timing of the Q1 tax refunds, deferring the arrival of unredeemed collateral until later in the quarter.

In the end, consolidated merchandise sales were up slightly but due to the introduction of the product in many of our Cash Advance locations. However, gross profit margins as anticipated were lower leading to lower gross profit on retail sales and a $2.7 million drop in gross profit dollars in the second quarter of 2009 compared to the prior year.

In addition, we talked about the uncertainty of loan demand as we entered the second quarter. We were pleased that pawn loan demand did rebound during the second quarter and the company ended with a healthy increase in pawn loan balances in its US locations, up about 9% year over year which combined with our Mexico based pawn loans to generate a 25% increase in pawn service charges which took some of the sting out of the difficult retail sales environment. More importantly this is a positive indicator for the upcoming quarter.

The Cash Advance business, while suffer with lower revenues due to the absence of certain profitable markets that the company was in, in the second quarter 2008, still performed admirably during the quarter and in fact exceeded our expectations. Loan losses on the Cash Advance business continued their trend of improvement year over year despite the challenging economy. The store front Cash Advance locations came in slightly above expectations which helped push us above the high end of our initial guidance for the quarter.

The consolidated loan loss provision as a percentage of loans written dropped to 5.5% in the second quarter of 2009 compared to 6.5% in the second quarter of 2008. Consolidated loan loss as a percentage of cash advance fees decreased to 34.5% compared to 37.4% in the prior year. Also, each of the businesses posted improvement in year over year losses as a percentage of fees and I encourage you to review those levels as both the pawn and store front Cash Advance business had exceptional performance in the quarter.

Our Mexico based pawn operations Prenda Facil continued their business plan of aggressive store growth but did contribute incremental profitability to our pawn operating segment. Overall it was a very solid quarter for our key lending businesses balance sheet metrics performed quite well and we experienced some positive movement in our store front Cash Advance business.

Now I’ll get into some of the specific metrics of each of the business lines. Starting off with the pawn business, as many of you know, the second quarter is more about balance sheet changes than it is about earnings but earnings is the headliner so I’ll start there.

The pawn segment reported an increase in net revenue of a little more than 5% during the quarter due to the inclusion of our Mexico based pawn operations as the US business was down slightly. The year over year slight decrease in US pawn income from operations was anticipated due to the unseasonably strong 2008 second quarter which was driven by stimulus checks. Operating income from the total pawn segment was flat year over year as the difficult comparisons in the US business was offset by the additional contribution from the Mexico based operation.

Looking at the specific components of net revenue related to the pawn business, consolidated service charges were up 25% aided by the inclusion of Prenda Facil’s operations. The US pawn business posted a healthy 9% increase in pawn service charges. This improvement came later in the quarter commensurate with the later period increase in pawn loan balance that I mentioned earlier.

As anticipated, retail sales in the pawn lending segment was down but only slightly. However, the segment experienced a lower gross profit margin coming in at 35.1% compared to 38.3% in the prior year. Similar to the first quarter results, lower gross profit margin is a function mostly of higher percentage of refined gold sales as well as active discounting to maintain inventory levels during the current quarter. Consolidated refined gold margins were 27% compared to 33% in the prior year and comprise about one third of gross profit dollars.

Inventory turnover was up slightly to 3.0 times compared to 2.9 times and inventory aging remained ideal as total inventory over one year old was less than 8%. For the first time in a number of quarters the company’s US pawn business ratio of pawn loans to pawn loans plus inventory pushed back above 60% as inventory finished the quarter up only 5% while US pawn loans were up 9%.

Same store US pawn net revenue came in 1% above the prior year on the strength of pawn service charges. More importantly, same store pawn loan balances finished the quarter up 8.8% year over year. While this increase in same store net revenue for the US pawn business is not as strong as it has been in recent quarters I was surprised we were up at all given the difficult comp to the second quarter of 2008.

Another perspective to evaluating the Q2 2009 retail sales activity of the US pawn business is to compare to the most recent like quarter with no economic stimulus, the second quarter of 2007. The company posted 3.7% increase in retail sales excluding refined gold comparing the second quarter of 2009 to the second quarter of 2007 which I interpret as positive given the economic environment in 2009.

At the end of the day the second quarter story on the pawn business is very much as we hoped for as US pawn balances rebounded nicely and increased demand and inventory maintained its trend of favorable metrics. Our Mexico based pawn operations contributed earnings despite an aggressive store opening ramp.

Moving on to the Cash Advance segment which also performed consistent with expectations. Net revenue was down year over year due to absence of profitable markets which led to a drop in income from operations, down 28% due to lower levels of net revenue and the continued investment in development costs to pursue future revenue opportunities in our online distribution platform which is expected to be harvested in 2010.

Loan losses continue their improvement as Cash Advance losses as a percentage of fees in the Cash Advance segment came in at 35.8% in 2009 compared to 38.1% in the second quarter of 2008. This metric understates the real progress on losses due to the lower margin of profitability of our store front product based in Ohio.

As I mentioned at the outset store front Cash Advance volume levels have returned nicely which allowed us to report a positive income from operations of about $670,000 during the second quarter for store front Cash Advance business. Contributing to the success is the low level of loss provision which fell to 15.2% of Cash Advance fees in the second quarter 2009 compared to 24.3% in the second quarter 2008.

As we’ve indicated in the past, the future of this business will be a function of continued increases in volume levels as well the continued contribution of ancillary services such as pawn lending and gold buying. You’ll note in the quarter that store front Cash Advance business did post a small amount of pawn service charges and just over $800,000 on the disposition of merchandise related to the introduction of those two products which is very encouraging and was an important improvement component in Q2.

As expected, the company’s online business for the Cash Advance business struggled during the quarter because of the comparison to the prior year earnings. It included the full effect of the lost state markets of Florida, Pennsylvania, Minnesota, and Ohio. The online businesses lower revenue levels and higher operating costs caused it to post a 33% decrease in operating income of $8.8 million compared to $13.1 million last year.

Even though the Cash Advance loss provision as a percentage of fees dropped to 42.9% compared to 44.7% last year, bear in mind that we did have a small contribution from our Pennsylvania business which was included in our guidance for the quarter.

