Cash America 2007 Annual Report Download - page 70

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December 31, 2007. The next measurement date will be March 31, 2008. The magnitude of these payments
could be significant if the past success of the business continues throughout 2008.
In August 2007, the Company received gross proceeds in the amount of $16.8 million on the sale of
notes receivable that it had received in September 2004 as part of the proceeds from its sale of Svensk
Pantbelåning, its former Swedish pawn lending subsidiary to Rutland Partners LLP, for cash and two
subordinated notes receivable. One of the notes receivable was convertible into approximately 27.7% of the
parent company of Svensk Pantbelåning on a fully-diluted basis. In August 2007, Rutland Partners LLP sold
Svensk Pantbelåning to a third party who also purchased the notes receivable from the Company. The
Company’s total proceeds of $16.8 million represent $12.4 million in the repayment of principal, including
$0.3 million of accrued interest owed on notes receivable and $4.4 million for the value of its conversion
rights under the convertible note. For the year ended December 31, 2007, the Company recognized a pre-tax
gain of approximately $6.3 million from the sale of the notes and related rights. Proceeds from the sale
were used for general corporate purposes, including the repayment of debt and the repurchase of shares in
the open market pursuant to an existing share repurchase authorization.
Management anticipates that capital expenditures for 2008 will be approximately $50 to
$60 million, primarily for the remodeling of selected operating units, for the continuing development and
enhancements to communications and information systems, including the multi-year project to upgrade the
Company’s proprietary point-of-sale and information system, and for the establishment of approximately
three to ten combined total of new cash advance-only locations and pawnshops. The additional capital
required to make supplemental acquisition payments related to the CashNetUSA acquisition and to pursue
other acquisition opportunities is not included in the estimate of capital expenditures because of the
uncertainties surrounding such payments or any potential transaction of this nature at this time.
Management expects the implementation of the new point-of-sale system, which will occur during 2008,
will result in a substantial increase in depreciation expense.
Cash flows from financing activities. During 2007, the Company borrowed $90.1 million under
its bank lines of credit. The Company reduced the balance owed on its senior unsecured notes by
$21.1 million through the scheduled principal payments. Additional uses of cash included $4.1 million for
dividends paid. On April 20, 2005, the Board of Directors authorized the Company’s repurchase of up to a
total of 1,500,000 shares of its common stock (the “2005 authorization”). At its regularly scheduled
meeting of its Board of Directors on October 24, 2007, the Board established a new authorization (the “2007
authorization”) for the repurchase of 1,500,000 shares and ended the 2005 authorization. Management
expects to purchase shares of the Company from time to time in the open market, and funding will come
from operating cash flow. During the year ended December 31, 2007, 667,600 shares were purchased for an
aggregate amount of $23.6 million under the 2005 authorization and the 2007 authorization. In addition,
9,794 shares were acquired as partial payments of taxes for shares issued under stock-based compensation
plans for an aggregate amount of $408,000. During 2007, stock options for 69,854 shares were exercised
which generated $0.8 million of additional equity.
In March 2007, the Company amended its line of credit to extend the final maturity by two years, to
March 2012. The amended credit agreement also contained a provision for the ratable $50.0 million
increase in the committed amounts, up to $300.0 million, upon the Company’s request and approval by the
lenders. The Company exercised the increase provision on February 29, 2008. As a result, as of that date,
the committed amount under its line of credit is $300.0 million. The line of credit agreement and the senior
unsecured notes require that the Company maintain certain financial ratios. The Company is in compliance
with all covenants and other requirements set forth in its debt agreements. A significant decline in demand
for the Company’s products and services may cause the Company to reduce its planned level of capital
expenditures and lower its working capital needs in order to maintain compliance with the financial ratios in
those agreements. A violation of the credit agreement or the senior unsecured note agreements could result
in an acceleration of the Company’s debt and increase the Company’s borrowing costs and could adversely
affect the Company’s ability to renew its existing credit facility or obtain new credit on favorable terms in