Cash America 2008 Annual Report Download

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Cash America International, Inc.
2008 Annual Report
New Frontiers

Table of contents

  • Page 1
    Cash America International, Inc. 2008 Annual Report New Frontiers

  • Page 2
    ... have long since been exhausted, opportunities remain for bold and forward-thinking companies to forge into uncharted business territory to meet customer needs. Cash America is just such a progressive company and has been a leader for the past 25 years in pushing the pawn industry to new heights...

  • Page 3
    .... Payroll" check cashing centers. For more information, visit the Company's Web sites at: www.cashamerica.com www.cashnetusa.com www.cashlandloans.com www.quickquid.co.uk www.strikegoldnow.com Cash America common shares are listed on the New York Stock Exchange under the symbol "CSH." Core PurPose...

  • Page 4
    ...'s Discussion and Analysis of Financial Condition and Results of Operations" and "Financial Statements and Supplementary Data" for amounts related to the gain on the sale of foreign notes in 2007 and the gain from the early termination of a lease contract in 2006. (b) Returns based on Net income for...

  • Page 5
    ...eld on which we are playing today. And I recognize that you do not pay management to stare at blank screens. You pay us to skillfully activities related to our short-term cash advance product. Legislators and voters in Ohio, together with regulators in Florida, Pennsylvania and Minnesota, abruptly...

  • Page 6
    ...pawn loan products over the past two years have been consistent with historical patterns, and loss rates on our unsecured short-term cash advance products have actually declined. This is not a matter of happenstance. We have always managed this business with a focus on the long-term goal of building...

  • Page 7
    10

  • Page 8
    ...Cash America has charted new territory by offering cash advance loans, sometimes called payday loans. Much like a pawn loan, a cash advance is simple. The customer brings in paperwork such as a current pay stub and a bank statement to apply for the loan. Besides signing a promissory note and related...

  • Page 9
    10

  • Page 10
    ...'s bank account the next day, eliminating the need to travel to a lending location. In addition, CashNetUSA has recently begun testing an online installment loan product in Illinois and New Mexico, with plans to expand into additional states during late 2009, and offers 24-hour customer service...

  • Page 11
    10

  • Page 12
    ... markets in Mexico. The pawn business that Prenda Fácil operates in Mexico is entirely based on gold jewelry, much like the services Cash America provided in the United Kingdom and Sweden. This is certainly a simpler business model than a full-scale general merchandise pawn shop that Cash America...

  • Page 13
    10

  • Page 14
    ... to new heights. We've accomplished a number of firsts. Before Cash America, the pawn industry was traditionally a closely guarded business, but we were the first company to raise capital, including public equity, to build a chain of pawn lending locations, the first to develop formal training...

  • Page 15
    10

  • Page 16
    ... managers and basic jewelry appraisal education. This training program was recently recognized and won first place for Best Learning Center Web Site as part of the Learn.com Empowerment Awards. Many members of our operations team also participate in Cash America University, a week-long educational...

  • Page 17
    10

  • Page 18
    ... cash advances, plus the ability to sell valuepriced merchandise from unredeemed pawn loans. The Prenda Fácil acquisition and the innovation of online customer-centric solutions only add to our growth potential. Our business prospects are focused on the strength and stability of our U.S. pawn shop...

  • Page 19
    ... Pawn, SuperPawn, Prenda Fácil, CashNetUSA, Cashland and Cash America Payday Advance locations and market coverage as of December 31. lending locations As of December 31 u.s. PaWn 2008 Texas ...200 Florida ...69 Nevada ...26 Tennessee...22 Louisiana ...20 Illinois ...19 Arizona ...18 Georgia...

  • Page 20
    ... lending counterparts." (4) "In order to provide a valuable service, payday lenders choose to keep longer business hours and operate a higher density of stores than traditional lenders such as banks. The cost of convenience is lower profitability." (5) (1) (2) July 2007 study, "Expanding Credit...

  • Page 21
    ... Advance Centers, Inc. Source: SNL Financial LC, Charlottesville, VA. Total Lending Locations as of December 31 1,000 Gross Lending Assets (in millions, as of December 31) $350 $300 800 $250 600 $200 $150 $100 200 $50 0 $0 Card Services Cash Advances Internet* Cash Advances Storefront* Pawn Loans...

