Cash America 2007 Annual Report Download - page 68

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48
Interest Expense. Interest expense as a percentage of total revenue decreased to 1.7% in 2006 from 1.8%
in 2005. Interest expense increased $1.3 million, or 12.6%, to $11.9 million in 2006 as compared to $10.6
million in 2005. The increase was primarily due to the higher weighted average floating interest rate (6.2%
during 2006 compared to 4.7% during 2005). The average amount of debt outstanding decreased during
2006 to $160.7 million from $168.3 million during 2005. The effective blended borrowing cost was 6.6% in
2006 and 6.3% in 2005.
On December 19, 2006, the Company issued $60.0 million of senior unsecured long-term notes.
The notes were comprised of $35.0 million 6.09% senior notes due 2016 payable in five annual installment
payments of $7.0 million beginning December 19, 2012; and $25.0 million 6.21% senior notes due 2021
payable in eleven annual payments of $2.3 million beginning December 19, 2011. Net proceeds received
from the issuance of the notes were used to reduce the amount outstanding under the bank line of credit and
for general corporate purposes.
Interest Income. Interest income was $1.6 million for both 2006 and 2005. Interest income was comprised
of the interest earned on excess cash and on two subordinated notes denominated in Swedish kronor that the
Company received in the sale of the foreign pawn lending operations.
Foreign Currency Transaction Gain (Loss). The Company held two notes receivable denominated in
Swedish kronor in connection with its 2004 sale of its foreign pawn lending operations with a carrying value
of $9.8 million at December 31, 2006. Exchange rate changes between the United States dollar and the
Swedish kronor resulted in a net gain of $296,000 (net of a loss of $1.1 million from foreign currency
forward contracts) in 2006 and a net loss of $834,000 (net of a gain of $731,000 from foreign currency
forward contracts) in 2005. The foreign currency forward contracts totaling 68 million Swedish kronor
(approximately $9.9 million at maturity) were established by the Company in 2005 to minimize the financial
impact of currency market fluctuations.
Gain from Termination of Contract. In April 2006, the Company reached an agreement with a landlord
of a lending location to terminate the lease and vacate the property for $2.2 million. The Company recorded
a pre-tax net gain of $2.2 million ($1.4 million net of related taxes) from this transaction at that time. The
closure of this significant pawn lending location reduced consolidated earnings for the remainder of the
year.
Income Taxes. The Company’s effective tax rate for 2006 was 36.6% as compared to 36.8% for 2005.