Cash America 2008 Annual Report Download - page 70

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47
offset by a lower weighted average interest rate on floating rate debt (3.9% during 2008 compared to 6.3%
during 2007). The average amount of total debt outstanding increased during 2008 to $324.8 million from
$249.8 million during 2007. The effective blended borrowing cost was 4.7% in 2008 and 6.4% in 2007.
Interest Income. Interest income decreased $0.7 million to $0.3 million in 2008 compared to $1.0 million
in 2007. The interest income in 2007 was primarily from the two notes receivable denominated in Swedish
kronor that the Company held in connection with its 2004 sale of its foreign pawn lending operations.
These notes were sold in August 2007. The interest income in 2008 was primarily from a note receivable
with PBSI, which was paid in full when the assets of PBSI were acquired in July 2008.
Foreign Currency Transaction Gain (Loss). The Company held two notes receivable denominated in
Swedish kronor until they were sold in August 2007. Exchange rate changes between the United States
dollar and the Swedish kronor resulted in a net gain of $63,000 (including a gain of $52,000 from foreign
currency forward contracts) in 2007.
In July 2007, the Company began offering cash advances to residents of the United Kingdom. The
functional currency of the Company’s United Kingdom operations is the British pound. In June 2008, the
Company entered into a line of credit facility of £7.5 million with a foreign commercial bank and designated
the debt as a hedging instrument of the Company’s net investment in its subsidiary that offers cash advances
to residents of the United Kingdom. In 2008 and 2007, the Company recorded foreign currency transaction
losses of approximately $177,000 and $87,000, respectively.
Income Taxes. The Company’s effective tax rate for 2008 was 38.9% as compared to 36.4% for 2007. The
Company recognized a one-time $1.1 million deferred tax benefit during 2007 as a result of a change in
Texas law enacted during that period. The Company incurred $4.4 million of nondeductible expenses
during 2008 primarily related to development activities leading up to an industry referendum and efforts to
overturn the provisions in Ohio law in the November 2008 election. Excluding the one-time Texas deferred
tax benefit, the effective rate for 2007 would have been 37.3%. If the current year expense related to the
development activities surrounding the change in Ohio law were deductible, the effective tax rate for 2008
would be 37.7%.
Year Ended 2007 Compared to Year Ended 2006
Consolidated Net Revenue. Consolidated net revenue increased $193.0 million, or 39.4%, to $682.6
million during 2007 from $489.6 million during 2006. The following table sets forth 2007 and 2006 net
revenue by operating segment (dollars in thousands):
2007 2006 Increase/(Decrease)
Cash advance operations components:
Storefront .................................................................... $ 137,979 $ 130,106 $ 7,873 6.1%
Internet lending ........................................................... 184,729 30,483 154,246 506.0
Total cash advance operations.................................... $ 322,708 $ 160,589 $ 162,119 101.0%
Pawn lending operations................................................. 356,275 325,071 31,204 9.6
Check cashing operations ............................................... 3,619 3,925 (306) (7.8)
Consolidated net revenue ........................................... $ 682,602 $ 489,585 $ 193,017 39.4%
The components of consolidated net revenue are finance and service charges from pawn loans,
which increased $11.5 million; profit from the disposition of merchandise, which increased $20.9 million;
cash advance fees generated from pawn locations, cash advance locations and via the internet distribution
channel, which increased $160.1 million; and combined segment revenue from check cashing fees, royalties
and other, which increased $516,000. Net revenue from pawn lending operations includes finance and
service charges and profit from disposition of merchandise, both of which increased in 2007 as compared to
2006, as well as cash advance fees from pawn locations, which decreased in 2007 compared to the prior