  • Page 22
    ... 7th Street Fort Worth, Texas (Address of principal executive offices) 76102 - 2599 (Zip Code) Registrant's telephone number, including area code: (817) 335-1100 Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock...

  • Page 23
    ... ...102 Item 9A. Controls and Procedures...102 Item 9B. Other Information ...102 PART III Item 10. Directors, Executive Officers and Corporate Governance ...102 Item 11. Executive Compensation ...103 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 24
    ... Corporation ("Mr. Payroll"), the Company offers check cashing services through 128 franchised and five company-owned check cashing centers. Many of the Company's pawn and cash advance locations also offer check cashing services and other retail financial services such as stored-value cards, money...

  • Page 25
    ... quarter of 2008, the Company's online business and its Ohio storefronts, including the remaining Ohio Cashland locations, began offering customers short-term unsecured loans governed by the Ohio Second Mortgage Loan statute, and most of the remaining Ohio Cashland locations also began offering gold...

  • Page 26
    .... The Company's principal executive offices are located at 1600 West 7th Street, Fort Worth, Texas 76102-2599, and its telephone number is (817) 335-1100. As used in this report, the term "Company" includes Cash America International, Inc. and its subsidiaries, unless the context otherwise requires...

  • Page 27
    ... willing to lend against an item. A sustained increase or decrease in the market price of gold can cause a related increase or decrease in the amount of the pawnshop's loan portfolio and related finance and service charge revenue. Pawn loans at the Company's Mexico operations are generally made for...

  • Page 28
    ... used merchandise; however, the Company offers customers a 30day satisfaction guarantee, whereby customers can return merchandise and receive a full refund, a replacement item of comparable value or store credit. Customers may purchase merchandise on a layaway plan under which the customer makes an...

  • Page 29
    ... Kingdom. Cash advance products offered under the CSO program were available at 249 locations and through the CashNetUSA website. In connection with the Company's card services business, the Company provides marketing and loan processing services for a third-party bank issued line of credit made...

  • Page 30
    ...of its pawnshop and payday advance locations. Other financial services include the sale of stored-value cards, money orders and money transfers, among others. As of December 31, 2008, Mr. Payroll's operations consisted of 128 franchised and five company-owned check cashing centers in 16 states. Each...

  • Page 31
    ...who reports to the Chief Executive Officer. The Company's administrative functions are coordinated by nine Senior Vice Presidents and 24 Vice Presidents of various departments located at the Company's Field Support Center in Fort Worth, Texas and in its home office for the Internet Services Division...

  • Page 32
    ... on-the-job training. A new employee is introduced to the business through an orientation program and through training programs covering job-appropriate topics such as pawn lending, cash advances, layaways, merchandising, collections, anti-money laundering, compliance, and general administration of...

  • Page 33
    ... lend on an unsecured as well as a secured basis. Other lenders may and do lend money on terms more favorable than those offered by the Company. According to the Community Financial Services Association's web site, industry analysts estimate that there are more than 22,000 cash advance locations...

  • Page 34
    ...disclosure requirements under the Federal Truth in Lending Act (and Federal Reserve Regulation Z under that Act) in connection with disclosing the interest, fees, total payments and annual percentage rate related to each pawn loan transaction. Additional federal regulations governing pawn operations...

  • Page 35
    ...of its cash advance locations and over the internet. Each state in which the Company originates cash advance products, including cash advances made online, has specific laws dealing with the conduct of this business. The same regulations generally apply to cash advances made both in physical lending...

  • Page 36
    ... are allowed under applicable state law; Requiring that any rates or fees charged are permitted by state or federal law; Providing customers the right to rescind any cash advance transaction on or before the close of the following business day without incurring any charges on the loan; Promoting...

  • Page 37
    ... of loan products, including cash advances, though it does not apply to pawn loans. The Company does not have any loan products bearing an interest rate of 36% per annum or less, as the Company believes the losses and servicing costs associated with lending to the Company's traditional customer base...

  • Page 38
    ... and Co-Chief Executive Officer of Mr. Payroll Corporation from February 1998 to February 1999 before returning to the position of President and Chief Operating Officer of the Company. Timothy S. Ho became President - Internet Services Division on October 1, 2008. Mr. Ho joined CashNetUSA in January...

