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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 333-172244

 

 

TMX Finance LLC

(Exact Name of Registrant as Specified in its Charter)

  

 

 

Delaware   20-1106313
(State of Incorporation)  

(I.R.S. Employer

Identification No.)

15 Bull Street

Savannah, Georgia

  31401
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s Telephone Number, Including Area Code: (912) 525-2675

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer   ¨    Accelerated Filer   ¨
Non-Accelerated Filer   x  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ¨    No  ¨    Not applicable  x

The Company has 100 outstanding limited liability company membership units, all of which are held by Tracy Young.

 

 

 


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012

TABLE OF CONTENTS

 

         Page  
PART I   FINANCIAL INFORMATION   
Item 1.   Financial Statements      3   
 

Consolidated Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011

     3   
 

Consolidated Statements of Income for the Three Months Ended March  31, 2012 (unaudited) and March 31, 2011 (unaudited)

     4   
 

Consolidated Statements of Cash Flows for the Three Months Ended March  31, 2012 (unaudited) and March 31, 2011 (unaudited)

     5   
 

Notes to Consolidated Financial Statements (unaudited)

     6   
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations      20   
Item 3.   Quantitative and Qualitative Disclosures About Market Risk      27   
Item 4.   Controls and Procedures      27   
PART II   OTHER INFORMATION   
Item 1.   Legal Proceedings      27   
Item 1A.   Risk Factors      27   
Item 6.   Exhibits      28   
  Signatures      29   

 

2


Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

TMX FINANCE LLC

AND AFFILIATES

Consolidated Balance Sheets

March 31, 2012 (unaudited) and December 31, 2011

(in thousands)

 

 

     March 31,
2012
    December 31,
2011
 
     (unaudited)        

Assets

    

Cash and cash equivalents

   $ 119,341      $ 38,141   

Title loans receivable

     425,009        490,093   

Allowance for loan losses

     (64,125     (73,103

Unamortized loan origination costs

     3,040        2,829   
  

 

 

   

 

 

 

Title loans receivable, net

     363,924        419,819   
  

 

 

   

 

 

 

Interest receivable

     26,101        31,517   

Property and equipment, net

     80,620        72,571   

Debt issuance costs (net of accumulated amortization of $6,434 and $5,445 as of March 31, 2012 and December 31, 2011, respectively)

     13,053        14,042   

Goodwill

     5,975        5,975   

Intangible assets, net

     80        140   

Note receivable from sole member

     1,436        1,549   

Other assets

     19,917        20,994   
  

 

 

   

 

 

 

Total Assets

   $ 630,447      $ 604,748   
  

 

 

   

 

 

 

Liabilities and Equity

    

Senior secured notes (with net premium of $1,970 and $2,120 as of March 31, 2012 and December 31, 2011, respectively)

   $ 311,970      $ 312,120   

Notes payable

     12,310        11,370   

Notes payable to related parties

     20,295        20,512   

Obligations under capital leases

     2,033        2,052   

Accounts payable and accrued expenses

     42,414        62,356   
  

 

 

   

 

 

 

Total Liabilities

     389,022        408,410   
  

 

 

   

 

 

 

Commitments and contingencies (Note 9)

    

Member’s equity and noncontrolling interests:

    

Total member’s equity (with retained earnings of $231,943 and $186,704 at March 31, 2012 and December 31, 2011, respectively)

     247,724        202,484   

Noncontrolling interests

     (6,299     (6,146
  

 

 

   

 

 

 

Total member’s equity and noncontrolling interests

     241,425        196,338   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 630,447      $ 604,748   
  

 

 

   

 

 

 

See notes to consolidated financial statements (unaudited).

 

3


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Consolidated Statements of Income (unaudited)

For the Three Months Ended March 31, 2012 and 2011

(in thousands)

 

     Three Months Ended March 31,  
     2012     2011  

Interest and fee income

   $ 151,361      $ 111,139   

Provision for loan losses

     (11,462     (5,917
  

 

 

   

 

 

 

Net interest and fee income

     139,899        105,222   
  

 

 

   

 

 

 

Costs, expenses and other:

    

Salaries and related expenses

     45,057        35,372   

Occupancy costs

     14,433        11,373   

Depreciation and amortization

     3,970        2,917   

Advertising

     1,351        2,642   

Other operating and administrative expenses

     17,423        13,522   

Interest, including amortization of debt issuance costs

     11,675        9,502   
  

 

 

   

 

 

 

Total expenses

     93,909        75,328   
  

 

 

   

 

 

 

Net income

     45,990        29,894   

Net loss attributable to noncontrolling interests

     (153     (986
  

 

 

   

 

 

 

Net income attributable to member’s equity

   $ 46,143      $ 30,880   
  

 

 

   

 

 

 

See notes to consolidated financial statements (unaudited).

 

4


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Consolidated Statements of Cash Flows (unaudited)

For the Three Months Ended March 31, 2012 and 2011

(in thousands)

 

     Three Months Ended March 31,  
     2012     2011  

Cash Flows from Operating Activities

    

Net income

   $ 45,990      $ 29,894   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Provision for loan losses

     11,462        5,917   

Depreciation and amortization

     3,970        2,917   

Amortization of discount, premium, debt issuance and upfront lease costs

     916        1,123   

Amortization of acquired intangibles

     60        —     

Net loss on disposal of property and equipment

     31        6   

Changes in assets and liabilities:

    

Interest receivable

     5,416        2,853   

Other assets

     1,375        (508

Net change in loan origination costs

     (211     (120

Accounts payable and accrued expenses

     (19,942     (15,784
  

 

 

   

 

 

 

Net cash provided by operating activities

     49,067        26,298   
  

 

 

   

 

 

 

Cash Flows from Investing Activities

    

Net title loans collected

     44,644        30,180   

Payments for acquisitions, net of cash acquired

     —          (4,100

Purchase of property and equipment

     (12,050     (8,939

Increase in restricted cash

     (375     (825

Receipt of payments on note receivable from sole member

     113        100   

Cash from consolidation of variable interest entities

     —          41   
  

 

 

   

 

 

 

Net cash provided by investing activities

     32,332        16,457   
  

 

 

   

 

 

 

Cash Flows from Financing Activities

    

Repayments of notes payable to related parties

     (217     (212

Repayments of notes payable and capital leases

     (29     (23

Distributions to sole member

     (903     (2,000

Proceeds from contributions to consolidated variable interest entities

     —          75   

Proceeds from notes payable issued by consolidated variable interest entities

     950        200   
  

 

 

   

 

 

 

Net cash used in financing activities

     (199     (1,960
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     81,200        40,795   

Cash and cash equivalents at beginning of period

     38,141        53,585   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 119,341      $ 94,380   
  

 

 

   

 

 

 

See notes to consolidated financial statements (unaudited).

 

5


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(1) Nature of Business, Seasonality, Principles of Consolidation, Basis of Presentation, Use of Estimates and Significant Accounting Policies

Nature of Business

TMX Finance LLC and affiliates (collectively, the “Company”) is a specialty finance company that originates and services automobile title loans through 801 title-lending stores in 12 states as of March 31, 2012. Affiliates include wholly-owned subsidiaries and consolidated variable interest entities (“VIEs”) as described below. The Company operates as TitleMax in 665 stores, and in 130 stores, the Company operates under a TitleBucks brand. The Company offers a second lien automobile product in Georgia under the EquityAuto Loan brand, with operations conducted within 121 TitleMax stores and through 6 standalone stores. Segment information is not presented since all of the Company’s revenue is attributed to a single reportable segment: specialty financial services.

The Company is subject to laws, regulations and supervision in each of the states in which it operates. Most states have laws that specifically regulate the Company’s products and services to establish allowable fees, interest and other economic terms. The terms of products and services offered by the Company vary between states to comply with each state’s specific laws and regulations. In addition to state laws and regulations, the Company’s business is subject to various local rules and regulations such as zoning regulation and permit licensing.