We have discussed additional business opportunities for the online platform, specifically our entrance into the United Kingdom as well as expansion into Australia and eventually Canada. I’m happy to report that the United Kingdom business was profitable in the second quarter more than offsetting the startup losses associated with our entrance to the Australian market during the quarter. Our expectations are that the UK operations will continue to contribute nicely for the remainder of 2009 and beyond.

As I put a final set of comments on the second quarter I would say overall it was consistent with expectations and that we will be well positioned as we move into Q3 as pawn loan balance in our US business rebounded nicely and finished the quarter up 9% complemented by continued progress with our Mexico based pawn operations.

The Cash Advance business continues to move through its transitional year and we will begin overlapping the period where certain profitable markets were eliminated in 2008. The store front Cash Advance business is showing some promise as the gold buying and pawn lending are providing benefits and same store active Cash Advance balances are now higher then they were in the prior year for the first time in four quarters.

As a result, our expectations for the Cash Advance business as we move into the third quarter are that it will return enough to contribute marginally higher operating income year over year but the segment is still lagging our beginning of the year expectations. The US pawn business is well positioned for Q3 and we expect our Mexico based operation to add incrementally again in Q3.

These factors lead us to announce an earnings per share expectation for the third quarter of 2009 of between $0.70 and $0.75 per share. As we look toward the final quarter of 2009 we do have concerns about the extent of Cash Advance customer growth in Q3 both online and in store front activities which is critical to the Q4 performance. As a result, we’ve decreased the range of our full year estimates to $3.00 to $3.15 per share compared to $2.70 per share for fiscal 2008.

Now I’ll turn the call back over to Dan.

Dan Feehan

As Tom’s report confirmed, we really didn’t experience any major operational surprises this quarter. The quarter’s results were in line with our expectations and consistent with both our guidance and our comments from the last two conference calls.

You may recall on our last call in late April I shared with you my intuition that the consumer, regardless of his or her position on the socio-economic scale would likely remain cautious and restrict in either discretionary borrowing or spending until gaining some confidence that the economy is rebounding and the risk of rising unemployment abates.

Consumer confidence stats have improved from the rather depressing levels of the first quarter this year but they still remain relatively weak and have declined here in June after a three month increase. We all know that the national unemployment is about to break the 10% mark and I don’t believe there are many people feeling particularly secure at this point. In addition, gasoline prices have rebounded from a low of around $1.65 a gallon in December to about $2.60 today which is obviously consuming a little extra discretionary income.

In short, I don’t think a lot has changed in the past three months to cause me to alter my watchful outlook for the balance of 2009 and perhaps even extending into 2010. Clearly my view has certainly influenced our guidance for the balance of the year. In fact, retail sales activity in our US pawn business was actually a little weaker than I had expected this quarter with over the counter retail sales trending down compared to the second quarter of last year as Tom has indicated.

Tom did mention that the second quarter of last year enjoyed the benefit of federally issued stimulus checks and we knew that the retail sales comp for this quarter would be particularly challenging. On a positive note, as Tom also indicated, the over the counter merchandise sales were up over the second quarter 2007 which I think is probably a little better comparison also believe is an indication of the relative health of the current pawn environment. Regardless I had hoped for a little stronger showing from our retail customer in the second quarter.

Even though our sales fell short of plan we did exceed the top end of our earnings guidance as our loan fees both pawn service charges and Cash Advance fees were ahead of expectations and loss rates came in lower than our plan. Part of the additional Cash Advance revenue is attributable to our ongoing internet presence in Pennsylvania for the entire quarter, in part due to greater asset growth then we had modeled for both pawn loans and cash advances.

Again, the year over year comparisons are affected by the stimulus checks of last year that served to stall loan growth in the second quarter 2008 so its hard to judge how much of this year’s growth reflects the impact of the year over year comparison and how much might be attributable to improvement in demand. At this point I’ll remain doubtful that we are experiencing any shifts in the macro economic environment until I see how the asset trends play out in the coming months.

Despite the ongoing uncertainty surrounding the economy and our continuing efforts to deal with a number of well documented regulatory and legislative challenges I remain very upbeat about the condition of our business and our prospects to emerge from 2009 a stronger more diverse and innovative player in the specialty finance field.

Those of you with some tenure on these calls know that I’m always candid in highlighting our deficiencies when they develop in disclosing our plans to address any problems. Today, other than ongoing efforts to adjust to the regulatory changes of 2008 and 2009 and to deal with the developing rush for regulatory reform on Capital Hill, which I will discuss later, there’s really nothing of consequence in our current business model that I’m overly concerned about.

While I would love to see greater consumer demand in our pawn business I think our retail services team is doing everything it can to encourage demand and protect all the key operating metrics we monitor daily. I’d be easy to panic in this environment and foolishly attempt to drive growth by expanding our risk appetite and overextending loan values for both secured pawn loans and unsecured cash advances. We continue to resist that temptation and you will see that our loan yields, forfeiture rates, inventory turns, over the counter retail sales margins have all held at favorable levels.

Most importantly the loss rates on our unsecured Cash Advance products continue to show improvement at a time when many purveyors of consumer credit are struggling with rising delinquencies and charge offs. The only pawn metric trending lower is the margin on refined gold sales which is a function of our cost basis rising at a faster pace then the spot value of gold. We allow our operators plenty of flexibility with this metric as the disposition of scrap gold and diamonds is an extraordinarily valuable lever for managing inventory levels and supporting loan demand.

We will continue to monitor this metric closely on a store by store basis but I would not expect to see any significant movement in the margin in coming quarters unless we see significant movement in the spot value of gold.

We’ve also recently introduced a brand new retail marketing campaign, highlighting the value proposition of buying pre-owned merchandise in order to drive more traffic in that segment of our business. We are testing the campaign in our Las Vegas market with the support of both television and billboards and we should know if we’re able to move the needle on sales in the next 30 to 60 days.

As Tom indicated our newly acquired foreign pawn operations Prenda Facil in Mexico is performing well, having added 19 new units in this quarter on top of the 15 open in the first quarter of the year. We expect Prenda Facil will add another 20 to 30 units before the end of the year. They are also testing retail jewelry sales in approximately 20 units and will be opening their first full format pawn shop in Mexico City within the next few weeks.

