Cash America 2008 Annual Report Download - page 74

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Check Cashing Fees, Royalties and Other. Check cashing fees, royalties and other income increased
$516,000 to $16.4 million in 2007, or 3.2%, from $15.9 million in 2006, primarily due to expanded product
offerings and their success in pawn locations and revenue growth in cash advance units. However, this
growth has been partially inhibited by lower fees from check cashing activities due to a lower volume of
checks being cashed potentially due to an increase in competition. The components of these revenue items
are as follows (in thousands):
Year Ended December 31,
2007 2006
Pawn Cash Chec
k
Pawn Cash Chec
k
Lending Advance Cashing Total Lending Advance Cashing Total
Check cashing fees..
.
$ 780 $ 5,684 $ 485 $ 6,949
$ 373 $ 6,057 $ 569 $ 6,999
Royalties .................
.
555 ʊ 3,064 3,619
569 ʊ 3,173 3,742
Other .......................
.
1,933 3,846 70 5,849 1,874 3,103 183 5,160
$ 3,268 $ 9,530 $ 3,619 $ 16,417 $ 2,816 $ 9,160 $ 3,925 $ 15,901
Operations Expenses. Consolidated operations expenses, as a percentage of total revenue, were 33.0% in
2007 compared to 35.7% in 2006. These expenses increased $56.8 million, or 22.9%, in 2007 compared to
2006. Pawn lending operating expenses increased $14.0 million, or 7.8%, primarily due to higher personnel
costs, increased occupancy expenses and an increase in store level incentives. Cash advance operating
expenses increased $42.8 million, or 64.5%, primarily as a result of the acquisition of a business that offers
cash advances online.
As a multi-unit operator in the consumer finance industry, the Company’s operations expenses,
excluding expenses related to loan losses, are predominately related to personnel and occupancy expenses.
Personnel expenses include base salary and wages, performance incentives, and benefits. Occupancy
expenses include rent, property taxes, insurance, utilities, and maintenance. The combination of personnel
and occupancy expenses represents 78.2% of total operations expenses in 2007 and 82.2% in 2006. The
comparison is as follows (dollars in thousands):
% of % of
2007
Revenue 2006 Revenue
Personnel .......................................................
.
$168,315 18.1%
$140,632 20.2 %
Occupancy.....................................................
.
71,185 7.7 63,926 9.2
Other..............................................................
.
66,956 7.2 44,265 6.4
Total ...........................................................
.
$306,456 33.0% $248,823 35.8 %
The increase in personnel expenses is mainly due to unit additions in 2007, an increase in staffing
levels, the acquisition of CashNetUSA and normal recurring salary adjustments. The increase in occupancy
expense is primarily due to unit additions, as well as higher utility costs and property taxes. The increase in
other operations expenses was primarily due to an increase in marketing and selling expenses.
The Company realigned its administrative activities during 2007 to create more direct oversight of
operations. This change resulted in an increase in operations expenses late in 2007. For comparison
purposes, the Company reclassified the same direct expenses from earlier periods out of administrative
expenses and into operations expenses. The amounts reclassified in 2007 and 2006 were $3.0 million and
$1.8 million, respectively. There was no change in the total amount of expenses related to this
reclassification.