The interest rates and fees for the Company’s products and services are not currently regulated directly at the federal level, but laws and regulations governing the business are subject to change. On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted into law. This act established the Consumer Financial Protection Bureau (“CFPB”) as a federal authority responsible for administering and enforcing the laws and regulations for consumer financial products and services. The CFPB has supervision, examination and enforcement authority over the consumer financial products and services of certain non-depository institutions, which could include the Company. The legislation does not specifically target title lending, traditional pawn or installment lending for CFPB regulation. Furthermore, the CFPB is specifically prohibited from instituting federal usury interest rate caps.

Seasonality

The Company experiences fluctuating demand for its title-lending products throughout the year. Historically, the highest demand exists in the fourth quarter of each fiscal year. Also, the Company has historically experienced reductions in title loans receivable during the first quarter of each fiscal year, primarily associated with customers’ receipt of tax refund checks. Accordingly, the Company typically experiences a higher use of cash in the fourth quarter while generating more cash in the first quarter (exclusive of any other capital usage). Due to the seasonal nature of the business, results of operations for any fiscal quarter are not necessarily indicative of the results of operations that may be achieved for the full fiscal year.

Principles of Consolidation

The Company conducts business in Texas through a wholly-owned subsidiary (TitleMax of Texas, Inc.) registered as a Credit Services Organization (“CSO”) and licensed as a Credit Access Business (“CAB”) under Texas law. TitleMax of Texas, Inc. entered into credit services organization agreements (“CSO Agreements”) with three third-party lenders (the “CSO Lenders”). The CSO Agreements govern the terms by which the Company performs underwriting services and refers customers in Texas to the CSO Lenders for a possible extension of a loan. The Company processes loan applications and commits to reimburse the CSO Lenders for any loans or related fees that are not collected from those customers. Two of the CSO Lenders operate on an exclusive basis, and the Company has determined that they are VIEs of which the Company is the primary beneficiary. Therefore, the Company has consolidated these VIEs.

 

6


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(1) Nature of Business, Seasonality, Principles of Consolidation, Basis of Presentation, Use of Estimates and Significant Accounting Policies (continued)

 

The Company is associated with several other entities that it must evaluate as potential variable interest entities. TY Investments (“TYI”) is owned by the sole member of TMX Finance LLC. TYI owns certain real estate that is leased to the Company. Parker-Young (“PY”) is owned 50% by the sole member of TMX Finance LLC. PY owns certain real estate that is leased to the Company. The Company evaluated these entities and determined that the Company does not have a variable interest and that neither has characteristics of a variable interest entity pursuant to the applicable accounting guidance. Both entities have sufficient equity at risk without the need for any additional subordinated financial support. The Company has therefore determined that TYI and PY are not variable interest entities. TitleMax Aviation, Inc., a Delaware corporation (“Aviation”), and TitleMax Construction, LLC (“Construction”) are other entities evaluated as variable interest entities. Aviation is owned by the sole member of TMX Finance LLC and has three aircraft and related debt. The aircraft are used by the Company to conduct its business. The Company and certain subsidiaries guarantee certain debt of Aviation. Construction is owned by the sole member and directly handles the store improvement work for TMX Finance LLC and its subsidiaries. Aviation and Construction are VIEs of which the Company is the primary beneficiary; therefore, these entities have been consolidated.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the accounting policies stated in the Company’s audited consolidated financial statements for the year ended December 31, 2011 and should be read in conjunction with the notes to those consolidated financial statements. These statements have also been prepared in accordance with the instructions to Form 10-Q and generally accepted accounting principles for interim financial information. The consolidated balance sheet data as of December 31, 2011 were derived from the Company’s audited consolidated financial statements. Accordingly, the accompanying unaudited consolidated financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented have been included. Results for any interim period are not necessarily indicative of the results for the entire year. Certain prior period amounts have been reclassified to conform to current period presentation, with no effect on net income or member’s equity.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses and the valuation of repossessed assets.

Significant Accounting Policies

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within our industry. The following is a description of significant accounting policies used in preparing the consolidated financial statements.

Loan Losses

Provisions for loan losses are charged to income in amounts sufficient to maintain an adequate allowance for loan losses and an adequate accrual for losses related to guaranteed loans processed for our unconsolidated CSO Lender. Factors used in assessing the overall adequacy of the allowance for loan losses, the accrual for losses related to guaranteed loans processed for our unconsolidated CSO Lender and the resulting provision for loan losses include loan loss experience, contractual delinquency of title loans receivable, the value of underlying collateral, economic and other qualitative considerations and management’s judgment. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. The Company’s average loan size is approximately $1,250. The Company charges-off an account when the customer is 61 days contractually past due. Charge-offs on title loans receivable are equal to the loan balance less an estimated amount of recovery.

 

7


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(1) Nature of Business, Seasonality, Principles of Consolidation, Basis of Presentation, Use of Estimates and Significant Accounting Policies (continued)

 

Goodwill and Intangible Assets

Goodwill and indefinite-life intangible assets acquired in a business combination are recorded using the acquisition method of accounting and are tested for impairment annually, or sooner when circumstances indicate an impairment may exist. In testing for impairment, the Company first assesses qualitative factors as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The first step of the impairment test, if necessary, is to compare the estimated fair value of the reporting unit to its carrying value. If the fair value is less than the carrying value, then a second step is performed to determine the fair value of goodwill and the amount of impairment loss, if any. In addition, intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment whenever events or circumstances indicate the carrying value may not be fully recoverable.

Income Taxes and Distributions

The Company, with the consent of the sole member, elected in prior years to be taxed under sections of the federal and state income tax laws, which provide that, in lieu of corporate income taxes, the sole member separately accounts for the Company’s items of income, deduction, losses and credits. The consolidated financial statements generally do not include a provision for income taxes as long as these elections remain in effect. Certain subsidiaries operate in states that impose an entity-level tax that is a percentage of income.

While the Company’s tax status and income tax elections remain in effect, the Company may occasionally make distributions to the sole member in amounts sufficient to pay some or all of the taxes due on the Company’s items of income, deductions, losses, and credits which have been allocated for reporting on the sole member’s income tax return. In April 2012, the Company made distributions of $20.4 million to its sole member to pay 2011 federal and state income taxes. The Company may make future distributions to the sole member in addition to those required for income taxes as permitted under the terms of the bond indenture. At March 31, 2012, the remaining availability of permitted distributions to our sole member for purposes other than estimated personal income tax payments was approximately $12.2 million (calculated net of an estimate for personal income taxes).

Recent Accounting Standards

In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-04 to provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between accounting principles generally accepted in the United States of America and International Financial Reporting Standards. This guidance changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. The Company adopted the provisions of this guidance in the first quarter of 2012 with no impact on the Company’s financial position, results of operations or cash flows.

 

8


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(2) Credit Quality Information, Allowance for Losses on Title Loans Receivable and Liability Related to Unconsolidated CSO Lender Loans

The Company loans cash to customers in exchange for a fee and an agreement to repay the amount loaned. The Company’s loan portfolio includes balances outstanding from all title loans, including short-term single payment loans and multi-payment installment loans. The Company utilizes a variety of underwriting criteria to specifically monitor the performance of its portfolio of title loans and maintains an allowance at a level estimated to be adequate to absorb loan losses inherent in the portfolio. The allowance for losses on title loans receivable is presented in the consolidated balance sheets. In addition, the Company maintains a liability for estimated losses related to loans processed for the Company’s unconsolidated CSO Lender that are guaranteed under CSO Agreements. The liability for estimated losses related to these guaranteed loans is included in accounts payable and accrued expenses in the consolidated balance sheets.

The Company does not stratify the title loan portfolio when evaluating performance of the loans. Rather, the total portfolio is assessed for losses based on contractual delinquency, the value of underlying collateral, economic and other qualitative considerations and management’s judgment. The Company uses historical collection performance adjusted for recent portfolio performance trends to develop the expected loss rates used to establish the allowance and liability for loan losses. Increases in the allowance and liability for loan losses are recorded as provision for loan losses in the consolidated statements of income. The Company charges-off an account when the customer is 61 days contractually past due. Charge-offs on title loans receivable are equal to the loan balance (including interest and fee) less an estimated amount of recovery. Recoveries on losses previously charged to the allowance are credited to the allowance when collected.

