Cash America 2008 Annual Report Download - page 42

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permits and licenses. Some of these factors are beyond the Company’s control. The failure to execute
this expansion strategy would adversely affect the Company’s ability to expand its business and could
materially adversely affect its business, prospects, results of operations and financial condition.
x Media reports and public perception of short-term consumer loans as being predatory or abusive
could materially adversely affect the Company’s cash advance business. In recent years, consumer
advocacy groups and some media reports have advocated governmental action to prohibit or place
severe restrictions on short-term consumer loans. The consumer advocacy groups and media reports
generally focus on the cost to a consumer for this type of loan, which is alleged to be higher than the
interest typically charged by banks to consumers with better credit histories. Though the consumer
advocacy groups and media reports do not discuss the lack of viable alternatives for our customers’
borrowing needs or the comparative cost to the customer when alternatives are not available, they do
typically characterize these short-term consumer loans as predatory or abusive despite the large
customer demand for these loans. If the negative characterization of these types of loans becomes
increasingly accepted by consumers, demand for the cash advance products could significantly decrease,
which could materially affect the Company’s results of operations and financial condition.
Additionally, if the negative characterization of these types of loans is accepted by legislators and
regulators, the Company could become subject to more restrictive laws and regulations that could
materially adversely affect the Company’s financial condition and results of operations.
x Increased competition from banks, savings and loans, other short-term consumer lenders, and
other entities offering similar financial services, as well as retail businesses that offer products and
services offered by the Company, could adversely affect the Company’s results of operations. The
Company has many competitors to its core lending and merchandise disposition operations. Its
principal competitors are other pawnshops, cash advance companies, credit service organizations, online
lenders, consumer finance companies and other financial institutions that serve the Company’s primary
customer base. Many other financial institutions or other businesses that do not now offer products or
services directed toward the Company’s traditional customer base, many of whom may be much larger
than the Company, could begin doing so. Significant increases in the number and size of competitors
for the Company’s business could result in a decrease in the number of cash advances or pawn loans
that the Company writes, resulting in lower levels of revenues and earnings in these categories.
Furthermore, the Company has many competitors to its retail operations, such as retailers of new
merchandise, retailers of pre-owned merchandise, other pawnshops, thrift shops, online retailers and
online auction sites. Increased competition or aggressive marketing and pricing practices by these
competitors could result in decreased revenues, margins and turnover rates in the Company’s retail
operations.
x The Company’s earnings and financial position are subject to changes in the value of gold. A
significant or sudden decline in the price of gold could materially affect the Company’s earnings.
A significant portion of 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, in inventory valuations, in the value of collateral securing outstanding pawn
loans, and in the balance of pawn loans secured by gold jewelry.
x The Company is subject to impairment risk. At December 31, 2008, the Company had goodwill
totaling $494.2 million, consisting of $205.0 million related to the pawn lending segment, $283.9
million related to the cash advance segment and $5.3 million related to the check cashing segment, on
its Consolidated Balance Sheet, all of which represent assets capitalized in connection with the
Company’s acquisitions and business combinations. Accounting for intangible assets requires
significant management estimates and judgment. The Company may not realize the value of these
intangible assets. Management performs periodic reviews of the carrying values of the intangible assets
to determine whether events and circumstances indicate that an impairment in value may have occurred.
A variety of factors could cause the carrying value of an intangible asset to become impaired. Should a