Cash America 2007 Annual Report Download - page 43

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23
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company provides specialty financial services to individuals. These services include secured
non-recourse loans, commonly referred to as pawn loans, to individuals through its pawn lending operations,
unsecured cash advances in selected lending locations and on behalf of independent third-party lenders in
other locations, and check cashing and related financial services through many of its lending locations and
through franchised and Company-owned check cashing centers. The pawn loan portfolio generates finance
and service charges revenue. A related activity of the pawn lending operations is the disposition of
collateral from unredeemed pawn loans. In September 2006, the Company began offering online cash
advances over the internet and began arranging loans online on behalf of independent third-party lenders in
November 2006 through its internet distribution platform. In July 2007, the Company began offering short-
term unsecured loans to customers who reside throughout the United Kingdom through its internet
distribution platform.
On September 15, 2006, the Company, through its wholly-owned subsidiary Cash America Net
Holdings, LLC, purchased substantially all of the assets of The Check Giant LLC (“TCG”), which offered
short-term cash advances exclusively over the internet under the name “CashNetUSA.” The Company paid
an initial purchase price of approximately $35.9 million in cash at closing and transaction costs of
approximately $2.9 million.
As of December 31, 2007, the Company had 942 total locations offering products and services to its
customers. The Company operates in three segments: pawn lending, cash advance and check cashing.
As of December 31, 2007, the Company’s pawn lending operations consisted of 499 pawnshops,
including 485 Company-owned units and 14 unconsolidated franchised units located in 22 states in the
United States. During the three-year period ended December 31, 2007, the Company acquired 33 operating
units, established 15 locations, and combined or closed four locations for a net increase in owned pawn
lending units of 44. In addition, it acquired or opened seven franchise locations, and either terminated or
converted four locations to Company-owned locations.
At December 31, 2007, the Company’s cash advance operations consisted of 304 cash advance
locations in seven states and its internet distribution channel. For the three year period ended December 31,
2007, the Company acquired one location, established 60 locations and combined or closed 10 locations for
a net increase in cash advance locations of 51. CashNetUSA serves multiple markets through its internet
distribution channel and had cash advances outstanding in 32 states and in the United Kingdom as of
December 31, 2007.
As of December 31, 2007, the Company’s check cashing operations consisted of 134 franchised and
five company-owned check cashing centers in 18 states. For the three year period ended December 31,
2007, the Company established 31 locations and combined or closed 26 locations for a net increase in check
cashing locations of five.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on the
Company’s consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements 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 dates of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting periods. On an on-going basis,
management evaluates its estimates and judgments, including those related to revenue recognition,