Delinquency experience of title loans receivable at March 31, 2012 and December 31, 2011 was as follows:

 

(in thousands)

   March 31,
2012
     December 31,
2011
 

1-30 days past due

   $ 46,026       $ 57,494   

31-60 days past due

     6,733         11,291   
  

 

 

    

 

 

 

Total past due

     52,759         68,785   

Current

     372,250         421,308   
  

 

 

    

 

 

 

Total

   $ 425,009       $ 490,093   
  

 

 

    

 

 

 

Title loans receivable on the consolidated balance sheets is net of unearned interest and fees of $2.4 million and $2.9 million as of March 31, 2012 and December 31, 2011, respectively.

Accrual of interest and fee income on title loans receivable is discontinued when no payment has been received for 35 days or more. The accrual of income is not resumed until the account is less than 5 days past due on a contractual basis, at which time management considers collectability to be probable. Title loans receivable in non-accrual status at March 31, 2012 and December 31, 2011 were as follows:

 

(in thousands)

   March 31,
2012
     December 31,
2011
 

Non-accrual loans

   $ 39,898       $ 54,198   

 

9


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(2) Credit Quality Information, Allowance for Losses on Title Loans Receivable and Liability Related to Unconsolidated CSO Lender Loans (continued)

 

Changes in the allowance for loan losses were as follows:

 

     Three Months Ended March 31,  

(in thousands)

   2012     2011  

Beginning balance

   $ 73,103      $ 52,048   

Provision for loan losses

     11,229        5,917   

Charge-offs

     (31,375     (19,664

Recoveries

     11,168        7,131   
  

 

 

   

 

 

 

Ending balance

   $ 64,125      $ 45,432   
  

 

 

   

 

 

 

Changes in the liability for losses on loans processed for the Company’s unconsolidated CSO Lender for the three months ended March 31, 2012 were as follows:

 

(in thousands)

   March 31,
2012
 

Beginning balance

   $ 1,006   

Provision for loan losses

     233   
  

 

 

 

Ending balance

   $ 1,239   
  

 

 

 

The aggregate provision for loan losses (in thousands) for the three months ended March 31, 2012 and 2011 was $11,462 and $5,917, respectively.

 

(3) Property and Equipment

Property and equipment at March 31, 2012 and December 31, 2011 consisted of the following:

 

(in thousands)

   March 31,
2012
    December 31,
2011
 

Leasehold improvements

   $ 42,990      $ 39,165   

Computers and software

     24,196        23,569   

Aircraft

     23,288        23,288   

Furniture and fixtures

     17,223        15,370   

Signs

     16,602        15,792   

Assets not placed in service

     11,846        7,022   

Assets under capital leases

     2,240        2,240   

Vehicles

     339        339   
  

 

 

   

 

 

 

Subtotal

     138,724        126,785   

Accumulated depreciation and amortization

     (58,104     (54,214
  

 

 

   

 

 

 

Net property and equipment

   $ 80,620      $ 72,571   
  

 

 

   

 

 

 

 

10


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(4) Goodwill and Intangible Assets

Goodwill and intangible assets as of March 31, 2012 consisted of the following:

 

(in thousands)

   Gross
Carrying
Amount
     Accumulated
Amortization
    Net  

Intangibles subject to amortization:

       

Customer relationships

   $ 300       $ (220   $ 80   

Intangibles not subject to amortization:

       

Goodwill

        $ 5,975   

During the three months ended March 31, 2012 and 2011, there was no impairment of goodwill or intangible assets. The remaining net intangibles subject to amortization will be expensed during 2012.

 

(5) Notes Payable

As of March 31, 2012, the Company’s consolidated CSO Lenders have a total of $11.9 million of notes payable to third parties. One consolidated CSO Lender has 26 notes due throughout 2012 and 2013, bearing interest ranging from 10% to 16% and secured by the assets of the consolidated CSO Lender. These notes allow the consolidated CSO Lender to take one or more draws up to a total maximum principal of $8.8 million. As of March 31, 2012, a total of $8.4 million was drawn under these notes. The other consolidated CSO Lender has two unsecured notes due in January 2013 that bear interest at 14% and allow draws up to a total maximum principal of $3.7 million. As of March 31, 2012, a total of $3.5 million was drawn under these notes. These notes each have an automatic annual renewal provision for an additional period of one year.

 

(6) Guarantees

Senior Secured Notes

TMX Finance LLC and TitleMax Finance Corporation, as co-issuers (the “Issuers”), issued $250 million of senior secured notes in June 2010 and $60 million of senior secured notes in July 2011 (collectively, the “Notes”). The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the Issuers and each of their existing and future domestic restricted subsidiaries, other than immaterial subsidiaries. This guarantee arose from the issuance of bonds for the purpose of additional financing. The Notes are secured by first-priority liens on substantially all of the Issuers’ assets and require performance under the guarantee if there is a default on the bonds. Under this guarantee, the maximum potential amount of future, undiscounted payments is $453.8 million. The current carrying amount of the related liability at March 31, 2012 is $312.0 million.

CSO Agreements

Under the terms of the CSO Agreements with non-exclusive third-party lenders, the Company is contractually obligated to reimburse the lenders for the full amounts of the loans and certain related fees that are not collected from the customers. In certain cases, the lenders sell the related loans, and the Company’s obligation to reimburse for the full amounts of the loans and certain related fees that are not collected from the customers extends to the purchasers. Under this guarantee, the maximum potential amount of future, undiscounted payments is approximately $8.7 million. The value of the related liability at March 31, 2012 is approximately $1.2 million and is included in accounts payable and accrued expenses on the consolidated balance sheets and provision for loan losses on the consolidated statements of income.

Aircraft

The sole member and Chief Executive Officer of the Company has a note payable to a finance company originating from the purchase of an aircraft. The note payable is unconditionally and absolutely guaranteed by TMX Finance LLC and certain of its wholly-owned subsidiaries. The note payable is collateralized by a security interest in the aircraft and requires performance under the guarantee if there is a default on the note payable and the collateral and sole member’s guarantee are not sufficient to pay the entire amount of the note. The maximum potential amount of future, undiscounted payments for the note is $3.7 million. The current carrying amount of the related liability at March 31, 2012 is $3.0 million.

 

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TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(7) Fair Value Measurement and Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company follows the provisions of accounting standards applicable to all assets and liabilities that are being measured and reported on a fair value basis. The accounting standards require disclosure that establishes a framework for measuring fair value within generally accepted accounting principles and expands disclosure about fair value measurements. This standard enables a reader of consolidated financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The standard requires that assets and liabilities carried at fair value be classified and disclosed in one of the three categories.

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to the accounting standards for fair value measurement. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

The Company has loans that are transferred to repossessed assets and are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The following table presents the repossessed assets value carried on the consolidated balance sheets by level within the fair value hierarchy (as described above) for which a nonrecurring change in fair value has been recorded:

 

(in thousands)

   Total      Active Markets
For Identical
Assets
(Level 1)
     Observable
Inputs
(Level 2)
     Unobservable
Inputs
(Level 3)
     Total Losses  

Repossessed assets – March 31, 2012

   $ 4,425       $ —         $ —         $ 4,425       $ 1,469   

Repossessed assets – December 31, 2011

   $ 4,785       $ —         $ —         $ 4,785       $ 1,755   

The fair value of repossessed assets was determined based on comparable recent used vehicle sales and known changes in the broad used vehicle market.