  • Page 39
    administration from Auburn University and a master's degree in business management from the University of Central Texas. Thomas A. Bessant, Jr. has been the Company's Executive Vice President - Chief Financial Officer since July 1998. He joined the Company in May 1993 as Vice President - Finance and...

  • Page 40
    ...effectively lend on an item of collateral. Such reductions could adversely affect pawn loan balances, pawn loan redemption rates, inventory balances, inventory mixes and gross profit margins. A decreased demand for the Company's products and specialty financial services and failure of the Company to...

  • Page 41
    ... a timely basis and could result in a deterioration of the Company's ability to write and process online cash advances, perform efficient storefront lending and merchandise disposition activities, provide customer service, perform collections activities, or perform other necessary business functions...

  • Page 42
    ...the Company's pawn loans are secured by gold jewelry. The Company's pawn service charges, sales proceeds and ability to dispose of excess jewelry inventory at an acceptable margin depend on the value of gold. A significant decline in gold prices could result in decreases in merchandise sales margins...

  • Page 43
    ... and financial condition. Adverse real estate market fluctuations could affect the Company's profits. The Company leases most of its locations. A significant rise in real estate prices or real property taxes could result in an increase in store lease costs as the Company opens new locations and...

  • Page 44
    ... 2008, the Company owned the real estate and buildings for nine of its pawnshop locations. The Company's headquarters are located in a nine-story building adjacent to downtown Fort Worth, Texas. The Company purchased its headquarters building in January 1992. CashNetUSA's cash advance operations and...

  • Page 45
    ... Financial Statements." ITEM 3. LEGAL PROCEEDINGS On August 6, 2004, James E. Strong filed a purported class action lawsuit in the State Court of Cobb County, Georgia against Georgia Cash America, Inc., Cash America International, Inc. (together with Georgia Cash America, Inc., "Cash America...

  • Page 46
    ... law, the Georgia Industrial Loan Act and Georgia's Racketeer Influenced and Corrupt Organizations Act. Community State Bank ("CSB") for some time made loans to Georgia residents through Cash America's Georgia operating locations. The complaint in this lawsuit claims that Cash America was the true...

  • Page 47
    ... high, low and closing sales prices of common stock as quoted on the composite tape of the New York Stock Exchange and cash dividend declared per share during 2008 and 2007 were as follows: First Quarter 2008 High ...Low...Close...Cash dividend declared per share ...2007 High ...Low...Close...Cash...

  • Page 48
    ...information with respect to purchases made by the Company of shares of its common stock during each of the months in 2008: Total Number of Shares Purchased as Part of Publicly Announced Plan... Total fourth quarter ...Total 2008...(1) Total Number of Shares Purchased 9,919(2) Average Price Paid Per ...

  • Page 49
    ... Pawn loans ...Cash advances, net ...Merchandise held for disposition, net ...Working capital...Total assets...Total debt ...Stockholders' equity ...Ratio Data at End of Year (a) Current ratio ...Debt to equity ratio ...Owned and Franchised Locations at Year End (a) Pawn lending operations ...Cash...

  • Page 50
    ...unsecured loans to customers who reside throughout the United Kingdom through its internet distribution platform. As of December 31, 2008, the Company had 994 total locations offering products and services to its customers. The Company operates in three segments: pawn lending, cash advance and check...

  • Page 51
    ... expectations, revenue for the next reporting period would be likewise affected. Due to the short-term nature of pawn loans, the Company can quickly identify performance trends. For 2008, $180.8 million, or 97.7%, of recorded finance and service charges represented cash collected from customers and...

  • Page 52
    ... consolidated statements of income. The Company charges off all cash advances once they have been in default for 60 days or sooner if deemed uncollectible. Recoveries on losses previously charged to the allowance are credited to the allowance when collected. The Company's online distribution channel...

  • Page 53
    ... Fair Value of a Financial Asset When the Market for That Asset Is Not Active," ("FSP FAS 157-3") which clarifies the application of SFAS 157 as it relates to the valuation of financial assets in a market that is not active for those financial assets. FSP FAS 157-3 became effective for the Company...

  • Page 54
    ... 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 related to the near-term and long...