Prenda Facil has absorbed the startup losses of all these new units and the significant development costs with the new retail and full format initiatives in order to position itself for significant profitability growth in 2010 and subsequent years. Prenda Facil is an important growth vehicle for our pawn lending segment and serves to help diversify our overall enterprise risk away from certain US regulatory threats.

On the Cash Advance segment of the business I am also pretty happy with the management of both our store front and online channels. Our teams have adjusted well to the new store front operating model in Ohio and we are finally beginning to see year over year volume increases in the amount of Cash Advance has written in Ohio even with 20% fewer units. Customers in Ohio have reacted well to the new loan product and loss rates are more favorable with that product then with the previously provided Payday product.

Unfortunately the revenue yield on that product is about 30% less than our previous yields, which obviously adversely affects margin or profitability of our units in Ohio. We have also set a portion of that loss marginal profitability with gold buying and pawn lending services that we’ve introduced into many of our store front Cash Advance units over the past six months.

As Tom mentioned and as noted in our press release the store front cash advance business actually posted a year over year increase in operating income this quarter although not in an amount that was meaningful to the overall enterprise. Regardless we are making progress there and I remain hopeful we can ultimately justify keeping our remaining units open in Ohio.

Our online channel, as Tom indicated, posted a fairly sizeable decrease in operating income as we had expected and modeled into our guidance. As we have previously discussed with you regulatory changes in Florida, Ohio, Pennsylvania and Minnesota had forced our online business to adjust its offering in those states. Both volume and yields in the states of Florida and Ohio had been adversely affected by changes in regulation and volume levels in Pennsylvania and Minnesota had been significantly lowered in this quarter compared to last year.

Based upon very recent court action in Pennsylvania we have ceased writing cash advances in that state in early July, pending an appeal. A new Minnesota law that becomes effective on August 1st significantly reduces the profitability of our product offering in that state. Though we intend to continue offering online loans in Minnesota we will be further scaling back volume with tighter underwriting standards. The changes in Pennsylvania and Minnesota have been reflected in the guidance Tom provided you at the end of his comments.

Other than absorbing the impact of these regulatory changes I believe our online subsidiary Cash Net USA is performing relatively well in this economic environment. The quality of Cash Net’s analytics team and their management of underwriting models both online and in our store front business have been great assets in controlling loss rates. Cash Net is also making great progress on a number of initiatives supported by the investment spending that I have noted in previous calls with you.

The UK online business continues to build new customer volume and has reached a scale of adding meaningful profitability to the enterprise. Cash Net has successfully launched its short term cash advance offering in Australia in May with the website www.DollarsDirect.com.au and is slowly building volume there. We estimate the Australia business will take about 12 months to reach profitability. We also hope to begin offering a short term cash advance product online in certain Canadian provinces sometime in Q4.

As I mentioned the forecast is also providing installment loans in New Mexico and Illinois and we will continue to search for opportunities to expand the installment loan offering later this year. I’m also excited about the progress of our card services channel which facilitated almost $26 million of bank issued line of credit advances in the quarter and posted a modest and positive operating income. This volume of advance as written is up sequentially from Q1 by approximately 30% and a loss rate on our participation interest in these advances are consistent with our business model.

This is a very scaleable business model and our team is working hard to expand our relationships with other financial institutions and card program managers in order to accelerate the rate of growth in this new channel.

The only other performance issue I will address is our operating and administrative expense levels. On the surface both expense categories would appear to be up a disproportionate amount in relation to our growth and revenue. A portion of the expense increases relate to the Prenda Facil acquisition which as you know is not in our numbers in Q2 of last year and a portion relates to an increased emphasis on R&D activities and several new initiatives we are pursuing which have yet to yield any meaningful revenue increases. I do watch these expense categories carefully and I’m satisfied we’re making the right investments in our future.

The final two topics I’d like to comment on are first our federal legislative outlook and second our recent convertible debt offering. First, the outlook in Washington for federal legislation affecting our business remains very fluid. In our first quarter call I discussed a number of bills that had been filed in both the House and Senate that would negatively impact the provision of consumer credit in this country and certainly affect our product offerings.

There’s been no significant movement on any of these bills since the first quarter call. The only new item on our radar is the administration’s much heralded proposal to create yet another regulatory watchdog that they’re calling the consumer financial protection agency. This proposed agency would be empowered to set rules and regulations for all forms of consumer credit. The bad news is that this is a far reaching and unprecedented attempt to strip rule making authority from the elected legislative brand and assign it to a group of commissioners appointed by the President which in my opinion is a really bad idea.

The good news is that the reach of this proposal adversely affects all financial institutions as well as a large contingent of existing regulatory agencies, which simply means we will have lots of company in working to either defeat this proposal or seriously alter its proposed charter to something far less onerous then currently proposed and hopefully to something that might actually be helpful to consumers needing viable sources of short term consumer credit.

Finally, I’d like to acknowledge the fine work of our finance team in completing the recent $115 million convertible debt offering in a very tough credit market. While we understand that convertible debt is expensive capital we do believe our shareholders will benefit from the additional liquidity and flexibility this offering has provided us. We intend to grow and expand our business both geographically and with new product offerings and these additional funds will help ensure that we have adequate capital to pursue those plans.

That finalizes my comments. Operator we’d like to know turn it over to questions please.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from David Burtzlaff - Stephens, Inc.

David Burtzlaff - Stephens, Inc.

I have a few questions on the convert. How much additional interest expense was there in the quarter from the convert offering?

Tom Bessant

Probably about $0.01 a share, round it down to $0.01 a share. As we look out toward Q3 and Q4 it’ll be about $0.02 a share in each quarter. Keep in mind that’s based on the straight debt rate that we apply to that instrument. As Dan mentioned, it’s the 5.25% cash interest but it will accrete book interest at 8.5% roughly.

David Burtzlaff - Stephens, Inc.

You said the loan balances were up late in the quarter. Was that mainly in June that you saw the big pick up?

Tom Bessant

As usual it’s a gradual increase. Just to recap for everybody, as we said in our first quarter call tax refunds were delayed for whatever reason in the first quarter which meant they dropped later in the quarter then they typically will and so as a result that normal return of demand was deferred a little bit into the second quarter. They begin their gradual rise later in the second quarter so we get a little less earnings off of that. It also defers any forfeiture activity that may have occurred in the second quarter from loans that would have been written in March.