The Company’s financial instruments consist primarily of cash and cash equivalents, restricted cash, title loans receivable (net), a note receivable from our sole member, notes payable and the Notes. For all such instruments, other than the Notes, the carrying amounts in the consolidated financial statements approximate their fair values. The fair values of cash and cash equivalents are measured using level 1 inputs. Title loans receivable are originated at prevailing market rates. Given the short-term nature of these loans, they are continually repriced at current market rates. The fair values of title loans receivable are measured using level 2 inputs. The fair values of notes payable and receivable are estimated using level 2 inputs based on rates currently available for debt with similar terms and remaining maturities. The fair value of the Notes is estimated using level 1 inputs based on the market yield on trades of the Notes at the end of each reporting period. The fair value of the Notes (in thousands) was $361,437 and $360,435 as of March 31, 2012 and December 31, 2011, respectively.

 

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Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(8) Related Party Transactions

The Company leases the corporate office from PY and various retail spaces from TYI and certain employees. Rental payments paid to these entities for operating leases amounted to approximately $0.1 million and $0.2 million for the three months ended March 31, 2012 and 2011, respectively.

The Company also leases several retail spaces under capital lease agreements from certain employees with total payments of approximately $20,000 for both the three months ended March 31, 2012 and 2011. The terms of the agreements are 15 years.

Interest expense on notes payable to related parties totaled $0.3 million and $0.6 million for the three months ended March 31, 2012 and 2011, respectively.

 

(9) Contingencies

The Company is involved in various legal proceedings. These proceedings are, in the opinion of management, ordinary routine matters incidental to the normal business conducted by the Company. Legal proceedings brought against the Company include, but are not limited to, allegations of violations of state or federal consumer protections, disputes regarding repossessions, and employment related matters. For example, TitleMax of Missouri, Inc. is a party to a putative class action lawsuit alleging that the entity failed to pay certain employees overtime compensation as required by Missouri law. In the opinion of management, an appropriate accrual has been established related to the above referenced legal matters. Outcomes of such proceedings are not expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

 

(10) Guarantor Condensed Consolidating Financial Statements

The payment of principal and interest on the Notes is guaranteed by the wholly-owned subsidiaries of the Issuers other than immaterial subsidiaries (the “Subsidiary Guarantors”). It is not guaranteed by Construction, Aviation or the Company’s consolidated CSO Lenders (the “Non-Guarantor Subsidiaries”). The separate financial statements of the Subsidiary Guarantors are not included herein because the Subsidiary Guarantors are the Company’s wholly-owned consolidated subsidiaries and are jointly, severally, fully and unconditionally liable for the obligations represented by the Notes. The Company believes that the consolidating financial information for the Issuers, the combined Subsidiary Guarantors and the combined Non-Guarantor Subsidiaries provide information that is more meaningful in understanding the financial position of the Subsidiary Guarantors than separate financial statements of the Subsidiary Guarantors.

The following consolidating financial statements present consolidating financial data for the Issuers, the combined Subsidiary Guarantors, the combined Non-Guarantor Subsidiaries and an elimination column for adjustments to arrive at the information for the Company on a consolidated basis as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011. Investments in subsidiaries are accounted for by the Company using the equity method for purposes of this presentation. Results of operations of subsidiaries are therefore reflected in the Issuers’ investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions.

 

13


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(10) Guarantor Condensed Consolidating Financial Statements (continued)

 

Consolidating Balance Sheet

March 31, 2012

(in thousands)

 

     Issuers      Guarantors     Non-
Guarantors
     Eliminations     Consolidated  

Assets

            

Cash and cash equivalents

   $ —         $ 117,899      $ 1,442       $ —        $ 119,341   

Title loans receivable

     —           408,882        16,127         —          425,009   

Allowance for loan losses

     —           (61,728     —           (2,397     (64,125

Unamortized loan origination costs

     —           3,040        —           —          3,040   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Title loans receivable, net

     —           350,194        16,127         (2,397     363,924   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Interest receivable

     —           26,028        73         —          26,101   

Property and equipment, net

     —           59,830        20,790         —          80,620   

Debt issuance costs, net of accumulated amortization

     13,053         —          —           —          13,053   

Goodwill

     —           5,975        —           —          5,975   

Intangible assets, net

     —           80        —           —          80   

Note receivable from sole member

     1,436         —          —           —          1,436   

Other assets

     10         39,380        1,648         (21,121     19,917   

Investment in affiliates

     574,323         —          —           (574,323     —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Assets

   $ 588,822       $ 599,386      $ 40,080       $ (597,841   $ 630,447   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Liabilities and Equity

            

Senior secured notes, net

   $ 311,970       $ —        $ —         $ —        $ 311,970   

Notes payable

     —           —          12,310         —          12,310   

Notes payable to related parties

     —           —          20,295         —          20,295   

Obligations under capital leases

     —           2,033        —           —          2,033   

Accounts payable and accrued expenses

     8,671         34,747        6,301         (7,305     42,414   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Liabilities

     320,641         36,780        38,906         (7,305     389,022   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total member’s equity and noncontrolling interests

     268,181         562,606        1,174         (590,536     241,425   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Liabilities and Equity

   $ 588,822       $ 599,386      $ 40,080       $ (597,841   $ 630,447   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

14


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements (unaudited)

 

(10) Guarantor Condensed Consolidating Financial Statements (continued)

 

Consolidating Balance Sheet

December 31, 2011

(in thousands)

 

     Issuers      Guarantors     Non-
Guarantors
     Eliminations     Consolidated  

Assets

            

Cash and cash equivalents

   $ —         $ 37,220      $ 921       $ —        $ 38,141   

Title loans receivable

     —           475,263        14,830         —          490,093   

Allowance for loan losses

     —           (70,955     —           (2,148     (73,103

Unamortized loan origination costs

     —           2,829        —           —          2,829   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Title loans receivable, net

     —           407,137        14,830         (2,148     419,819   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Interest receivable

     —           31,452        65         —          31,517   

Property and equipment, net

     —           51,437        21,134         —          72,571   

Debt issuance costs, net of accumulated amortization

     14,042         —          —           —          14,042   

Goodwill

     —           5,975        —           —          5,975   

Intangible assets, net

     —           140        —           —          140   

Note receivable from sole member

     1,549         —          —           —          1,549   

Other assets

     10         37,883        1,374         (18,273     20,994   

Investment in affiliates

     541,614         —          —           (541,614     —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Assets

   $ 557,215       $ 571,244      $ 38,324       $ (562,035   $ 604,748   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Liabilities and Equity

            

Senior secured notes, net

   $ 312,120       $ —        $ —         $ —        $ 312,120   

Notes payable

     —           —          11,370         —          11,370   

Notes payable to related parties

     —           —          20,512         —          20,512   

Obligations under capital leases

     —           2,052        —           —          2,052   

Accounts payable and accrued expenses

     18,940         44,582        5,698         (6,864     62,356   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Liabilities

     331,060         46,634        37,580         (6,864     408,410   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total member’s equity and noncontrolling interests

     226,155         524,610        744         (555,171     196,338   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Liabilities and Equity

   $ 557,215       $ 571,244      $ 38,324       $ (562,035   $ 604,748   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

15


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements

 

(10) Guarantor Condensed Consolidating Financial Statements (continued)

 

Consolidating Statement of Income

Three Months Ended March 31, 2012

(in thousands)

 

     Issuers     Guarantors     Non-
Guarantors
    Eliminations     Consolidated  

Interest and fee income

   $ —        $ 150,685      $ 676      $ —        $ 151,361   

Provision for loan losses

     —          (11,462     —          —          (11,462

Aircraft service revenue

     —          —          902        (902     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest and fee income and aircraft service revenue

     —          139,223        1,578        (902     139,899   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs, expenses and other:

          

Salaries and related expenses

     —          45,049        8        —          45,057   

Occupancy costs

     —          14,362        71        —          14,433   

Other operating and administrative expenses

     75        22,685        886        (902     22,744   

Interest, including amortization of debt issuance costs

     10,991        (81     765        —          11,675   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     11,066        82,015        1,730        (902     93,909   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income before equity in income of affiliates

     (11,066     57,208        (152     —          45,990   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity in income from affiliates

