Cash America 2001 Annual Report Download - page 35

16. Related Party Transactions
In December 1999, the Company sold 3 lending units, including certain real estate, for $4,520,000 to Ace Pawn, Inc. (“Ace”) whose sole stockholder, J.D. Credit, Inc.
(“J.D. Credit”), is controlled by the Chairman of the Board of Directors of the Company. The price was determined by independent appraisal and approved by the
Board of Directors of the Company. The Company received promissory notes from Ace that are collateralized by all of its assets. In addition, J.D. Credit has pledged
the common stock of Ace and the Chairman of the Board has provided a personal guaranty for repayment of the notes. The notes bear interest at 10% per annum and
require quarterly principal and interest payments and a final balloon payment in December 2002. The Company has the right of first refusal in the event of a pro-
posed resale of the lending units. A gain of $2,224,000 was recognized on the transactions. Amounts due on the notes were $3,097,000 and $3,156,000 as of
December 31, 2001 and 2000, respectively, and are included in “Other assets” in the accompanying consolidated balance sheets. The Company recorded interest
income from the notes of $313,000 and $378,000 in 2001 and 2000, respectively.
The 3 lending units were converted to Company franchise units, and the Company continued to manage the units pursuant to a management agreement for a
brief interim period immediately following the closing of the transaction. Royalties recorded by the Company were $79,000, $79,000, and $7,000 for 2001, 2000,
and 1999, respectively. The Company recorded management fee income of $60,000 and $35,000 for 2000 and 1999, respectively, and $30,000 in franchise fee rev-
enue for 1999.
17. Fair Values of Financial Instruments
Cash and cash equivalents bear interest at market rates and have maturities less than 90 days. Pawn loans have relatively short maturity periods depending on local
regulations, generally 90 days or less in the United States and 180 days or less in the United Kingdom and Sweden. Small consumer cash advances have maturity
periods of 31 days or less. Finance and service charge rates are determined by regulations and bear no valuation relationship to capital markets’ interest rate move-
ments. Generally, pawn loans may only be resold to a licensed pawnbroker. The Company’s interest rate cap agreements are evaluated pursuant to the terms of the
agreements and settled in specific three-month intervals. The fair values of the interest rate caps are based on quoted market prices for interest rate caps currently
available with similar terms.
The Company’s bank credit facilities bear interest at rates that are frequently adjusted on the basis of market rate changes. The fair values of the remaining long-
term debt instruments are estimated based on market values for debt issues with similar characteristics or rates currently available for debt with similar terms.
The carrying amounts and estimated fair values of financial instruments at December 31, 2001 and 2000 were as follows (in thousands):
2001 2000
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Cash and cash equivalents $ 6,394 $ 6,394 $ 4,626 $ 4,626
Pawn loans 116,590 116,590 117,982 117,982
Small consumer cash advances, net 1,695 1,695 811 811
Notes receivable 3,097 3,162 3,156 3,020
Interest rate caps 173 173 734 625
Financial liabilities:
Bank lines of credit 112,562 112,562 101,427 101,427
Senior unsecured notes 58,571 61,703 62,857 63,165
Capital lease obligations and other notes 649 646 6,180 6,075
Notes to Consolidated Financial Statements — Continued
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