As you point out, they did increase later in the quarter. They did increase obviously quite significantly to give us a 9% up year over year loan balance.

Dan Feehan

A fair amount of that did come in June.

David Burtzlaff - Stephens, Inc.

The loss rates online, I know last year in the third and the fourth quarter they kind of spiked a little bit due to some of the changes, or the removal of some of, as you cut back lending in some of the mature markets like Pennsylvania. Now that you’re not lending in Pennsylvania where do you think the loss rate is that going to affect the loss rate in the third and the fourth quarter this year?

Tom Bessant

You’re exactly right it’s a very astute observation because we did talk about two things that impacted loss rates later in the year last year online which was the absence of mature markets which changes your mix. We also indicated that we were tweaking our underwriting model because we were seeing some increases in loss levels. The improvement we’ve seen in the online business both in Q1 and Q2 is related to those underwriting practices and our analytics team that Dan mentioned a little bit earlier.

The expectations for the remainder of the year is that it will follow the typical trend which is loss rates gradually increased from Q2 sequentially to Q3 and into Q4. Hard to say as we sit here given the wildcard of the economy whether it will actually be up year over year in the fourth quarter or not. Obviously we’re comping quite strongly through Q2 we’ll just have to see where it goes.

Operator

Your next question comes from Bill Armstrong - CL King & Associates

Bill Armstrong - CL King & Associates

I was wondering if you could just update us in Ohio you’re operating under a different statute. Any regulatory movement there to perhaps further restrict your activity there?

Dan Feehan

There has been a bill filed in the House in Ohio to further restrict current lending models in Ohio. As you know when the bill passed last year and we were unsuccessful in our referendum efforts in November we converted to an existing statute that was different than the Payday statute. Other companies did as well, some converted to another statute that’s similar to the one we’re operating under.

There’s been a bill filed in the House in Ohio to basically reduce the rates on most statutes as well to take it back to down to something similar that was passed by the legislature in Ohio last year. It hadn’t got much movement, quite frankly in the House, doesn’t have many sponsors and I think the State of Ohio now like many of the states in the country are spending 120% of their time working on budget problems. It hasn’t really got any momentum at this point. It’s not unusual for us to see in just about every state somebody file bills that impact our business.

Bill Armstrong - CL King & Associates

In your comments in the press release sounded pretty positive as far as the outlook goes but you expressed some caution on the fourth quarter. I was wondering if you could just maybe flush that out a little bit more what you see and why that would have led to lower guidance for the year.

Dan Feehan

I think a couple of things. We are pretty cautious about the economy and what’s happening. It’s hard to know how the consumer is going to react for the balance of the year. I’m nervous about retail sales activity. We’ve got to really I think press hard to make sure we’re doing everything we can to drive traffic into our stores and give ourselves and opportunity to profitably liquidate merchandise. I am nervous about the consumer’s appetite again at every level of the socio-economic scale.

Also a little bit concerned about although we had good strong Cash Advance asset growth this quarter, as I said in my prepared comments its hard to understand exactly how much of that relates to a comp to last year’s second quarter where the stimulus checks would have brought loan demand down. While we had good year over year comps it’s really hard to understand quite frankly whether we’re seeing a resurgence in demand for the Cash Advance product.

That product is affected to some degree by employment levels because you’ve got to be employed, got to have a pay check in order to get a Cash Advance loan from us. Again, the states where we operate and have a strong presence in our Cash Advance business particularly in a state like Ohio whose unemployment rate is racing well ahead of the national average, places like Florida were well ahead of the national average, etc. that we’re just cautious about asset growth. We’d rather surprise on the upside than have to come back in Q3 and Q4 and tell you what we missed.

Bill Armstrong - CL King & Associates

On the gross margin side down about 300 basis points. I missed a little bit of Tom’s comments, can you break that out between gold and retail merchandise margins.

Tom Bessant

As I said on the comments, just to recap, similar to what we saw in the first quarter where we have a heavier weighting of scrap gold relative to retail sales but our scrap gold margins dropped to 27%. Even though we had a nominal increase in volume that volume wasn’t as strong as that higher loan balance would indicate in a typical environment. We didn’t have much of a volume increase to offset lower margins as a result the total of the $2.7 million decrease in gross profit dollars about $1 million of that was related to scrap, leaving the rest of it related to the retail business.

The retail business, again I’m talking about aggregate retail dollars here, posted a GP margin of 41.2% compared to 41.6% but had a drop in retail sales of about 5% year over year 2009 to 2008. As I mentioned, I think Dan also commented and elaborated on, sales were still up almost 4% compared to Q2’07 but we knew it was going to be a tough sales comp coming in. When you lose $2.7 million in gross profit dollars in a quarter it’s going to really take a little momentum out of your net revenue stream. Again we knew going in that was going to be a challenge. I talked about it in April; I’ve talked about it since. No real surprise there.

Operator

Your next question comes from John Rowan - Sidoti & Company

John Rowan - Sidoti & Company

On the internet lending how much goodwill do you guys have left from that acquisition? Given the decrease in operating earnings is there any risk of a goodwill impairment at the end of the year?

Tom Bessant

The aggregate goodwill in the Cash Advance business is about $279 million, that’s the aggregate Cash Advance business. Interestingly as you’ll see in our 10-Q filing which will be out hopefully tomorrow at some point, we do our impairment test on an annual basis each June, unless there’s a triggering event obviously. We did just conduct that test and there was no impairment. Obviously it’s based on our outlook of the future. If business continues to progress from here we obviously feel very good about it.

John Rowan - Sidoti & Company

How much did your hedging in the quarter affect your gross margin on scrap gold and what are the hedges for the third and the fourth quarter?

Tom Bessant

It helped a little bit but our hedges were in the mid 900’s lowish and we ended up with an aggregate sold value of about 930 an ounce. The hedges didn’t really hurt us at all. In fact they may have helped us just a little bit. We’re hedged in that 940 to 950 range for the rest of the year, again based on about half of our volume. If gold stays where it is our hedges are basically about even with the market. Obviously if gold ticks up then we’ll pick up that upside on the un-hedged portion.