     57,208        —          —          (57,208     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 46,142      $ 57,208      $ (152   $ (57,208   $ 45,990   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

16


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements

 

(10) Guarantor Condensed Consolidating Financial Statements (continued)

 

Consolidating Statement of Income

Three Months Ended March 31, 2011

(in thousands)

 

     Issuers     Guarantors     Non-
Guarantors
    Eliminations     Consolidated  

Interest and fee income

   $ —        $ 111,135      $ 4      $ —        $ 111,139   

Provision for loan losses

     —          (5,917     —          —          (5,917

Aircraft service revenue

     —          —          642        (642     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest and fee income and aircraft service revenue

     —          105,218        646        (642     105,222   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs, expenses and other:

          

Salaries and related expenses

     —          35,282        90        —          35,372   

Occupancy costs

     —          11,304        69          11,373   

Other operating and administrative expenses

     75        18,684        964        (642     19,081   

Interest, including amortization of debt issuance costs

     9,099        (106     509        —          9,502   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     9,174        65,164        1,632        (642     75,328   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income before equity in income of affiliates

     (9,174     40,054        (986     —          29,894   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity in income from affiliates

     40,054        —          —          (40,054     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 30,880      $ 40,054      $ (986   $ (40,054   $ 29,894   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

17


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements

 

(10) Guarantor Condensed Consolidating Financial Statements (continued)

 

Consolidating Statement of Cash Flows

Three Months Ended March 31, 2012

(in thousands)

 

     Issuers     Guarantors     Non-
Guarantors
    Consolidated  

Net cash (used in) provided by operating activities

   $ (20,496   $ 69,050      $ 513      $ 49,067   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows from Investing Activities

        

Net title loans collected (originated)

     —          45,941        (1,297     44,644   

Purchase of property and equipment

     —          (12,050     —          (12,050

Increase in restricted cash

     —          (375     —          (375

Receipt of payments on note receivable to sole member

     113        —          —          113   

Net activity with affiliates

     20,383        (20,965     582        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     20,496        12,551        (715     32,332   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities

        

Repayments of notes payable and capital leases

     —          (19     (227     (246

Distributions to sole member

     —          (903     —          (903

Proceeds from notes payable issued by consolidated variable interest entities

     —          —          950        950   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     —          (922     723        (199
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

     —          80,679        521        81,200   

Cash and cash equivalents at beginning of period

     —          37,220        921        38,141   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ —        $ 117,899      $ 1,442      $ 119,341   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

18


Table of Contents

TMX FINANCE LLC

AND AFFILIATES

Notes to Consolidated Financial Statements

 

(10) Guarantor Condensed Consolidating Financial Statements (continued)

 

Consolidating Statement of Cash Flows

Three Months Ended March 31, 2011

(in thousands)

 

     Issuers     Guarantors     Non-
Guarantors
    Consolidated  

Net cash (used in) provided by operating activities

   $ (18,697   $ 45,375      $ (380   $ 26,298   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows from Investing Activities

        

Net title loans collected

     —          30,265        (85     30,180   

Payments for acquisitions, net of cash acquired

     —          (4,100     —          (4,100

Purchase of property and equipment

     —          (8,896     (43     (8,939

Increase in restricted cash

     —          (825     —          (825

Receipt of payments on note receivable to sole member

     100        —          —          100   

Cash from consolidation of variable interest entities

     —          —          41        41   

Net activity with affiliates

     18,597        (19,346     749        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     18,697        (2,902     662        16,457   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities

        

Repayments of notes payable and capital leases

     —          (16     (219     (235

Distributions to sole member

     —          (2,000     —          (2,000

Proceeds from notes payable issued by consolidated variable interest entities

     —          —          200        200   

Proceeds from contributions to consolidated variable interest entities

     —          —          75        75   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     —          (2,016     56        (1,960
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

     —          40,457        338        40,795   

Cash and cash equivalents at beginning of period

     —          53,585        —          53,585   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ —        $ 94,042      $ 338      $ 94,380   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

19


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This section is intended to provide information that will assist you in understanding our consolidated financial statements, the changes in those financial statements from period to period and the primary factors contributing to those changes. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this report.

The “Company,” “we,” “us” and “our” refer to TMX Finance LLC and its affiliates on a consolidated basis unless the context indicates otherwise.

Forward-Looking Information and Factors That May Affect Future Results

The Securities and Exchange Commission, or “SEC,” encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This section and other written or oral statements that we make from time to time contain forward-looking statements that set forth anticipated results based on management’s plans and assumptions. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “will” and similar terms and phrases in connection with any discussion of our future operating or financial performance or business plans and prospects. In particular, these include statements relating to the future of our industry, our business strategy, and expectations concerning our future market position, operations, margins, profitability, capital expenditures, liquidity, capital resources and other financial and operating information.

Such forward-looking statements involve substantial risks and uncertainties. We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from past results and from anticipated, estimated or projected results. Our annual report on Form 10-K for the year ended December 31, 2011 describes in the section captioned “Risk Factors” various important factors that could cause actual results to differ materially from projected and historical results. We incorporate that section into this filing, and you should refer to it. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider such factors to be a complete set of all potential risks or uncertainties.

Forward-looking statements are only as of the date they are made, and we do not intend to update our forward-looking statements unless we are required to do so under applicable law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-K, 10-Q and 8-K and other reports to the SEC.

Company Overview

We are a privately-owned automobile title-lending company with 801 company-owned stores in the states of Georgia, Alabama, South Carolina, Tennessee, Missouri, Illinois, Mississippi, Texas, Virginia, Florida, Arizona and Nevada as of March 31, 2012. We serve individuals who generally have limited access to consumer credit from banks, thrift institutions, credit card lenders and other traditional sources of consumer credit. We provide our customers with access to loans secured by a lien on the customers’ automobiles while allowing the customers to retain use of the vehicles during the term of the loans. As of March 31, 2012, we served more than 350,000 customers and had approximately $425.0 million in title loans receivable. We believe that we are the largest automobile title lender in the United States based on title loans receivable.

Our business provides a simple, quick and confidential way for consumers to meet their liquidity needs. We offer title loans in amounts ranging from $100 to $5,000 at rates that we believe, based on market research, are up to 50% less than those offered by other title lenders, with an average loan size of approximately $1,250. Our asset-based loans have loan-to-value ratios that we believe are conservative. At origination, our weighted average loan amount is approximately 70% of appraised wholesale value and approximately 27% of the Black Book retail value. Our title loans do not impact our customers’ credit ratings as we do not run credit checks on our TitleMax and TitleBucks customers and we do not make negative credit reports if we are unable to collect loan balances.

We seek to develop and maintain a large presence in each of the markets in which we operate. Our growth strategy includes increasing our title loans receivable in our existing stores, opening new stores in existing markets, expanding our store base into new markets with favorable characteristics and launching an internet lending model. Our stores are located in highly visible and accessible locations, usually in free-standing buildings and end-units of strip shopping centers. Our strategy has enabled consistent growth throughout the Company’s history that has included fluctuating market conditions. The contraction of consumer credit that began in the fourth quarter of 2008 has led to higher average loan volumes for our stores.

 

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We conduct business in Texas through a wholly-owned subsidiary (TitleMax of Texas, Inc.) registered as a Credit Services Organization, or “CSO,” and licensed as a Credit Access Business, or “CAB,” under Texas law. TitleMax of Texas, Inc. entered into credit services organization agreements, or “CSO Agreements,” with three third-party lenders, or the “CSO Lenders.” The CSO Agreements govern the terms by which we perform underwriting services and refer customers in Texas to the CSO Lenders for a possible extension of a loan. We process loan applications and commit to reimburse the CSO Lenders for any loans or related fees that are not collected from those customers. Two of the CSO Lenders operate on an exclusive basis, and we have determined that they are variable interest entities, or “VIEs,” of which we are the primary beneficiary. Therefore, we have consolidated these VIEs.

