Cash America 2008 Annual Report Download - page 112

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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
89
The increase in unrecognized tax benefits relates to pre-acquisition tax matters and reduced the
amount of acquisition goodwill. If recognized, $1.4 million of the unrecognized tax benefits would affect
the effective tax rate. The total amount of interest and penalties related to these unrecognized tax benefits
was $1.7 million, which reduced acquisition goodwill. The company does not expect the total amount of
unrecognized tax benefit to significantly increase or decrease within the next 12 months.
As of December 31, 2008, the Company’s 2005 through 2008 tax years were open to examination
by the Internal Revenue Service and major state taxing jurisdictions. The 2003 through 2008 tax years of
the Company’s Mexican subsidiaries were open to examination by the Mexican taxing authorities.
10. Commitments and Contingencies
Leases x The Company leases certain of its facilities under operating leases with terms ranging from one to 15
years and certain rights to extend for additional periods. Future minimum rentals due under non-cancelable
leases are as follows for each of the years ending December 31 (in thousands):
2009..................................................................................................................................... $ 38,938
2010..................................................................................................................................... 28,138
2011..................................................................................................................................... 21,673
2012..................................................................................................................................... 15,625
2013..................................................................................................................................... 10,837
Thereafter ............................................................................................................................ 19,835
Total ................................................................................................................................ $ 135,046
Rent expense was $41.2 million, $37.1 million and $34.0 million for 2008, 2007 and 2006,
respectively.
Earn-Out Payments x The Company has agreed to pay final earn-out payments related to the acquisition of
CashNetUSA, Prenda Fácil and Primary Innovations. See Note 3 for further discussion.
Guarantees x The Company guarantees borrowers’ payment obligations to unrelated third-party lenders. At
December 31, 2008 and 2007, the amount of cash advances guaranteed by the Company was $37.5 million
and $34.6 million, respectively, representing amounts due under cash advances originated by third-party
lenders under the CSO program. The fair value of the liability related to these guarantees of $2.1 million
and $1.8 million at December 31, 2008 and 2007, respectively, was included in “Accounts payable and
accrued expenses” in the accompanying financial statements.
Litigation x 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”), Daniel R. Feehan, and several unnamed officers, directors,
owners and “stakeholders” of Cash America. The lawsuit alleges many different causes of action, among the
most significant of which is that Cash America made illegal 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 in this lawsuit claims that Cash America was
the true lender with respect to the loans made to Georgia borrowers and that CSB’s involvement in the
process is “a mere subterfuge.” Based on this claim, the suit alleges that Cash America is the “de facto”
lender and is illegally operating in Georgia. The complaint seeks unspecified compensatory damages,
attorney’s fees, punitive damages and the trebling of any compensatory damages. A previous decision by the
trial judge to strike Cash America’s affirmative defenses based on arbitration (without ruling on Cash