Cash America 2007 Annual Report Download - page 108

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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
88
19. Related Party Transactions
In October 2005, the Company acquired three pawnshops that were previously franchise units for a
total purchase price of $3.1 million from Ace Pawn, Inc. (“Ace”), whose sole stockholder J.D. Credit, Inc. is
controlled by the Chairman of the Board of Directors of the Company. The purchase price was determined
by independent appraisal and approved by the Board of Directors of the Company. The Company recorded
royalties of $48,000 in 2005 before the completion of the acquisition.
Under the Company’s now discontinued officer stock loan program, the Company recorded interest
income of $1,000, $36,000 and $149,000, respectively, in 2007, 2006 and 2005. At December 31, 2007 and
2006, the outstanding balance on these notes was $-0- and $18,000, and accrued interest on these notes was
$-0- and $5,000, respectively. As of December 31, 2007, all of the stock officer loans had been repaid.
In November 2005, the Company’s Chief Executive Officer adopted a pre-arranged, systematic
trading plan to sell company shares pursuant to guidelines specified by Rule 10b5-1 under the Securities and
Exchange Act of 1934 and with the Company’s policies with respect to insider sales (the “Plan”). From
November 2005 through June 2006, the Company’s Chief Executive Officer exercised stock options and
sold Company shares under the Plan. The Chief Executive Officer used proceeds from the sales of shares
under the Plan to fully repay his pre-2003 secured loan under the Company’s now discontinued officer stock
loan program and accrued interest thereon totaling $2.1 million. In 2006, the Company’s Chief Financial
Officer and another executive officer also paid a total of $985,000 (including accrued interest) to fully repay
similar officer stock loans.
20. Fair Values of Financial Instruments
The carrying amounts and estimated fair values of financial instruments at December 31, 2007 and
2006 were as follows (in thousands):
2007 2006
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
Financial assets:
Cash and cash equivalents................................... $ 22,725 $ 22,725 $ 25,723 $ 25,723
Pawn loans........................................................... 137,319 137,319 127,384 127,384
Cash advances, net............................................... 88,148 88,148 79,975 79,975
Subordinated notes receivable............................. ņ ņ 9,760 9,889
Interest rate cap ................................................... 25 7 85 85
Foreign currency forward contracts..................... ņ ņ (2) (2)
Financial liabilities:
Bank line of credit ............................................... $ 171,777 $ 171,777 $ 81,677 $ 81,677
Senior unsecured notes ........................................ 117,000 120,029 138,072 137,158
Cash and cash equivalents bear interest at market rates and have maturities of less than 90 days.
Pawn loans have relatively short maturity periods depending on local regulations, generally 90 days or less.
Cash advance loans generally have a loan term of 7 to 45 days. Finance and service charge rates are
determined by regulations and bear no valuation relationship to the capital markets’ interest rate movements.
Generally, pawn loans may only be resold to a licensed pawnbroker.
The fair value of the subordinated notes receivables was estimated by taking the present value of the
expected cash flow over the life of the notes discounted at a rate prevalent to financial instruments with
similar credit profiles and like terms.