  • Page 55
    ... the components of consolidated statements of operations as a percentage of total revenue for the periods indicated. Year Ended December 31, 2008 2007 2006 Revenue Finance and service charges ...Proceeds from disposition of merchandise...Cash advance fees ...Check cashing fees, royalties and other...

  • Page 56
    ... of year, owned ...Acquired ...Start-ups...Combined or closed ...End of year, owned ...Franchise locations at end of year ...Total pawnshop locations at end of year ...Average number of owned pawnshop locations in operation...Cash advances (c) Pawn locations offering cash advances at end of year...

  • Page 57
    ...by third-party lenders (a) (e) ...Aggregate cash advance customer balances due (gross) (a) (g) ...Number of states with online lending at end of year ...Number of foreign countries with online lending at end of year...Card services operations (h): Amount of cash advances processed on behalf of third...

  • Page 58
    ... ...Total locations offering cash advances at end of year ...Average total locations offering cash advances...Number of states with online lending at end of period...Number of foreign countries with online lending at end of period...Number of states and other jurisdictions with card services at end...

  • Page 59
    ... these cash advances under a line of credit offered on certain stored-value and payroll cards issued by such lender. The Company acquires a participation interest in the cash advance receivables generated through this program. Cash advance fees associated with the Company's card services activities...

  • Page 60
    ... from pawn loans, profit from the disposition of merchandise, cash advance fees less cash advance loss provision, and other revenue. Other revenue is comprised mostly of check cashing fees but includes royalties and small miscellaneous other revenue items generated through ancillary products offered...

  • Page 61
    ...card services business includes other miscellaneous fees related to those card services, such as marketing and processing fees. During 2008, the contribution of cash advance revenue from storefront activities decreased as the Company adjusted underwriting to reduce loss exposure and closed locations...

  • Page 62
    ...addition, the Company's decision to reduce the maximum loan term from 90 days to 60 days in 198 pawn locations in the last half of 2007 contributed to higher reported pawn loan yields and contributed to better performance in the portfolio, as customer payments of finance and service charges occurred...

  • Page 63
    of pawn loans secured by jewelry, the liquidation of jewelry inventory, and the sale of gold items purchased directly from customers. Proceeds from disposition of merchandise, excluding refined gold, increased $10.2 million, or 3.7%, in 2008, primarily due to the higher levels of retail sales ...

  • Page 64
    ... quarter of 2008, the Company's online business and its Ohio storefronts, including the remaining Ohio locations, began offering customers short-term unsecured loans governed by the Ohio Second Mortgage Loan statute, and most of the remaining Ohio Cashland locations also began offering gold buying...

  • Page 65
    ... and business metrics of the Company's operations. (c) Cash advances written by third-party lenders that were marketed, processed or 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 and card services...

  • Page 66
    ... in competition, and the closing of storefront locations during 2008. The components of these revenue items are as follows (dollars in thousands): Year Ended December 31, Pawn Lending Check cashing fees...$ 646 Royalties ...713 Other ...2,385 $ 3,744 2008 Cash Check Advance Cashing $ 4,908 $ 400...

  • Page 67
    ... business environment, which resulted in a one-time charge to earnings of $3.3 million in severance and related compensation expenses in 2008. Cash Advance Loss Provision. The Company maintains an allowance for losses on cash advances at a level projected to be adequate to absorb credit losses...

  • Page 68
    ...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 and card services distribution channels. (Note: The Company did not commence business in the card services distribution channel until the third quarter of 2008...

  • Page 69
    ... Company's pawn and cash advance locations and through the Company's internet and card services distribution channels. (Note: The Company did not commence business in the card services distribution channel until the third quarter of 2008). During 2008, the Company's online distribution channel sold...

  • Page 70
    ... from check cashing fees, royalties and other, which increased $516,000. Net revenue from pawn lending operations includes finance and service charges and profit from disposition of merchandise, both of which increased in 2007 as compared to 2006, as well as cash advance fees from pawn locations...

  • Page 71
    .... The Company also experienced a 24% increase in the volume of refined gold sold during 2007, which is generally in line with the increase in pawn loan balances for the period, primarily due to higher pawn loans on jewelry, the liquidation of jewelry inventory and the sale of gold items purchased...

