Cash America 2007 Annual Report Download - page 69

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49
LIQUIDITY AND CAPITAL RESOURCES
The Company’s cash flows and other key indicators of liquidity are summarized as follows ($ in
thousands):
Year Ended December 31,
2007 2006
2005
Operating activities cash flows ......................................................... $ 273,073 $ 161,812 $ 123,320
Investing activities cash flows:
Pawn loans ................................................................................... (21,761) (26,359) (19,697)
Cash advances.............................................................................. (161,904) (77,349) (45,828)
Acquisitions ................................................................................. (82,557) (64,927) (19,937)
Property and equipment additions ............................................... (70,097) (46,355) (27,255)
Proceeds from sale of foreign notes............................................. 16,589 ņ ņ
Proceeds from insurance claims................................................... 1,416 1,934 530
Proceeds from termination of contract and disposition of assets. ņ 2,198 486
Financing activities cash flows ......................................................... 42,218 55,917 (7,870)
Working capital................................................................................. $ 302,275 $ 259,813 $ 232,556
Current ratio...................................................................................... 3.8x 3.2x 4.8x
Merchandise turnover ....................................................................... 2.7x 2.7x 2.7x
Cash flows from operating activities. Net cash provided by operating activities from continuing
operations was $273.1 million for 2007, an increase of 68.8% compared to the prior year. Net cash
generated by the Company’s pawn lending operations, cash advance operations and check cashing
operations were $99.8 million, $172.7 million and $594,000, respectively. The improvement in cash flows
from operating activities in 2007 as compared to 2006 was primarily due to the improvement in results of
pawn lending operations, the addition of CashNetUSA and the growth and development of cash advance
locations opened in recent periods.
Historically, the Company’s finance and service charge revenue is highest in the fourth fiscal
quarter (October through December) due to higher average loan balances. Proceeds from the disposition of
merchandise are generally highest in the Company’s fourth and first fiscal quarters (October through March)
due to the holiday season and the impact of tax refunds. The net effect of these factors is that income from
continuing operations typically is highest in the fourth and first fiscal quarters and likewise the Company’s
cash flow is generally greatest in these two fiscal quarters.
Cash flows from investing activities. The Company’s pawn lending activities used cash of $21.8 million
and cash advance activities used cash of $161.9 million during the current period. The Company also
invested $70.1 million in property and equipment, including $17.6 million toward the development of a new
point-of-sale system and $52.5 million for the establishment of new locations, the remodeling of certain
locations, as well as development and enhancements to communications and information systems. In
addition, the Company received $1.4 million of proceeds from insurance claims.
During the year ended December 31, 2007, the Company’s acquisition of pawnshop assets used
cash of $3.8 million. Additionally, the Company made two supplemental payments of $33.8 million and
$43.4 million in February 2007 and November 2007, respectively, and paid other acquisition costs of
approximately $1.7 million in connection with the acquisition of substantially all of the assets of The Check
Giant LLC (“TCG”). To the extent that the defined multiple of earnings attributable to the business acquired
from TCG exceeds the total amounts paid through the supplemental payment measurement dates, as defined
in the asset purchase agreement, the Company will make additional payments to the sellers in May and
November of 2008. As of December 31, 2007, the Company has accrued to accounts payable approximately
$22.0 million for this payment based on the defined multiple of trailing twelve months earnings through