Cash America 2008 Annual Report Download - page 69

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46
The following table summarizes the cash advance loss provision and combined allowance for losses
and accrued third-party lender losses for the years ended and at December 31, 2008 and 2007, and contains
certain non-GAAP measures with respect to the cash advances written by third-party lenders that are not
included in the Company’s consolidated balance sheets and related statistics. The Company believes that
presenting these non-GAAP measures is meaningful and necessary because management evaluates and
measures the cash advance portfolio performance on an aggregate basis including its evaluation of the loss
provision for the Company-owned portfolio and the third-party lender-owned portfolio that the Company
guarantees (dollars in thousands).
Year Ended December 31,
2008 2007
Cash advance loss provision:
Loss provision on Company-owned cash advances ....................... $ 140,416 $ 154,565
Loss provision on third-party owned cash advances ...................... 307 673
Combined cash advance loss provision............................................. $ 140,723 $ 155,238
Charge-offs, net of recoveries ........................................................... $ 144,597 $ 148,402
Cash advances written:
By the Company (a)......................................................................... $1,373,642 $1,370,167
By third-party lenders (b) (c)............................................................. 702,933 654,760
Combined cash advances written (b) (d) .............................................. $2,076,575 $2,024,927
Combined cash advance loss provision as a % of combined cash
advances written (b)(d) ...................................................................... 6.8% 7.7%
Charge-offs (net of recoveries) as a % of combined cash advances
written (b)(d) .................................................................................... 7.0% 7.3%
(a) Cash advances written by the Company for its own account in pawn locations, cash advance locations and
through the internet distribution channel.
(b) Non-GAAP presentation. For informational purposes and to provide a greater understanding of the
Company’s businesses. Management believes that information provided with this level of detail is
meaningful and useful in understanding the activities and business metrics of the Company’s operations.
(c) Cash advances written by third-party lenders that were marketed, processed or arranged by the Company on
behalf of the third-party lenders, all at the Company’s pawn and cash advance locations and through the
Company’s internet and card services distribution channel. (Note: The Company did not commence
business in the card services distribution channel until the third quarter of 2008).
(d) Includes (i) cash advances written by the Company, and (ii) cash advances written by third-party lenders
that were marketed, processed or arranged by the Company on behalf of the third-party lenders, all at the
Company’s pawn and cash advance locations and through the Company’s internet and card services
distribution channels. (Note: The Company did not commence business in the card services distribution
channel until the third quarter of 2008).
During 2008, the Company’s online distribution channel sold selected cash advances which had
been previously written off. These sales generated proceeds of $4.7 million. Those proceeds were recorded
as recoveries on losses previously charged to the allowance for losses.
Depreciation and Amortization. Depreciation and amortization expense as a percentage of total revenue
increased to 3.8% in 2008 from 3.5% in 2007. Total depreciation and amortization expenses increased $7.5
million, or 23.4%, primarily due to accelerated depreciation costs related to planned store closures as well as
accelerated depreciation on legacy computer hardware which will be replaced during the deployment of the
Company’s new point-of-sale system. Management expects the implementation of the new point-of-sale
system, which is expected to occur late in 2010, will result in a substantial increase in depreciation expense.
Interest Expense. Interest expense as a percentage of total revenue was 1.6% in 2008 and 1.7% in 2007.
Interest expense was flat at $16.0 million for 2008 and 2007. The Company had a higher average amount of
floating rate debt outstanding ($211.2 million during 2008 and $121.3 million during 2007), which was