During the three months ended March 31, 2012, we continued to execute our growth strategy and opened 45 new stores. The majority of stores opened were in Texas, Arizona and Virginia, where we opened 22, 7 and 6 stores, respectively. For the three months ended March 31, 2012, the Company had revenues of $151.4 million, an increase of $40.3 million, and net income of $46.0 million, an increase of $16.1 million, from the corresponding results for the three months ended March 31, 2011. The increase in net income for the first quarter of 2012 compared to the first quarter of 2011 was the result of strong same-store performance and several of our newer stores becoming profitable.

Regulatory Environment

The industry in which we operate is subject to strict state and federal laws and regulations, as well as local rules and regulations (such as zoning ordinances and rules related to permit licensing). For example, the Dallas and Austin, Texas City Councils both recently passed ordinances that would restrict extensions of consumer credit within the city limits by, among other things, linking maximum allowable loan size to 3% of a consumer’s gross annual income, mandating a 25% principal reduction requirement on refinances or renewals and limiting the term of a loan to no more than four months. The industry is currently pursuing legal action against the cities of Dallas and Austin by challenging the legality of the ordinances in court. TitleMax of Texas, Inc. is also engaged in challenging the legality of the ordinances in Dallas and Austin. The Dallas City Council has postponed the effective date of its ordinance to June 17, 2012. The Austin ordinance went into effect on May 1, 2012, and we are complying with the ordinance.

Changes in applicable laws and regulations governing consumer protection, lending practices and other aspects of our business at the federal level or in any state where we conduct operations could have a significant adverse impact on our business, liquidity, capital resources, net sales or revenues or income from continuing operations and ability to service our debt obligations. For example, federal, state or local legislative or regulatory actions could negatively impact us by:

 

   

imposing limits on APRs on consumer loan transactions;

 

   

prohibiting cash advances and similar services;

 

   

imposing zoning restrictions limiting areas in which we can open new stores; and

 

   

requiring that we obtain special use permits for the operation of our business in certain areas.

Any of the above actions could result in a decrease in demand for, or profitability of, our services which could decrease interest and fee income accordingly, as well as decrease demand for employees and stores, and possibly affect our need for additional capital resources. Moreover, similar actions by states in which we do not currently operate could limit opportunities to pursue our growth strategies.

In some cases, we believe regulatory changes have resulted in a constriction of the availability of unsecured credit for consumers with poor or no credit history (for example, the Card Accountability Responsibility and Disclosure Act of 2009, which, among other things, disallowed the issuance of a credit card to anyone under 21 without a co-signer or proof of ability to repay and also curtailed the amount of fees that banks can assess on cardholders). The Company believes that this constriction in available sources of credit has resulted in, and will continue to result in, an increased demand for our services, which has produced a corresponding growth in our interest and fee income, as well as an increase in our need for employees and opportunities for opening new stores.

Although regulatory uncertainties are outside of our control, the Company will continue to monitor legislative activity closely and attempt to mitigate the risk by expanding our geographic footprint to new states as well as expanding the types of products we offer (such as our introduction of a second lien product).

 

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Key Performance Indicators

We measure our performance through certain key performance indicators, or “KPIs,” that drive our revenue and profitability. Our KPIs include total originations, average originations per store, total title loans receivable balance, average receivable balance per store and net charge-off rate as a percent of aggregate originations over the period. We influence our KPIs through operational execution, information systems and proper incentives for our field-level employees. Externally, our KPIs are affected by competition and macroeconomic conditions, including availability of credit, consumer confidence, consumer spending habits, unemployment and state and federal regulations.

The following table reflects our results as measured by these KPIs:

 

     Three Months Ended March 31,  

(dollars in thousands)

   2012     2011  

Total title loans receivable

   $ 425,009      $ 317,682   

Average title loans receivable per store

     531        527   

Originations

     137,689        100,457   

Average originations per store

     175        168   

Net charge-offs as a percent of originations

     14.7     12.5

In addition, we closely monitor same-store interest and fee income. The Company considers interest and fee income from stores open more than 13 months in its calculation of same-store interest and fee income. The following summarizes the Company’s same-store interest and fee income for the three months ended March 31, 2012 and 2011:

 

     Three Months Ended March 31,  

(dollars in thousands)

   2012     2011  

Interest and fee income

   $ 135,806      $ 109,954   

Interest and fee income growth

     23.5     26.9

Number of stores open more than 13 months

     587        552   

 

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Results of Operations

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

Interest and fee income

Interest and fee income was $151.4 million for first quarter of 2012 compared to $111.1 million for the first quarter of 2011. The increase of $40.3 million, or 36.3%, is primarily due to strong same-store performance as customers turned more to title lending because of a contraction of credit from other sources. Same-store interest and fee income increased $25.8 million, or 23.5%, versus the comparable period of the prior year. The Company considers interest and fee income from stores open more than 13 months in its calculation of same-store interest and fee income. Interest and fee income also was higher in the first quarter of 2012 due to an increase of approximately $14.5 million of revenue from stores open less than 13 months. The increase from stores open less than 13 months accounted for 36% of the total increase in interest and fee income.

Provision for loan losses

The provision for loan losses is based on loan loss experience, contractual delinquency of title loans receivable, the value of underlying collateral, economic and other qualitative considerations and management’s judgment. We charge-off any loan that is 61 days past due. Our provision for loan losses was $11.5 million for the first quarter of 2012 compared to $5.9 million for the first quarter of 2011. The provision increased $5.6 million, or 94.9%. Approximately $2.2 million of the increase relates to a 37.0% increase in loan originations, and the remaining increase of $3.4 million is due to an increase in our loan loss charge-off rate that began in the third quarter of 2011. Net charge-offs as a percent of originations increased to 14.7% for the first quarter of 2012 compared to 12.5% for the first quarter of 2011. Net charge-offs as a percent of originations were 13.8% and 14.7% for the third and fourth quarters of 2011, respectively. The increase in our net charge-off rate was a result of a shift toward growth in our store management incentive plans and operations training programs. We modified the store management incentive plans at the end of 2011 to better balance growth and profitability. Due to our policy to charge-off any loan that is 61 days past due, we do not expect to see the impact of this change until the second quarter of 2012. During the first quarter of 2012, our net charge-off trend improved in January and February compared to the last five months of 2011, but we did not experience continued improvement in March. In April 2012, net charge-offs as a percent of originations decreased to 8.7%, primarily due to seasonality and partly due to our change to the store management incentive plans. We are currently implementing a new store-level KPI that measures the ratio of appraised value to charge-offs. This new KPI in the stores’ performance metrics will provide our store managers with enhanced detail for the sources of charge-offs, which we believe will lead to improved execution going forward. In the third quarter of 2012, we plan to provide each store with historical appraised value to charge-off data for loans extended for vehicles of the same model and year as the vehicles they are currently appraising. We believe the combination of these three changes will help our store managers to better balance growth and charge-offs to ultimately maximize their profitability. Net charge-offs as a percent of originations were 12.5% for the full year 2011, and we expect they will be similar for the full year 2012.

Costs, expenses and other

Salaries and related expenses

Salaries and related expenses were $45.1 million for the first quarter of 2012 compared to $35.4 million for the first quarter of 2011. This represents an increase of $9.7 million, or 27.4%. This increase was mostly due to growth-related increases in headcount, primarily related to operational personnel necessary to service the higher volume of loans and as a result of opening new stores. Also contributing to the increase was higher corporate headcount, primarily in the areas of information technology, recruiting and real estate and construction. In addition, a significant portion of our operations employees’ compensation is incentive-based, which increased $1.2 million due to higher profitability at the store, district and regional levels.

Occupancy costs

Occupancy costs were $14.4 million for the first quarter of 2012 compared to $11.4 million for the first quarter of 2011. This increase of $3.0 million, or 26.3%, was primarily due to increases in rent, utilities, and maintenance costs associated with opening new stores as well as expanding corporate office space.