John Rowan - Sidoti & Company

Your guidance for the year does include the $0.03 of dilution from the accounting shift of the convertible debt, correct?

Tom Bessant

Yes, it’s actually $0.04, $0.02 in each quarter and it does include that.

Operator

Your next question comes from Rick Shane – Jefferies & Company

Rick Shane – Jefferies & Company

You’d indicated that you did see towards the end of the quarter a behavioral shift in terms of an increase in pawn loan volumes and it sounds like it was kind of continuous throughout the quarter. Have you seen any other behavioral shifts in terms of forfeitures? It looks like the inventory aging remains pretty good but just curious if there’s anything you’re seeing there especially given what you’re describing in terms of retail sales.

Dan Feehan

No, in fact our forfeiture rates have remained very stable in comparison to prior years and right in line with our models for this quarter and really for the first six months of the year. Real happy with all the fundamental metrics, we’re not seeing anything move against us, as I mentioned, the only thing that’s trending down is scrap gold margins but that is something that we manage and something that we stay on top of daily. As I said, it’s a great lever for controlling inventory. We’ve not seen from a behavioral standpoint we’re not seeing our pawn customers forfeit at a greater level.

Rick Shane – Jefferies & Company

In order to see that on the jewelry side you would have to see presumably a pretty significant shift down in terms of gold rates?

Dan Feehan

If you’re talking about a significant drop in the spot value of gold?

Rick Shane – Jefferies & Company

Yes.

Dan Feehan

The real impact, if we saw a real drop in the spot value of gold would probably impact our loan balances first. We would be forced at that point in time really to cut back on our loan to value ratios as it relates to jewelry and scrap gold particularly. Movements in the spot value of gold typically don’t have a dramatic and linear impact on the customer’s behavior. Our customers are really not coming in and talking to us about loan and retail values on a per gram basis, they’re valuing their jewelry on a much more emotional level.

Rick Shane – Jefferies & Company

Its funny, I generally assume the consumer is fairly rational and if you were to see for example an increase in spot prices that forfeiture rates would go down because the consumer knows that they’ve given you even greater value.

Dan Feehan

That really hasn’t been our experience.

Operator

Your next question comes from John Hecht - JMP Securities

John Hecht - JMP Securities

Can you detail the same store sales figures for the pawn in the US and Mexico? What tax rate should we assume going forward?

Tom Bessant

Of course, as you know, we report same store net revenue numbers, obviously Mexico wasn’t in the mix last year so this is really a US number. It was up basically 1% net revenue for the US pawn business was up 1%. Our store front Cash Advance business we were down 17% which compares sequentially to down 23% in Q1. Last year in this quarter we were down about 14% in the Cash Advance business.

Actually sequentially in the store front business our downward comp is improving and again the fact that our active balances actually comped up 16% in the store front Cash Advance business, as I said, first time in four quarters.

John Hecht - JMP Securities

You don’t publish it so you may not be able to give us the figures but there are some stores obviously in your Mexico mix that are greater than one year old. Are the same store sales figures there performing as you expected, are they more favorable, are there any economic implications changing things in Mexico?

Tom Bessant

Honestly I don’t have that, as that acquisition is being integrated and we’ve got a pretty aggressive store opening campaign, most of our focus has been on the new stores and making sure they’re performing in line with our expectations which is the case. Their existing store base has generally been pretty stable and don’t have any same store numbers with them.

John Hecht - JMP Securities

The tax rate?

Tom Bessant

I would expect it to be comparable maybe 50 basis points or so below prior year periods as the blended rate is down with the effective rate in Mexico is a little bit lower.

John Hecht - JMP Securities

The guidance, if I’m trying to characterize this holistically your guidance for Q4 is it a combination of lower expectations for Payday lending volumes related to combination regulatory changes and just sort of economic and business softness along with conservatism for expectations in retail activity at the pawn, am I capturing that correctly and if so is there any, it sounds like you might be weighting it more toward weakness in Payday lending or is it more of a balanced mix?

Tom Bessant

I think you’ve got it summarized well. The Cash Advance business, as Dan said a minute ago, is in fact by unemployment rates and so that growth in customers continues to add incrementally in sequential quarters. We just didn’t see the kind of growth in customer counts that we had hoped to push us into Q3. If that continues into Q4 again while we may be comping up on earnings the growth rates won’t be quite as strong as we had hoped. I think anybody in this environment has to be sensitive to consumer appetites in the forth quarter for retail disposition activities.

Dan Feehan

We’ve mentioned a couple times $0.02 a quarter relative to the counting on the convert.

John Hecht - JMP Securities

You typically do reserve build in this quarter and you did again this year so it seems very consistent with your loss provisioning. In the reserve build is there anything we’re to read from that, are you seeing anything change with respect to charge off rates on a roll rate basis or is everything moving consistently at how you’d see things with the economy and given the change in the mix given regulatory changes.

Tom Bessant

It’s really very much in line. Methodology is very consistent and just to refresh, the provision as a percentage of loans written up to 5.5% and the reason is that that points us toward Q3. The charge off rate as a percentage of loans written at quarter at 4.4% which is really reflective of loans written in the first quarter which is the best performing quarter. In Q1 our provision was 5.1%, so 5.1% provisioning in Q1 covers 4.4% in Q2, likewise the 5.5% in Q2 is designed to cover losses in Q3.

Dan Feehan

Our default rates on the Cash Advance product have been really good reflecting the quality I think of our underwriting as has the collection activity on those that are defaulted. Both of those metrics have been pretty strong.

Operator

Your next question comes from Henry Coffey - Sterne Agee

Henry Coffey - Sterne Agee

You did mention that you’ve been spending more money, I’m assuming that that’s why the operating costs and the administrative costs number at the internet business was higher.

Dan Feehan

Yes, we’re spending quite a bit more money there quite frankly. We rolled out Australia, we got teams working on Canada, we have rolled out installment loan products in New Mexico and Illinois, and we’re working on installment loan products elsewhere. There are a lot of things going on from a development perspective. I would tell you there are a handful of other initiatives that we’re not at a point to really talk about, those guys are working on.