  • Page 72
    ..., including 431 pawnshops and 304 cash advance locations. In 319 of these lending locations, the Company arranges for customers to obtain cash advance products from independent third-party lenders for a fee. Cash advance fees from same stores (stores that have been open for at least twelve months...

  • Page 73
    ...18.5% 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...

  • Page 74
    ...in 2006, primarily due to expanded product offerings and their success in pawn locations and revenue growth in cash advance units. However, this growth has been partially inhibited by lower fees from check cashing activities due to a lower volume of checks being cashed potentially due to an increase...

  • Page 75
    ... of a business that offers cash advances online, increased staffing levels and annual salary adjustments. In addition, total administrative expenses in 2006 were offset by a gain of $773,000 recognized from a partial insurance settlement in 2006 related to hurricanes in 2005. The Company realigned...

  • Page 76
    ... had established borrowing histories as a percent of all customers in the later half of the year. This change in mix was primarily in the portfolio of cash advances originated by the Company's online channel. In addition, management took steps to reduce losses in its storefront business beginning in...

  • Page 77
    ... 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...

  • Page 78
    ... 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. Income Taxes. The Company's effective tax rate for 2007 was 36...

  • Page 79
    ...follows (dollars in thousands): 2008 2007 2006 Operating activities cash flows ...$ Investing activities cash flows: Pawn loans ...Cash advances ...Acquisitions ...Property and equipment additions...Proceeds from sale of foreign notes ...Proceeds from insurance claims...Proceeds from termination of...

  • Page 80
    ...Insurance Services, Inc. (collectively, "PBSI"), a group of companies in the business of, among other things, providing loan processing services for, and participating in receivables associated with, a bank issued line of credit made available by the bank on certain stored-value debit cards the bank...

  • Page 81
    ...unsecured long-term notes, due in November 2012, pursuant to a Credit Agreement dated November 21, 2008. Interest is charged, at the Company's option, at either LIBOR plus a margin of 3.50% or at the agent's base rate plus a margin of 3.50%. The notes are payable through scheduled quarterly payments...

  • Page 82
    ...As of December 31, 2008, the CSO program was available to consumers in 249 of the Company's lending locations in Texas and online borrowers located in the states of Maryland and Texas. When a consumer executes a credit services agreement with the Company, the Company agrees, for a fee payable to the...

  • Page 83
    ... are included in "Accounts payable and accrued expenses" in the consolidated balance sheets. The Company believes that this amount is adequate to absorb credit losses from cash advances expected to be assigned to the Company or acquired by the Company as a result of its guaranty obligations. 60

  • Page 84
    ... who offer products and services at the Company's locations, fluctuations in the price of gold, changes in competition, the ability of the Company to open new operating units in accordance with its plans, economic conditions, real estate market fluctuations, interest rate fluctuations, changes...

  • Page 85
    ... items of value to their pledge in order to obtain the desired loan amount. However, those customers unable or unwilling to provide additional collateral would receive lower loan amounts, possibly resulting in a lower balance of pawn loans outstanding for the Company. Foreign Currency Exchange...

  • Page 86
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm ...64 Report of Management on Internal Control over Financial Reporting ...65 Consolidated Balance Sheets - December 31, 2008 and 2007 ...66 ...

  • Page 87
    ... stock was acquired by the Company in a purchase business combination in December 2008. We have also excluded Creazione from our audit of internal control over financial reporting. Creazione's total assets and total revenue were less than 7.9% and 0.2%, respectively of the related consolidated...

  • Page 88
    ...of internal control over financial reporting as of December 31, 2008 because 80% of its outstanding stock was acquired by the Company in a purchase business combination in December 2008. Creazione's total assets and total revenue were less than 7.9% and 0.2%, respectively of the related consolidated...

  • Page 89
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2008 2007 Assets Current assets: Cash and cash equivalents...Pawn loans ...Cash advances, net ...Merchandise held for disposition, net ...Finance and service charges ...

  • Page 90
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Year Ended December 31, 2007 2006 2008 Revenue Finance and service charges ...$ Proceeds from disposition of merchandise ...Cash advance fees ...Check cashing fees, royalties and...