Depreciation and amortization

Depreciation and amortization for the first quarter of 2012 was $4.0 million compared to $2.9 million for the first quarter of 2011. The increase of $1.1 million, or 37.9%, was primarily attributable to remodeling and relocating stores, fitting out new stores and expanding corporate office space. Also contributing to the increase was depreciation expense related to an upgrade to our proprietary loan system, which was placed in service in the second quarter of 2011.

 

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Advertising

Advertising expense for the first quarter of 2012 was $1.4 million compared to $2.6 million for the first quarter of 2011. The decrease of $1.2 million, or 46.2%, was primarily due to increased television advertising costs in 2011 related to airtime for our “short on cash” marketing campaign.

Other operating and administrative expenses

Other operating and administrative expenses for the first quarter of 2012 were $17.4 million compared to $13.5 million for the first quarter of 2011. The increase of $3.9 million, or 28.9%, was primarily driven by growth-related increases in costs associated with recruiting and relocation, collateral collection, accounting and legal services, travel, and office supplies and postage.

Interest expense, net, including amortization of debt issuance costs

Interest expense, net, including amortization of debt issuance costs, was $11.7 million for the first quarter of 2012 compared to $9.5 million for the first quarter of 2011. This represents an increase of $2.2 million, or 23.2%. During the first quarter of 2012, we incurred interest on $60.0 million aggregate principal amount of our 13.25% senior secured notes issued on July 22, 2011. We expect interest expense to increase in the future relative to prior periods due to the higher average outstanding debt balance.

Net income

As a result of the above factors, net income was $46.0 million for the first quarter of 2012 compared to $29.9 million for the first quarter of 2011.

Liquidity and Capital Resources

We manage our liquidity and capital positions to satisfy several objectives. Near-term liquidity is managed to ensure adequate resources are available to fund seasonal growth in loans and related interest receivable in an amount that exceeds increases in accounts payable and accrued expenses (our working capital). Growth in working capital is driven by demand for our loan products and is currently funded through operating cash flows without the need for reliance on other sources. Long-term capital needs are managed by assessing the growth capital needs of the Company and balancing those needs against the available internal and external capital resources. Long-term capital needs have historically been funded through credit facilities and issuances of debt securities. We manage the risk that we may not be able to refinance our debt securities through proper timing of refinancing transactions ahead of scheduled maturities and, to a lesser extent, as market conditions permit.

Our principal sources of near-term liquidity are cash on hand, working capital and cash flows from operations. Cash and cash equivalents were $119.3 million at March 31, 2012 compared to $38.1 million at December 31, 2011.

In June 2010 and July 2011, we issued $250.0 million and $60.0 million, respectively, of senior secured notes due 2015. These senior secured notes, or the “Notes,” were offered only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, or the “Securities Act,” and to non-U.S. persons outside of the United States in compliance with Regulation S under the Securities Act.

The indenture governing our Notes, or the “Indenture,” limits our ability to incur additional indebtedness. However, we are permitted to obtain a $25.0 million secured revolving loan facility that would be equal in priority with the senior secured notes. Additionally, we may incur additional debt as long as the new debt does not cause us to maintain less than a 3:1 earnings to fixed charge ratio, as defined in the Indenture. As of March 31, 2012, our earnings to fixed charge ratio is above 3:1. We may seek to draw on the additional permitted sources of borrowing in the foreseeable future to continue to facilitate our aggressive growth strategy. For a description of our outstanding borrowings, see “ – Other Indebtedness.”

Additional covenants in the Indenture restrict, among other things, our ability to dispose of assets, incur guarantee obligations, prepay other indebtedness, make dividends and other restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms of the Indenture, engage in mergers or consolidations, change the business we conduct, engage in certain transactions with affiliates and make distributions to our sole member. Such restrictions, together with our highly leveraged nature and recent disruptions in the credit markets, could limit our ability to respond to changing market conditions, fund our capital spending program, provide for unexpected capital investments or take advantage of business opportunities.

We are in compliance with the covenants in the Indenture as of March 31, 2012. A significant decline in the demand for our products and services or other unexpected changes in financial condition could cause our earnings to fixed charge ratio to drop below 3:1 for an extended period of time. This ratio must be above 3:1 for us to incur additional indebtedness, including the issuance of

 

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guarantees under our CSO Agreements. If we are unable to incur additional indebtedness for growth in our CSO operations, our net income may decrease due to impairment of assets and less revenue from CSO operations, which could adversely affect our ability to obtain new credit under favorable terms. We do not anticipate a significant decline in demand for our products and services. To the extent that we experience short-term or long-term funding disruptions, we have the ability to address these risks through various means, including adjustments to short-term lending to customers, reductions in capital spending and reductions in expenses, all of which could be expected to generate additional liquidity.

To the extent permitted by the Indenture, we expect to make periodic distributions to our sole member in amounts sufficient for him to pay some or all of the taxes due on the Company’s items of income, deductions, losses and credits which have been allocated for reporting on the sole member’s income tax return. We may also make distributions to the sole member in addition to those required for personal income taxes. In April 2012, we made distributions of $20.4 million to the sole member for estimated income taxes for 2011. At March 31, 2012, the remaining availability of permitted distributions to our sole member for purposes other than estimated personal income tax payments was approximately $12.2 million (calculated net of an estimate for personal income taxes).

The Indenture requires us, beginning in the first quarter of 2012 and each year thereafter, to make “excess cash flow offers” (as defined in the Indenture) to all holders of our Notes to purchase the maximum principal amount of notes that may be purchased with the lesser of $30.0 million or 75% of excess cash flow (as defined in the Indenture) for the applicable fiscal year. We made an excess cash flow offer in March 2012 at 102% of the principal amount of the Notes. The offer expired in April and we did not purchase any holders of our Notes accepted the 2012 excess cash flow offer.

In May 2010, the IRS initiated an examination of the income tax return of TitleMax of Georgia, Inc., or “TMG.” The examination was expanded to cover all of the Company’s wholly-owned subsidiaries and TitleMax Aviation, or “Aviation.” The IRS completed its fieldwork and issued its report in April 2011. We paid approximately $0.9 million in 2011 for agreed adjustments related to the IRS examination. We are contesting other proposed adjustments that could result in maximum additional tax distributions of approximately $1.0 million.

In November 2010, we acquired an aircraft for $17.5 million that satisfied the requirements of Section 1031 of the Internal Revenue Code to complete the like-kind exchange for an aircraft sold in May 2010. The purchase of the aircraft was funded by notes payable to the sole member. In February 2011, these notes were refinanced into one note payable to the sole member with a principal balance of $17.4 million bearing interest at 10%. In December 2011, this note was refinanced into two notes payable to the sole member. The balance of these notes at March 31, 2012 was $11.8 million and $5.4 million, bearing interest at 5.12% and 10%, respectively.

Cash flows from operating activities

Net cash provided by operating activities was $49.1 million for the first quarter of 2012 compared to $26.3 million for the first quarter of 2011. The increase of $22.8 million, or 86.7%, was due to a $16.1 million increase in net income, as well as a $6.7 million increase in adjustments to reconcile net income to cash provided by operating activities. The increase in adjustments to reconcile net income to cash provided by operating activities was driven primarily by the increase in the provision for loan losses, which resulted from increased demand for our loan products.

Cash flows from investing activities

Net cash provided by investing activities was $32.3 million for the first quarter of 2012 compared to $16.5 million for the first quarter of 2011. The increase of $15.8 million, or 95.8%, was primarily attributable to the $14.4 million increase in net title loans collected. Also contributing to the increase in cash from investing activities was $4.1 million cash paid for an acquisition in the first quarter of 2011 that did not recur in the first quarter of 2012, partially offset by an increase in capital expenditures of $3.2 million compared to the first quarter of 2011. This increase is related to ongoing projects to upgrade our technology and to manage our store portfolio through remodels or movement of locations, fitting out new stores and installing new signs.

Cash flows from financing activities

Net cash used in financing activities for the first quarter of 2012 was $0.2 million compared to $2.0 for the first quarter of 2011. The decrease of $1.8 million was the result of an increase in proceeds from notes payable offset by a decrease in distributions to our sole member.

