Cash America 2007 Annual Report Download - page 60

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40
The following table summarizes the cash advance loss provision and combined allowance for losses
and accrued third-party lender losses for the years ended and at December 31, 2007 and 2006, and contains
certain non-GAAP measures with respect to the cash advances written by third-party lenders that are not
included in the Company’s consolidated balance sheets and related statistics. The Company believes that
presenting these non-GAAP measures is meaningful and necessary because management evaluates and
measures the cash advance portfolio performance on an aggregate basis including its evaluation of the loss
provision for the Company-owned portfolio and the third-party lender-owned portfolio that the Company
guarantees ($ in thousands).
Year Ended December 31,
2007 2006
Cash advance loss provision:
Loss provision on Company-owned cash advances ....................... $ 154,563 $ 59,284
Loss provision on third-party owned cash advances ...................... 675 279
Combined cash advance loss provision............................................. $ 155,238 $ 59,563
Charge-offs, net of recoveries ........................................................... $ 148,400 $ 46,080
Cash advances written:
By the Company (a)......................................................................... $1,370,167 $ 817,186
By third-party lenders (b) (c)............................................................. 654,760 360,577
Combined cash advances written (b) (d) .............................................. $2,024,927 $1,177,763
Combined cash advance loss provision as a % of combined cash
advances written (b)(d) ...................................................................... 7.7% 5.1%
Charge-offs (net of recoveries) as a % of combined cash advances
written (b)(d) .................................................................................... 7.3% 3.9%
(a) Cash advances written by the Company for its own account in pawn locations, cash advance locations and
through the internet distribution channel.
(b) Non-GAAP presentation. For informational purposes and to provide a greater understanding of the
Company’s businesses. Management believes that information provided with this level of detail is
meaningful and useful in understanding the activities and business metrics of the Company’s operations.
(c) Cash advances written by third-party lenders that were arranged by the Company on behalf of the third-party
lenders, all at the Company’s pawn and cash advance locations and through the Company’s internet
distribution channel.
(d) Includes (i) cash advances written by the Company, and (ii) cash advances written by third-party lenders
that were arranged by the Company on behalf of the third-party lenders, all at the Company’s pawn and
cash advance locations and through the Company’s internet distribution channel.
During 2007, the Company’s online distribution channel sold selected cash advances which had
been previously written off. These sales generated proceeds of $4.2 million related to loans originated after
the acquisition of the online distribution channel. Those proceeds were recorded as recoveries on losses
previously charged to the allowance for losses.
Depreciation and Amortization. Depreciation and amortization expense as a percentage of total revenue
decreased to 3.4% in 2007 from 3.9% in 2006. Total depreciation and amortization expenses increased $4.8
million, or 17.6%, primarily due to remodeling expenditures for storefront and lending locations in 2007 and
2006, the increase in operating locations and the amortization of certain intangible assets obtained in
acquisitions.
During 2008, the Company expects to deploy the first phase of its new proprietary point-of-sale
system for its cash advance business in its storefront locations and the underlying platform that will serve its
cash advance storefronts and pawn locations. Upon initial deployment, the Company will begin
depreciating the costs currently capitalized during the system’s development and the costs of related
hardware. This will significantly increase depreciation expense in future periods.