  • Page 91
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except share data) Year Ended December 31, 2007 Shares Amount 30,235,164 $ 3,024 161,683 (2,015) 3,060 853 163,581 287,962 79,346 (4,128) 363,180 Shares Common stock Balance at end of ...

  • Page 92
    ... prepaid expenses ...Accounts payable and accrued expenses ...Customer deposits, net...Current income taxes, net ...Excess income tax benefit from stock-based compensation ...Deferred income taxes, net ...Net cash provided by operating activities ...Cash Flows from Investing Activities: Pawn loans...

  • Page 93
    ...a bank issued line of credit made available by the bank on certain stored-value debit cards the bank issues. As of December 31, 2008, the Company had 994 total locations and an internet-based distribution platform offering products and services to its customers. The pawn lending operations consisted...

  • Page 94
    ...of collection of finance and service charges. For loans not repaid, the carrying value of the forfeited collateral ("merchandise held for disposition") is stated at the lower of cost (cash amount loaned) or market. Revenue is recognized at the time that merchandise is sold. Interim customer payments...

  • Page 95
    ... with the Company's card services business, the Company provides marketing and loan processing services for a third-party bank issued line of credit made available by the bank on certain stored-value debit cards the bank issues ("Processing Program"). The Company also acquires a participation...

  • Page 96
    ...at the time of sale. Cash received upon the sale of forfeited merchandise is classified as a recovery of principal on unredeemed loans under investing activities and any related profit or loss on disposed merchandise is included in operating activities in the period when the merchandise is sold. The...

  • Page 97
    ... and Administration Expenses x Operations expenses include expenses incurred for personnel, occupancy and marketing that are directly related to the pawn lending, cash advance and check cashing operations. These costs are incurred within the lending locations and the Company's call centers for 74

  • Page 98
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) customer service and collections. In addition, similar costs related to non-home office management supervision, oversight of locations and similar costs incurred by the Retail Services Division ...

  • Page 99
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and emphasizes ...

  • Page 100
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 ...

  • Page 101
    ...Insurance Services, Inc. (collectively, "PBSI"), a group of companies in the business of, among other things, providing loan processing services for, and participating in receivables associated with, a bank issued line of credit made available by the bank on certain stored-value debit cards the bank...

  • Page 102
    ... CashNetUSA 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...

  • Page 103
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, 2008, the original purchase price of CashNetUSA, including the accrued contingent payments as of December 31, 2006 and the earn-out payments through December 31, 2008, were ...

  • Page 104
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2008 Number of stores acquired: Pawnshops ...Purchase price allocated to: Pawn loans...Finance and service charges receivable...Cash advances and fees receivable...Merchandise held for ...

  • Page 105
    ... Cashland locations also began offering gold buying services. Also, in the fourth quarter of 2008, 24 of Cashland's Ohio locations were combined or closed. The Company discontinued offering single payment third-party bank-originated cash advances to its Texas, Florida and North Carolina customers...

  • Page 106
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2008 Allowance for Company-owned cash advances Balance at beginning of year ...Cash advance loss provision...Charge-offs...Recoveries ...Balance at end of year ...Accrual for third-party lender-...

  • Page 107
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Goodwill x Changes in the carrying value of goodwill for the years ended December 31, 2008 and 2007 were as follows (in thousands): Pawn Lending $ 143,556 64,108 (2,655) $ 205,009 $ 141,700 1,632...

  • Page 108
    ... the Company's option, at either USD LIBOR plus a margin or at the agent's base rate. The margin on the line of credit varies from 0.875% to 1.875% (1.375% at December 31, 2008), depending on the Company's cash flow leverage ratios as defined in the amended agreement. The Company also pays a fee on...

  • Page 109
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) within its long-term facility. Therefore, these borrowings are reported as part of the line of credit and as long-term debt. In June 2008, the Company established a credit facility with a group ...

  • Page 110
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) million on December 28, 2012. Net proceeds received from the issuance of the notes were used to reduce the amount outstanding under the Company's line of credit and for general corporate purposes...

  • Page 111
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The components of the provision for income taxes and the income to which it relates for the years ended December 31, 2008, 2007 and 2006 are shown below (in thousands): 2008 132,803 37,709 129 ...

