Cash America 2008 Annual Report Download - page 77

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54
Year Ended December 31,
2007 2006
Cash advance loss provision:
Loss provision on Company-owned cash advances ....................... $ 154,563 $ 59,284
Loss provision on third-party owned cash advances ...................... 675 279
Combined cash advance loss provision............................................. $ 155,238 $ 59,563
Charge-offs, net of recoveries ........................................................... $ 148,400 $ 46,080
Cash advances written:
By the Company (a)......................................................................... $1,370,167 $ 817,186
By third-party lenders (b) (c)............................................................. 654,760 360,577
Combined cash advances written (b) (d) .............................................. $2,024,927 $1,177,763
Combined cash advance loss provision as a % of combined cash
advances written (b)(d) ...................................................................... 7.7% 5.1%
Charge-offs (net of recoveries) as a % of combined cash advances
written (b)(d) .................................................................................... 7.3% 3.9%
(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 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
distribution channel.
(d) Includes (i) cash advances written by the Company, and (ii) cash advances written by third-party lenders
that were 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 distribution channel.
During 2007, the Company’s online distribution channel sold selected cash advances which had
been previously charged off. These sales generated proceeds of $4.2 million related to loans originated after
the acquisition of the online distribution channel. 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
decreased to 3.4% in 2007 from 3.9% in 2006. Total depreciation and amortization expenses increased $4.8
million, or 17.6%, primarily due to remodeling expenditures for storefront and lending locations in 2007 and
2006, the increase in operating locations and the amortization of certain intangible assets obtained in
acquisitions.
Interest Expense. Interest expense as a percentage of total revenue was 1.7% in both 2007 and 2006.
Interest expense increased $4.1 million, or 34.1%, to $16.0 million in 2007 as compared to $11.9 million in
2006. The increase was primarily due to the higher weighted average floating interest rate borrowings
($121.3 million during 2007 and $81.2 million during 2006) and the higher average floating interest rate
(6.3% during 2007 compared to 6.2% during 2006) and the issuance in December 2006 of $60 million of
senior unsecured long-term notes. The average amount of debt outstanding increased during 2007 to $249.8
million from $160.7 million during 2006. This increase was primarily attributable to the acquisition of
CashNetUSA in the third quarter of 2006 and the funding of two earn-out payments in February and
November 2007. The effective blended borrowing cost was 6.4% in 2007 and 6.6% in 2006.
Interest Income. Interest income was $1.0 million in 2007 compared to $1.6 million in 2006. The interest
income is primarily from the two notes receivable denominated in Swedish kronor that the Company held
until August 2007 and had received in connection with its 2004 sale of its foreign pawn lending operations.