Cash America 2008 Annual Report Download - page 115

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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
92
Amounts included in the consolidated balance sheets relating to the Nonqualified Savings Plan and
the SERP were as follows (in thousands):
2008
2007
Other receivables and prepaid expenses......................................... $ 6,759
$ 7,994
Accounts payable and accrued expenses ........................................ 7,479
8,725
Other liabilities............................................................................... 1,114
972
Treasury shares............................................................................... 1,167
1,017
13. Derivative Instruments and Hedging Activities
As a policy, the Company does not engage in speculative or leveraged transactions, nor does it hold
or issue financial instruments for trading purposes. The Company does periodically use derivative financial
instruments, such as interest rate cap agreements, for the purpose of managing interest rate exposures that
exist from ongoing business operations. In December 2007 and December 2008, the Company entered into
interest rate cap agreements that have been determined to be perfectly effective cash flow hedges, pursuant
to DIG Issue No. G20, “Assessing and Measuring the Effectiveness of a Purchased Option Used in a Cash
Flow Hedge” (“Issue G20”) at inception and on an ongoing basis. The fair value of these interest rate cap
agreements is recognized in the accompanying consolidated balance sheets and changes in fair value are
recognized in accumulated other comprehensive income/loss. The Company also entered into foreign
currency forward contracts in 2007 to minimize the effect of market fluctuations. See Note 13. The
Company may periodically enter into forward sale contracts with a major gold bullion bank to sell refined
gold that is produced in the normal course of business from the Company’s liquidation of forfeited gold
merchandise. These contracts are not accounted for as derivatives because they meet the criteria for the
normal purchases and normal sales scope exception in SFAS 133.
In 2007, the Company entered into foreign currency contracts totaling £1.0 million (approximately $2.0
million at maturity), to minimize the effect of market fluctuations. Under the contracts, the Company received
fixed total payments of $2.0 million and paid the counter parties a total of 1.0 million British pounds upon
maturity. For the year ended December 31, 2008, the Company recognized an approximate loss of $27,000
related to these contracts, which was netted in the foreign currency transaction gain (loss) in the consolidated
statements of income.
On December 27, 2007, the Company entered into an interest rate cap agreement with a notional
amount of $10.0 million of the Company’s outstanding floating rate line of credit for a term of 24 months at
a fixed rate of 4.75%. On December 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 flow hedges pursuant to DIG Issue G20, “Assessing and Measuring the Effectiveness of a
Purchased Option Used in a Cash Flow Hedge” at inception and on an ongoing basis. For derivatives
designated as cash flow hedges, the effective portions of changes in fair value of the derivative are reported
in other comprehensive income and are subsequently reclassified into earnings when the hedged item affects
earnings. The change in the fair value of the ineffective portion of the hedge, if any, will be recorded as
income or expense. The fair values of the interest rate cap agreements are included in “Other receivables
and prepaid expenses” of the accompanying consolidated balance sheets.
14. Stock Purchase Rights
In August 1997, the Board of Directors declared a dividend distribution of one Common Stock
Purchase Right (the “Rights”) for each outstanding share of its common stock. The Rights were to become