One of the attractions when we made that acquisition was not only to expand our Cash Advance business but it was to basically acquire very robust channel of distribution. Again, as I said when we made that acquisition over two years ago our challenge was to find additional products and services to distribute through that channel.

I think we’re positioned I think better than people we compete with to innovate new products and to get them distributed quickly. It’s going to be hard to compete with us given the investment that we have in the foundation in that platform. I’ve got them spending a lot of time and energy and we are spending money trying to get new stuff in place.

Henry Coffey - Sterne Agee

As it relates to the Payday loan product, you’ve really got three different things going on right now, the international activity, the US online, then of course the store base. Are there stores that are likely to be closed now that you put all the new products through there or are you satisfied with the production and the profitability of your current store base?

Dan Feehan

The jury is still out on that. Quite frankly I think given the challenge that we had in Ohio where we have a large segment of our store front Cash Advance base. I’m pretty happy where we are here in July of 2009 but I think we still got some ground to cover; we got some additional business to bring to the table there in terms of justifying our return on assets deployed. I’m not ready to throw in the towel, as I said in my prepared comments I’m hopeful we’ll be able to keep those units open.

As I look around the rest of the system there may be a handful of locations that we might consider closing later this year. We do not have any on the chopping block immediately but we’re taking a hard look at every one of our Cash Advance locations and making ourselves justify keeping it open.

Henry Coffey - Sterne Agee

On the international front and trying to sort of sort through the numbers I know you don’t break it out but you were losing money in the UK, now you’re making a profit. You are going into Canada; can you give us some sense of what those numbers look like?

Tom Bessant

Just like we don’t break out individual states per se we don’t currently break out our international activities. To the extent that grows and prospers and becomes material then we’ll begin to break that out. I’m afraid we’re going to have to leave you where you are.

Operator

Your next question comes from Jason Arnold – RBC Capital Markets

Jason Arnold – RBC Capital Markets

I had a big picture question on the loan volume increase, I was curious if you’re seeing any evidence of increased loan demand coming from consumers that would maybe be turned away from banks, moving toward non-bank lenders like yourself.

Dan Feehan

All I can do is give you an opinion. It’s impossible to really know. We don’t really go through that sort of process of interviewing customers on the front end. We’ve seen a resurgence; quite frankly, I was concerned I think I mentioned in the first quarter call, particularly about our new customer growth in our online channel. We began late in May and in June to really see some resurgence of new customer growth in the online channel.

I think those customers that might be turned away from some of the traditional lenders folks whose credit cards have been stripped away from them, etc. would probably first turn to the online channel to find other options and alternatives. There’s got to be some of that going on, I can’t quantify it for you but I’ve got to believe that we’re seeing some of that activity particularly online.

Operator

Your next question comes from Gregg Hillman - First Wilshire Securities

Gregg Hillman - First Wilshire Securities

Could you talk about how in the marketing activity surrounding gold buying in both on an online level and a retail store level and whether that can be material in that segment in 2010?

Dan Feehan

From a retail perspective where we’ve introduced gold buying activity, we obviously have always done gold buying activity in our pawn segment units; we’ve just recently introduced over the last six months that activity into quite a few of our Cash Advance locations. Most of the advertising that we are doing there has been in store, reader boards and billboards, we’ve not done any electronic advertising at this point.

From an online perspective we’ve been dabbling with an online buy gold business model. You’re probably familiar with other companies, private companies out there like Cash for Gold and others who are on TV all the time hawking their gold activities. We began trying to see if we can create an online market where we can attract people who are wanting to sell gold or to raise a little money that they are capital constrained by liquidating some of their old jewelry and things.

We’re brand new into that. Its way too early for me to predict that it’ll have any meaningful impact on our business. I do think the store front activity I would expect in 2010 to gain greater momentum with that, assuming the spot value of gold remains where it is today. We had a meaningful profit from those store front activities in the quarter, we made about $800,000 of incremental operating income just out of those few store front units that we had in place.

We’re not making anything yet from a profit perspective with out online test but its way too early to really give you a good perspective on whether we think that’s a significant business opportunity for us. We’re spending the time and energy and its part of the operating costs increases as well. We dedicated a fair amount of money to see if we can make that business work for us.

Gregg Hillman - First Wilshire Securities

Have you tested TV advertising for gold buying?

Dan Feehan

We started a test in the second quarter. We picked four markets, two markets where we currently operate, two markets where we do not operate so we could have a base case against what sort of volume could we get in either venue. We just started that test in the second quarter. There’s no question that TV advertising is effective from the standpoint of generating traffic and generating an opportunity to take in additional gold.

The question becomes whether it’s efficient and whether you can get in enough volume at a high enough margin to justify the relatively expensive cost of TV advertising.

Gregg Hillman - First Wilshire Securities

Have you done a cross media thing like using the internet to drive people to the stores for gold buying?

Dan Feehan

Yes, we’ve done that as well and in addition, part of our activity in the online gold buying program is to send people to stores as well. When we get inquiries we’re getting inquires of people that want to send it in directly through the mail and others who would like a store location. We’re monitoring that as well. We’ve got a fair number based upon the report I saw the other day we’ve got a fair number of referrals into our stores. Of course we’re providing coupons with that so we can track whether people actually show up and whether they actually transact business with us.

Gregg Hillman - First Wilshire Securities

Do you think any of your emerging businesses could be material next year or do you think that would be too aggressive?

Dan Feehan

We’re not at this point obviously we don’t have 2010 guidance out on the street. I think of all the businesses, all the things we’ve got going on, all of them have real opportunity to be significant. The UK business, for instance, is scaling nicely and providing meaningful profitability. As I said in my comments I think it’ll take Australia probably 12 months to get to the same point. Hopefully in the later half of 2010 Australia will be adding profitability.

I think our card services businesses that I’ve talked about for the last few calls is something that if we’re able to scale that business I think could be a meaningful contributor to the enterprise operating income and profitability. Our installment lending activity with Cash Net is another I think big opportunity for us down the road. We’re not at the point where I’ve got a great deal of confidence that we’re just on a precipice of breaking through, or I could tell you that they would add very significant incremental profitability in 2010 but I would tell you that we’re working real hard in that direction.