 

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Other Indebtedness

As of March 31, 2012 we have $32.6 million of notes payable in the aggregate, consisting of one unsecured note payable to a bank, three unsecured notes payable to our sole member and 28 notes payable to individuals issued by our two consolidated CSO Lenders. The note payable to a bank and the three notes payable to our sole member were issued by TitleMax Aviation, Inc., or “Aviation,” an entity owned by our sole member that we consolidate because we have determined it is a VIE of which we are the primary beneficiary. The note payable to a bank has a principal balance of $0.4 million as of March 31, 2012 and incurs interest at the prime rate plus 2.0% (5.25% at March 31, 2012). The three notes payable to our sole member are in the amounts of $11.8 million, $5.4 million and $3.0 million. The $11.8 million note has a fixed interest rate of 5.12% and is payable in monthly installments of $104,000, including interest and principal, with a final payment of $8.4 million due in December 2016. The $5.4 million note has a fixed interest rate of 10% payable monthly, with the full principal amount due in December 2015. The $3.0 million note is collateralized by an aircraft owned by Aviation and guaranteed by the Company. This note has a fixed interest rate of 6.35% and is payable in monthly installments of $35,000, including interest and principal, with a final payment of $2.1 million due in October 2015. As of March 31, 2012, the Company’s consolidated CSO Lenders have a total of $11.9 million of notes payable to third parties. One consolidated CSO Lender has 26 notes due throughout 2012 and 2013, bearing interest ranging from 10% to 16% and secured by the assets of the consolidated CSO Lender. These notes allow the consolidated CSO Lender to take one or more draws up to a total maximum principal of $8.8 million. As of March 31, 2012, a total of $8.4 million was drawn under these notes. The other consolidated CSO Lender has two unsecured notes due in January 2013 that bear interest at 14% and allow draws up to a total maximum principal of $3.7 million. As of March 31, 2012, a total of $3.5 million was drawn under these notes. These notes each have an automatic annual renewal provision for an additional period of one year.

Management believes that our currently available short-term and long-term capital resources will be sufficient to fund our anticipated cash requirements, including working capital requirements, capital expenditures, scheduled principal and interest payments, payments pursuant to any excess cash flow offers and income tax obligations of our sole member, for at least the next 12 months.

Capital Expenditures

Since 2009, our capital expenditures have increased consistently. Capital expenditures for the first quarter of 2012 were $12.1 million compared to $8.9 million for the first quarter of 2011. We do not have any material capital expenditure commitments as of March 31, 2012.

Seasonality

Our business is seasonal due to fluctuating demand for our title loans during the year. Historically, we have experienced our highest demand in the fourth quarter of each fiscal year, with approximately 31% of our annual originations occurring in this period. Also, we have historically experienced a reduction of 9% to 15% in our title loans receivable in the first quarter of each fiscal year, primarily associated with our customers’ receipts of tax refund checks. Accordingly, we typically experience a higher use of cash in the fourth quarter while generating more cash in the first quarter (exclusive of any other capital usage). Due to the seasonality of our business, results of operations for any fiscal quarter are not necessarily indicative of the results of operations that may be achieved for the full fiscal year or any future period.

Critical Accounting Policies

In the ordinary course of business, we make a number of estimates, assumptions and judgments relating to the reporting of results of operations and financial condition in the preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the U.S., or “GAAP.” We evaluate these estimates on an ongoing basis. We base these estimates, assumptions and judgments on information currently available to us and on various other factors that we believe are reasonable under the circumstances. Actual results could vary under different estimates, assumptions, judgments or conditions. A summary of the more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in the Company’s audited consolidated financial statements for the year ended December 31, 2011 in our annual report on Form 10-K for such year filed with the SEC.

Recent Accounting Standards

In May 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-04 to provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between accounting principles generally accepted in the United States of America and International Financial Reporting Standards. This guidance changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. We adopted the provisions of this guidance in the first quarter of 2012 with no impact on our financial position, results of operations or cash flows.

 

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Off-Balance Sheet Arrangements with Unconsolidated CSO Lender

Under the terms of the CSO Agreement with a non-exclusive third-party lender, we are contractually obligated to reimburse the lender for the full amounts of the loans and certain related fees that are not collected from the customers. In certain cases, the lender sells the related loans, and our obligation to reimburse for the full amounts of the loans and certain related fees that are not collected from the customers extends to the purchaser. As of March 31, 2012, the total amount of loans and related fees guaranteed by us was approximately $8.7 million. The value of the related liability at March 31, 2012 was approximately $1.2 million and is included in accounts payable and accrued expenses on the consolidated balance sheets and provision for loan losses on the consolidated statements of income.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company does not have any financial instruments that expose it to material cash flow or earnings fluctuations as a result of market risks.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures, as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2011. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2012.

Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting, as defined in Rule 15d-15(f) under the Exchange Act, during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company’s annual report on Form 10-K for the year ended December 31, 2011 contains a description of all material pending legal proceedings to which the Company was a party or of which any of its property was the subject as of December 31, 2011. There have not been any material subsequent developments or status assessments by management related to those legal proceedings.

ITEM 1A. RISK FACTORS.

The Company’s business, results of operations and financial condition are subject to numerous risks and uncertainties described under the heading “Risk Factors” in the Company’s annual report on Form 10-K, which risk factors are incorporated herein by reference. You should carefully consider these risk factors in conjunction with the other information contained in this report. Should any of these risks materialize, the Company’s business, financial condition and future prospects could be negatively impacted.

 

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ITEM 6. EXHIBITS.

The following exhibits are filed or furnished as part of this report:

 

Exhibit
No.

  

Description of Exhibit

    3.1    Certificate of Formation of TMX Finance LLC, dated September 25, 2003 (exhibit 3.1 to TMX Finance LLC’s Registration Statement on Form S-4, dated February 14, 2011, is incorporated herein by this reference)
    3.2    First Amendment to the Certificate of Formation of TMX Finance LLC, dated June 18, 2010 (exhibit 3.2 to TMX Finance LLC’s Registration Statement on Form S-4, dated February 14, 2011, is incorporated herein by this reference)
    3.3    Amended and Restated Operating Agreement of TMX Finance LLC, dated June 21, 2010 (exhibit 3.3 to TMX Finance LLC’s Registration Statement on Form S-4, dated February 14, 2011, is incorporated herein by this reference)
    4.1    Indenture, dated June 21, 2010, among TMX Finance LLC and TitleMax Finance Corporation as Issuers, the guarantors party thereto, and Wells Fargo Bank, National Association as Trustee and Collateral Agent, including the guarantee and the form of 13.25% senior secured note due 2015 (exhibit 4.1 to TMX Finance LLC’s Registration Statement on Form S-4, dated February 14, 2011, is incorporated herein by this reference)
    4.2    First Supplemental Indenture, dated May 13, 2011, among TMX Finance LLC and TitleMax Finance Corporation as Issuers, the guarantors party thereto, and Wells Fargo Bank, National Association as Trustee and Collateral Agent, including the guarantee and the form of 13.25% senior secured note due 2015 (exhibit 4.2 to TMX Finance LLC’s Registration Statement on Form S-4, dated September 16, 2011, is incorporated herein by this reference)
  31.1    Certification Pursuant to Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer
  31.2    Certification Pursuant to Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer
  32.1    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer
  32.2    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer
101   

Interactive Data File:

(i) Consolidated Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011; (ii) Consolidated Statements of Income for the Three Months Ended March 31, 2012 (unaudited) and March 31, 2011 (unaudited); (iii) Consolidated Statements of Cash Flows for the Three Months Ended March 30, 2012 (unaudited) and March 31, 2012 (unaudited); and (iv) Notes to Consolidated Financial Statements (unaudited) – submitted herewith pursuant to Rule 406T

 

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 11, 2012

 

TMX FINANCE LLC

(registrant)

By:  

/s/    Donald E. Thomas        

  Donald E. Thomas
  Chief Financial Officer

 

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