  • Page 112
    ... payday loans in Georgia in violation of Georgia's usury law, the Georgia Industrial Loan Act and Georgia's Racketeer Influenced and Corrupt Organizations Act. Community State Bank ("CSB") for some time made loans to Georgia residents through Cash America's Georgia operating locations. The complaint...

  • Page 113
    ... payment of taxes for shares issued under stock-based compensation plans. On April 20, 2005, the Company's Board of Directors authorized management to purchase up to a total of 1,500,000 shares of its common stock from time to time in open market transactions and terminated the existing open market...

  • Page 114
    ..., Inc. 401(k) Savings Plan is open to substantially all employees. Beginning January 1, 2006, new employees are automatically enrolled in this plan unless they elect not to participate. The Cash America International, Inc. Nonqualified Savings Plan is available to certain members of management...

  • Page 115
    ... 3, 2008, the Company entered into an interest rate cap agreement with a notional amount of $15.0 million of the Company's outstanding floating rate line of credit for a term of 36 months at a fixed rate of 3.25%. These interest rate cap agreements have been determined to be perfectly effective cash...

  • Page 116
    ...the Internal Revenue Code of 1986, as amended), nonqualified stock options and restricted stock units. At December 31, 2008, 1,082,849 shares were reserved for future grants under these equity compensation plans. Historically, the Company has purchased its shares on the open market from time to time...

  • Page 117
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock options outstanding and exercisable as of December 31, 2008, are summarized below (shares in thousands): Options Outstanding Weighted Average Exercise Price 7.83 9.84 13.84 9.42 Weighted ...

  • Page 118
    ...: pawn lending, cash advance and check cashing. The cash advance and check cashing segments are managed separately due to the different operational strategies required and, therefore, are reported as separate segments. Check cashing fees, royalties and other income at pawn lending locations, which...

  • Page 119
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Information concerning the operating segments is set forth below (in thousands): Year Ended December 31, 2008: Revenue Finance and service charges ...Proceeds from disposition of merchandise ...Cash advance fees...Check cashing fees, royalties and...

  • Page 120
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Pawn Lending $ 149,472 334,036 43,676 2,816 530,000 204,929 325,071 181,081 15,377 26,882 18,579 241,919 $ 83,152 $ 37,645 Cash Advance (2) $ - - 151,429 9,160 160,589 - 160,589 Check Cashing $ -...

  • Page 121
    ...equipment" for the Pawn Lending segment for the years ended December 31, 2008, 2007 and 2006 are substantially all of the capital expenditures for the development of the new proprietary point-of-sale system software and other general corporate investment expenditures. (2) The Cash Advance segment is...

  • Page 122
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended December 31, 2007: Revenue Cash advance fees...Check cashing fees, royalties and other...Total revenue ...Expenses Operations ...Cash advance loss provision...Administration......

  • Page 123
    ... by Rule 10b5-1 under the Securities and Exchange Act of 1934 and with the Company's policies with respect to insider sales (the "Plan"). From November 2005 through June 2006, the Company's Chief Executive Officer exercised stock options and sold Company shares under the Plan. The Chief Executive...

  • Page 124
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) SFAS 157 defines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date ...

  • Page 125
    CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 23. Quarterly Financial Data (Unaudited) The Company's operations are subject to seasonal fluctuations. Net income tends to be highest during the first and fourth calendar quarters, when the ...

  • Page 126
    ..., EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information required by this Item 10 with respect to directors, the Audit Committee of the Board of Directors and Audit Committee financial experts is incorporated into this report by reference to the Company's Proxy Statement for the 2009 Annual Meeting...

  • Page 127
    ... at Cash America International, Inc., 1600 West 7th Street, Fort Worth, Texas 76102. In 2008, Daniel R. Feehan, Chief Executive Officer of the Company, filed his annual certification with the New York Stock Exchange ("NYSE") regarding the NYSE's corporate governance listing standards as required by...

  • Page 128
    ... duly authorized, on February 27, 2009. CASH AMERICA INTERNATIONAL, INC. By: /s/ DANIEL R. FEEHAN Daniel R. Feehan Chief Executive Officer and President Pursuant to the requirements of the Securities and Exchange Act of 1934, the report has been signed by the following persons on February 27...

  • Page 129
    ... STATEMENT SCHEDULE To the Board of Directors and Stockholders of Cash America International, Inc. Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February 27, 2009 appearing in this Annual...