Gregg Hillman - First Wilshire Securities

Could you refresh me about what the card service business, I didn’t quite understand what is it?

Dan Feehan

We provide IT support; processing support, marketing and servicing for a bank issued line of credit laid over a pre-paid or stored value card. People out here in the country that are un-banked or under-banked a large portion of those people have stored value or pre-paid debit cards where they will load their payroll or other sources of cash directly onto the card which they use that card as a debt card just as you might do at retail outlets or getting cash out of the ATM etc.

There’s a bank that we deal with, a national bank that has provided a line of credit to customers, a certain number of customers who have these cards. If they’re between payday and they’re short of cash they can call or go online and get an advance onto that card in $20 increments. You have to have direct payroll deposit to qualify for this program. If you get an advance it’s repaid on your next payroll deposit. It is a lower rated advance than the Payday product and one that again gives us an opportunity to scale national.

When I mentioned that the bank had written $26 million of advances and we participate in those receivables in the second quarter, those were advances that were actually provided to customers in all 50 states around the country.

Gregg Hillman - First Wilshire Securities

Have you said what your participation is and do you decide on the underwrite, you’re in control of the underwriting for any advances?

Dan Feehan

It’s the bank’s program, they’re in control of the underwriting, they’re in control of compliance activities, and they’re primarily in control of direct customer interface. We’re providing IT support and processing support and then we’re participating in those receivables, we’re buying a percentage of those receivables from the bank.

Gregg Hillman - First Wilshire Securities

Do you know what percentage it is?

Dan Feehan

Currently we’re buying 90%.

Gregg Hillman - First Wilshire Securities

You don’t even advise them on underwriting?

Dan Feehan

We do advise them on underwriting but it’s their models, we advise them based upon our experience and background, based upon things that we’re seeing in other aspects of our business but it is ultimately their credit models that determine who they advance products to. So far again we’re into this now probably in a significant way for the last three quarters and the loss rates associated with this product are directly in line with the models that we started with. We’re pretty happy with the performance of the portfolio so far. All we really need is greater scale.

Gregg Hillman - First Wilshire Securities

So it’s basically a partnership between you and this bank which you have not disclosed.

Dan Feehan

It’s in all of our public filings.

Gregg Hillman - First Wilshire Securities

What’s the name of the bank?

Dan Feehan

The name of the bank is not in the public filings.

Gregg Hillman - First Wilshire Securities

It hasn’t been disclosed what the name of the bank is?

Dan Feehan

No.

Operator

Your next question comes from Jordan Hymowitz - Philadelphia Financial

Jordan Hymowitz - Philadelphia Financial

The Australia loss in the quarter was how much in dollars?

Tom Bessant

We don’t break out the individual segment but what I’ll tell you is the UK business made more than enough to offset the Australia loss by a multiple.

Jordan Hymowitz - Philadelphia Financial

There’s very little Canada loss too?

Dan Feehan

The only thing that we would have associated with Canada at this point would be our development costs and our payroll costs of the folks that are working on that. There’s some development activity from our IT group that would be capitalized, that’s a very small number. We’ve got a team of folks that are in our admin number, our admin personnel costs working on all the things that it takes to get us ready to operate in Canada. We’re not writing advances in Canada yet. As I said in my comments we expect to begin doing so hopefully in the fourth quarter.

Jordan Hymowitz - Philadelphia Financial

When you intend to enter Canada late this year correct?

Dan Feehan

Correct.

Jordan Hymowitz - Philadelphia Financial

Canada is about 20% as large as the US states that have Payday lending business, in other words there are certain states that don’t allow Payday lending but of those that do it seems that Canada is about 20% as big, with obviously higher rates. Would it be fair to think that if everything was equal that your volume in Payday could expand by 20% if you had a similar penetration?

Dan Feehan

Those numbers for you, you’re dealing with the entire population of Canada.

Jordan Hymowitz - Philadelphia Financial

Right, I’m assuming Canada it seems to be legalized Payday lending and only 60% of the US is about legalized Payday lending.

Dan Feehan

At this point, based upon our intelligence we’re not sure that all the provinces in Canada are going to line up. In think Quebec particularly is maybe doubtful. Outside of Quebec we’re optimistic to be able to get into the other provinces. If you adjust your analysis by that that’s probably a reasonable assumption.

Jordan Hymowitz - Philadelphia Financial

Would there be any interest in doing a brick and mortar or strictly the internet in Canada?

Dan Feehan

I don’t have a lot of energy for that today. I think we’ve got a real advantage with our online platform. It’s going to cost us by comparison a negligible amount of money to get ourselves positioned to enter Canada. At this point, all of our activity and interest is oriented around the online segment.

Jordan Hymowitz - Philadelphia Financial

If we set an aggregate a year from now, what do you think your international, when I say international let’s just say Canada, UK, and Australia businesses could do if everything went well? Would $0.10 to $0.20 be unreasonable?

Tom Bessant

At this point the uncertainties are going to prevent us from speculating on that. Let’s see how the ramp up goes in Australia and maybe as we look at our 2010 numbers we can give you some more color on that.

Dan Feehan

At the point where we get to the point where our foreign business online is significant enough for us to feel compelled to disclose in our SEC filings etc. we’d be prepared at that point to talk more specifically about those businesses and the opportunities. Clearly I think from a strategic perspective we wouldn’t be spending this amount of time, energy, and money quite frankly pursuing those if we didn’t think they were very significant opportunities.

Jordan Hymowitz - Philadelphia Financial

If the $3.00 to $3.15 number this year if there is nothing from US Payday but international was still there what would the earnings be? In other words, how much of the $3.00 to $3.15 number is from US Payday this year in the numbers?

Tom Bessant

If international grows as we hoped and again incrementally we offset the startup losses of the new markets obviously it’s going to be greater. I’m not sure I can give you any more color than that.

Jordan Hymowitz - Philadelphia Financial

Henry Coffey has written that you guys could do $2.60 to $2.80 excluding domestic Payday for next year, is that an unreasonable number in your mind?

Tom Bessant

I haven’t seen Henry’s analysis so I’m going to have to beg off on that. It’s probably in the ballpark.

