Cash America 2008 Annual Report Download - page 100

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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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 related to the near-term and long-term economic impact of expensing transaction
costs.
In March 2008, FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging
Activities—an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced
disclosures concerning (1) the manner in which an entity uses derivatives (and the reasons it uses them), (2)
the manner in which derivatives and related hedged items are accounted for under SFAS 133 and
interpretations thereof, and (3) the effects that derivatives and related hedged items have on an entity's
financial position, financial performance, and cash flows. The standard is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not
expect SFAS 161 to have a material effect on the Company’s financial position or results of operations.
In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible
Assets,” (“FSP FAS 142-3”) which amends the list of factors an entity should consider in developing
renewal or extension assumptions used in determining the useful life of recognized intangible assets under
SFAS No. 142, “Goodwill and Other Intangible Assets.” The new guidance applies to (1) intangible assets
that are acquired individually or with a group of other assets and (2) intangible assets acquired in both
business combinations and asset acquisitions. Under FSP FAS 142-3, entities estimating the useful life of a
recognized intangible asset must consider their historical experience in renewing or extending similar
arrangements or, in the absence of historical experience, must consider assumptions that market participants
would use about renewal or extension. The standard is effective for financial statements issued for fiscal
years beginning after December 15, 2008. The Company does not expect this standard to have a material
impact on the consolidated results of operations or financial condition.
Reclassifications x Certain amounts in the consolidated financial statements for 2007 and 2006 have been
reclassified to conform to the presentation format adopted in 2008. These reclassifications have no effect on
net income previously reported.
3. Acquisitions
Prenda Fácil
Pursuant to its business strategy of expanding its reach into new markets, the Company, through its
wholly-owned subsidiary, Cash America of Mexico, Inc., on December 16, 2008, acquired 80% of the
outstanding stock of Creazione Estilo, S.A. de C.V., SOFOM, E.N.R., a Mexican sociedad anónima de
capital variable, sociedad financiera de objeto múltiple, entidad no regulada (“Creazione”), which, as of
December 31, 2008, operates a chain of 112 pawnshops in Mexico under the name “Prenda Fácil.” The
Company paid an aggregate initial consideration of $90.5 million, net of cash acquired, of which $82.6
million was paid in cash, including acquisition costs of approximately $3.4 million. The remainder of the
initial consideration was paid in the form of 391,236 shares of the Company’s common stock with a fair
value of $7.9 million as of the closing date. In addition, the Company paid acquisition costs of
approximately $3.4 million. The Company also agreed to pay a supplemental earn-out payment in an
amount based on a five times multiple of the consolidated earnings of Creazione’s business as specifically
defined in the Stock Purchase Agreement (generally Creazione’s earnings before interest, income taxes,
depreciation and amortization expenses) for the twelve month period ending June 30, 2011, reduced by
amounts previously paid. If the calculation of the supplemental payment produces an amount that is zero or
less, there would be no supplemental payment. This supplemental payment is expected to be paid in cash on