Cash America 2008 Annual Report Download - page 80

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acquisition of substantially all of the assets of The Check Giant, LLC (“TCG”). On October 31, 2008, the
Company and TCG amended the underlying purchase agreement, to provide that $34.7 million of the
aggregate November 2008 payment due to TCG was deferred until March 31, 2009, with a deferral fee of
$2.2 million, of which $0.9 million had been paid as of December 31, 2008. Going forward, in addition to
the deferred portion of the November 2008 payment, the Company will have one additional payment as of
March 31, 2009, when the Company will calculate a final true up payment to be paid to TCG to reflect
amounts collected between October 1, 2008 and March 31, 2009 on loans that had been fully reserved in its
allowance for loan losses on or before September 30, 2008, less the costs of collecting on such loans. As of
December 31, 2008, the Company has accrued to accounts payable approximately $9.6 million for this
payment.
On July 23, 2008, the Company, through a wholly-owned subsidiary, Primary Cash Holdings, LLC
(now known as Primary Innovations, LLC, or “PI”), purchased substantially all the assets of Primary
Business Services, Inc., Primary Finance, Inc., Primary Processing, Inc. and Primary Members Insurance
Services, Inc. (collectively, “PBSI”), a group of companies in the business of, among other things, providing
loan processing services for, and participating in receivables associated with, a bank issued line of credit
made available by the bank on certain stored-value debit cards the bank issues. The Company paid
approximately $5.6 million in cash, of which approximately $4.9 million was used to repay a loan that the
Company had made to PBSI, and transaction costs of approximately $0.3 million. The Company also
agreed to pay up to eight supplemental earn-out payments during the four-year period after the closing. The
amount of each supplemental payment is to be based on a multiple of 3.5 times the consolidated earnings
attributable to PI’s business for a specified period (generally 12 months) preceding each scheduled
supplemental payment, reduced by amounts previously paid. Substantially all of these supplemental
payments will be accounted for as goodwill. The first supplemental payment is due in April 2009, and, under
the terms of the purchase agreement, shall be not less than $2.7 million; which has been accrued to accounts
payable as of December 31, 2008.
On December 16, 2008, the Company acquired 80% of the outstanding stock of Creazione Estilo,
S.A. de C.V., SOFOM, E.N.R., a Mexican sociedad anónima de capital variable, sociedad financiera de
objeto múltiple, entidad no regulada (“Creazione”), which, as of December 31, 2008, operates a chain of
112 pawnshops in Mexico under the name “Prenda Fácil.” The Company paid an aggregate initial
consideration of $90.5 million, net of cash acquired, of which $82.6 million was paid in cash, including
acquisition costs of approximately $3.4 million. The remainder of the initial consideration was paid in the
form of 391,236 shares of the Company’s common stock with a fair value of $7.9 million as of the closing
date. The Company also agreed to pay a supplemental earn-out payment in an amount based on a five times
multiple of the consolidated earnings of Creazione’s business as specifically defined in the Stock Purchase
Agreement (generally Creazione’s earnings before interest, income taxes, depreciation and amortization
expenses) for the twelve month period ending June 30, 2011, reduced by amounts previously paid. If the
calculation of the supplemental payment produces an amount that is zero or less, there would be no
supplemental payment. This supplemental payment is expected to be paid in cash on or before August 15,
2011. The Company is operating the Prenda Fácil pawnshops through its Retail Services Division, and is
including the activities of Prenda Fácil in the results of its pawn lending segment.
Management anticipates that capital expenditures for 2009 will be approximately $20.0 to
$30.0 million, primarily for the remodeling of selected operating units, for the continuing development and
enhancements to communications and information systems, including the multi-year project to upgrade the
Company’s proprietary point-of-sale and information system, and for the establishment of approximately 50
to 60 new pawnshops, primarily in its foreign operations. The Company will pay $34.7 million for the
deferred portion of the November 2008 supplemental payment related to CashNetUSA in early 2009. The
additional capital required to make the final true-up acquisition payment related to the CashNetUSA
acquisition currently estimated at $9.6 million, the $2.7 million supplemental payment on PI, and capital to
pursue other acquisition opportunities is not included in the estimate of capital expenditures.