Operator

Your next question comes from Ted Hillenmeyer – Northstar Partners

Ted Hillenmeyer – Northstar Partners

Can you discuss the consumer financial protection agency more fully? As I’ve read it appears they wouldn’t have the authority to set rates but can you just talk about in what way that potentially could be negative for you.

Dan Feehan

I think you’re right in terms of the current draft on that piece of legislation. The struggle I think that people in our business and other financial institutions have with introducing a new regulatory agency which would really strip current powers from other agencies such as the FTC and the Federal Reserve, the FDIC, etc.

Even though we may not be dealing specifically at this point with authority to set rates it appears to us that they’d have the authority to set other aspects of providing consumer credit and certain disclosure guidelines that ultimately I think make the transaction with the consumer only more difficult and not less difficult.

The other thing that we all struggle with, quite frankly, and I’ve talked to quite a few other people other than folks in our specialty finance group, is a concern that we’ve got the candle’s nose under the tin here and once you get something of this established and even though I think to some extent President Obama and his team are trying to position this to look benign to people in general. Our fear is that it’ll only grow in influence and its powers will be expanded and its reach will be expanded.

Having dealt with regulatory agencies for the last 25 years and you look at statutes that establish those agencies and what their statutory powers are, quite frankly they frequently overstep those. The recourse to lenders such as ourselves or others is not very palatable. For a company like us or a bank or anybody else who is regulated by a particular agency to litigate against someone because they overstepped their boundaries is usually a pretty perilous task.

The concern is that even though that may not be in there today that our concern would be that this is just the first step towards a rule making and potentially rate setting environment. Although you’re correct, it’s not currently in that draft.

Ted Hillenmeyer – Northstar Partners

In its current form would you expect disclosure requirements to be more burdensome then what you face now?

Dan Feehan

Potentially yes. I’ll give you my personal opinion that disclosure requirements that we’re forced to live with that are set by regulatory agencies around the country are extraordinarily more confusing to customers then they are helpful. The terminology that we’re forced to use, the disclosures, the length of things that we have to put in our forms today don’t really accomplish the purpose or the intent of what the legislators had hoped to accomplish.

I’m concerned again any time that you complicate the process of having a discussion with a customer, it potentially impacts your business and your volume.

Ted Hillenmeyer – Northstar Partners

Can you comment on Gutierrez bill? I think that was supposed to be marked up but I never heard anything.

Dan Feehan

The markup I believe has been deferred until after the August recess. We’d still expect that to happen. There really hasn’t been much movement with respect to that bill. Prior to our last call Chairman Gutierrez had a hearing on his bill which quite frankly I thought was a positive from the perspective that it had very bi-partisan support of the fact that a product like Payday needs to be available for the consumer. The question is in what form it needs to be available. Clearly Chairman Gutierrez and his committee do not, to me, appear to have any interest on trying to do away with products.

We, being the industry and all our representatives are actively involved in the process of trying to influence that markup when it comes out. We’ll see what happens. There’ve been a couple other bills, a Baca bill and a Shuler Bill that have been filed, quite frankly are more favorable than the Gutierrez bill. Perhaps those bills which are both representative Baca and representative Shuler are both Democrats, perhaps those bills can have some positive influence on the markup of the Gutierrez bill when they get back after recess.

Ted Hillenmeyer – Northstar Partners

There’s generally nothing in the Senate they would just be waiting to see if this side passed?

Dan Feehan

The Durbin bill hasn’t gone anywhere in the Senate so my view is it’s had a hard time getting any momentum and probably not likely to get a lot of momentum between now and the end of the year. Most of the activity that we’re active on today and where we’re dedicating most of our time is in the House.

Operator

Your next question comes from Henry Coffey - Sterne Agee

Henry Coffey - Sterne Agee

Now that we’ve gotten into the regulatory discussion, the California House recently passed a Payday loan bill it took the number I think from $300 to $500 and talked about in essence legitimatizing the internet business. Its going through the Senate, I don’t know if you know how it’s going through the Senate, is that going to be a significant change for you given where that market was before?

Dan Feehan

The assembly in California did pass a bill. That bill did not contain the increase that you mentioned. The assembly bill included a number of consumer protection items that we, the industry supported and a few other things. When that bill got out of the assembly and over to the senate there was an amendment attached to it to take the loan amount from $300 which in California it includes fees up to $500 and the Senate has elected to defer consideration of that until sometime in 2010. That’s where it sits today.

Henry Coffey - Sterne Agee

So it’s in a holding pattern?

Dan Feehan

It’s in a holding pattern but I do think it’s positive that we had a Payday bill come out of the assembly in California that was certainly not an attack on the industry.

Operator

Your next question comes from Liz Pierce - Roth Capital Partners

Liz Pierce - Roth Capital Partners

One quick question on inventory for fourth quarter, do you feel like with inventory looking as clean as it is do you have enough on the electronics side?

Tom Bessant

Obviously with loan demand up nicely in Q2 we’re back to following a traditional cycle. As traditionally occurs, loan balances continue to rise into the third quarter which produces inventory for our fourth quarter selling season and also the first quarter tax refund season. As I look at some of the intricacies of our pawn loan portfolio as Dan mentioned it continues to perform very well, we’re not seeing a rise in forfeiture levels. We are seeing consistent forfeiture levels. I do feel like we’ll have adequate fresh inventory.

Likewise the price points on electronics, newer generation electronics like flat screen TVs are now touching our customers and so we’re starting to see those goods, which again attracts stronger retail demand as retail customers look for the best value purchase opportunity which pre-owned obviously is the best value purchase opportunities. I think we’ll be well positioned from an asset perspective and again we’ll just have to wait and see how the economic environment cycles.

Dan Feehan

We manage categories pretty carefully so electronics has been one of those categories that throughout this last 12 months we’ve done extraordinarily well in. Our guys have been loaning more aggressively on electronics where we’ve pulled back significantly on tools given the slowdown in residential construction in Florida, Nevada, and elsewhere we’ve really focused more. I think we’re in great shape from a category perspective with our inventory today.

We’re going to have to cut it off at this point. Thanks everybody for joining this morning.

Operator

That does conclude the conference call for today. We thank you all for your participation and ask that you please disconnect your lines. Thank you and have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Cash America International, Inc. Q2 2009 Earnings Call Transcript
This Transcript
All Transcripts