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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
68
fair value option is elected shall be recognized in earnings as incurred and not deferred. SFAS 159 will be
effective for fiscal years beginning after November 15, 2007. The Company does not expect SFAS 159 to
have a material effect on the Company’s financial position or results of operations.
In December 2007, FASB issued Statement of Financial Accounting Standards No. 141, “Business
Combinations – Revised” (“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements for how
an acquirer in a business combination: recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; recognizes and
measures the goodwill acquired in the business combination or a gain from a bargain purchase price; and,
determines what information to disclose to enable users of the consolidated financial statements to evaluate
the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008. In the past, the Company has completed significant acquisitions.
The application of SFAS 141(R) will cause management to evaluate future transaction returns under
different conditions, particularly the near term and long term economic impact of expensing transaction
costs up front.
Reclassifications x Certain amounts in the consolidated financial statements for 2006 and 2005 have been
reclassified to conform to the presentation format adopted in 2007. These reclassifications have no effect on
net income previously reported.
3. Acquisitions
Pursuant to its business strategy of expanding its reach into new markets with new customers and new
financial services, 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”). TCG
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 and transaction costs of
approximately $2.9 million, and has continued to use the CashNetUSA trade name in connection with its
online operations.
The Company also agreed to pay up to five supplemental earn-out payments during the two-year
period after the closing. The amount of supplemental payments are based on a multiple of earnings
attributable to CashNetUSA’s business for the twelve months preceding the date of determining each
scheduled supplemental payment. Each supplemental payment is reduced by amounts previously paid. The
supplemental payments are to be paid in cash within 45 days of the payment measurement date. The
Company may, at its option, pay up to 25% of each supplemental payment in shares of its common stock
based on an average share price as of the measurement date thereby reducing the amount of the cash
payment. Management expects all of these supplemental payments will be accounted for as goodwill.
The first supplemental payment of approximately $33.8 million, which was paid in February 2007 in
cash, was based on the trailing twelve months earnings of CashNetUSA through December 31, 2006 and
reflects adjustments for amounts previously paid. A second payment of $43.4 million was determined as of
September 30, 2007 and was paid in cash in November 2007. Total purchase price payments through the
September 2007 measurement date were $113.1 million. Subsequent measurement dates of March 31 and
September 30, 2008 will be calculated at 5.0 times trailing twelve month earnings. As of December 31,
2007, the Company has accrued for the payment of approximately $22.0 million as an addition to goodwill
and accounts payable based on the defined multiple of 5.0 times trailing twelve months earnings through
December 31, 2007. Pursuant to the terms of the purchase agreement with CashNetUSA, payments