  • Page 130
    SCHEDULE II CASH AMERICA INTERNATIONAL, INC. VALUATION AND QUALIFYING ACCOUNTS For the Three Years Ended December 31, 2008 (dollars in thousands) Balance at Beginning of Period Additions Charged Charged To To Expense Other Balance at End of Period Description Allowance for valuation of inventory - ...

  • Page 131
    ... Agreement dated July 9, 2006 by and among Cash America International, Inc. and certain of its subsidiaries, The Check Giant, LLC and its members and subsidiaries. (x) (Exhibit 2.1) Articles of Incorporation of Cash America Investments, Inc. filed in the office of the Secretary of State of Texas...

  • Page 132
    ...Exhibit 10.1) Amendment No. 1 (December 11, 2008) to Note Agreement dated as of December 19, 2006 among the Company and the Purchasers named therein. Revolving Credit Facility Agreement dated May 7, 2008 between Cash America International, Inc. and Barclays Bank PLC. (v) (Exhibit 10.1) 109 10.2 10...

  • Page 133
    ...10.1) Code of Ethics. The Company's Code of Business Conduct and Ethics may be accessed via the Company's website at www.cashamerica.com. Subsidiaries of Cash America International, Inc. Consent of PricewaterhouseCoopers LLP. Certification of Chief Executive Officer. Certification of Chief Financial...

  • Page 134
    ..., 2007. Annual Report on Form 10-K for the year ended December 31, 2007 Current report on Form 8-K dated March 5, 2008. Current report on Form 8-K dated May 6, 2008. Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. Current report on Form 8-K dated July 7, 2008. Quarterly Report on...

  • Page 135
    ...Inc...Georgia Cash America, Inc...Cash America, Inc. of North Carolina ...Cash America Pawn, Inc. of Ohio ...Cash America, Inc. of Alabama...Cash America, Inc. of Colorado ...Cash America, Inc. of Indiana ...Cash America Holding, Inc...Mr. Payroll Corporation...Express Cash International Corporation...

  • Page 136
    ..., LLC ...Cash America Net of New Hampshire, LLC ...Cash America Net of New Mexico, LLC...CashNetUSA CO, LLC ...CashNetUSA, OR, LLC ...The Check Giant NM, LLC ...Cash America Net of North Dakota, LLC...Cash America Net of Ohio, LLC ...Ohio Consumer Financial Solutions, LLC ...Cash America Net of...

  • Page 137
    ... Innovations, LLC...Primary Credit Processing, LLC...Primary Payment Solutions, LLC ...Primary Credit Services, LLC ...Mexican Structure Delaware Delaware Delaware Delaware Cash America of Mexico, Inc. (owns 80%), Capital International, S.á.R.L., a Luxemborg limited liability company (owns 10...

  • Page 138
    ...-12547, 333-97273, 333-95827, 333-26339, 03318150, and 033-59733) of Cash America International, Inc. of our report dated February 27, 2009 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. We also consent to the...

  • Page 139
    ... information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b) Date: February 27, 2009 /s/ Daniel R. Feehan Daniel R. Feehan Chief Executive Officer and President

  • Page 140
    ...fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b) Date: February 27, 2009 /s/ Thomas A. Bessant, Jr. Thomas A. Bessant, Jr. Executive Vice President and Chief Financial Officer

  • Page 141
    ... with the Annual Report of Cash America International, Inc. (the "Company") on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel R. Feehan, Chief Executive Officer and President of the Company, certify...

  • Page 142
    ... Annual Report of Cash America International, Inc. (the "Company") on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas A. Bessant, Jr., Executive Vice President and Chief Financial Officer of the Company...

  • Page 143
    ... Internet Services Division other information Corporate Address Cash America International Building 1600 West 7th Street Fort Worth, Texas 76102-2599 (817) 335-1100 www.cashamerica.com www.cashnetusa.com www.quickquid.co.uk www.cashlandloans.com www.strikegoldnow.com Investor Relations Information...

  • Page 144
    1600 West 7th Street Fort Worth, Texas 76102-2599 (817) 335-1100 www.cashamerica.com www.cashnetusa.com www.quickquid.co.uk www.cashlandloans.com www.strikegoldnow.com