Cash America 2008 Annual Report Download - page 102

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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
79
As of December 31, 2008, the purchase price of PI was allocated as follows (in thousands):
Cash advances .............................................................................................................................. $ 1,148
Property and equipment................................................................................................................ 195
Goodwill....................................................................................................................................... 6,084
Intangible assets............................................................................................................................ 1,220
Total consideration paid for acquisition ....................................................................................... $ 8,647
Settlement of note receivable .................................................................................................... (4,885)
Cash consideration payable ....................................................................................................... (2,700)
Total cash paid for acquisition .................................................................................................. $ 1,062
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 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 each supplemental payment was based on a multiple of earnings
attributable to CashNetUSA’s business as defined in the purchase agreement, for the twelve months
preceding the date of determining each scheduled supplemental payment. Each supplemental payment was
reduced by amounts previously paid. The supplemental payments were to be paid in cash within 45 days of
the payment measurement date. The Company had the option to 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; however, the Company did not issue any shares for any
supplemental payments. All of these supplemental payments were accounted for as goodwill. On October 31,
2008, the Company and TCG amended the underlying purchase agreement to provide that the Company will
pay 50%, or $34.7 million, of the November 2008 payment in cash and will defer payment of the remainder,
or $34.7 million, until March 31, 2009, with a deferral fee of $2.2 million, of which $0.9 million had been
paid as of December 31, 2008. Pursuant to the terms of the purchase agreement with TCG, payments
determined at the March 31 and September 30, 2007 measurement dates were calculated at 5.5 times trailing
twelve month earnings. The March 31, 2008 and the September 30, 2008 measurement dates were
calculated at 5.0 times trailing twelve month earnings. Going forward, in addition to the deferred portion of
the November 2008 payment, the Company will have one additional payment as of March 31, 2009, when
the Company will calculate a final true up payment to be paid to TCG to reflect amounts collected between
October 1, 2008 and March 31, 2009 on loans that had been fully reserved in its allowance for loan losses
on or before September 30, 2008, less the costs of collecting on such loans. As of December 31, 2008, the
Company has accrued to accounts payable approximately $9.6 million for this payment, as well as $34.7
million for the deferred portion of the November 2008 payment.