Cash America 2008 Annual Report Download - page 81

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Cash flows from financing activities. During 2008, the Company borrowed $109.9 million under its bank
lines of credit. In addition, the Company borrowed an additional $48.0 million through the issuance of two
senior unsecured notes in the amounts of $38.0 million, and $10.0 million, as discussed below. The
Company paid approximately $1.0 million in debt issuance costs associated with the new senior unsecured
notes. The Company reduced the balance owed on its senior unsecured notes through scheduled principal
payments during the year of $8.5 million. Additional uses of cash included $4.1 million for dividends paid.
On October 24, 2007, the Board of Directors established an authorization (the “2007 authorization”) for the
repurchase of 1,500,000 shares of the Company’s common stock. Management expects to purchase shares
of the Company from time to time in the open market, and funding will come from operating cash flow.
During the year ended December 31, 2008, 195,000 shares were purchased for an aggregate amount of
$6.4 million under the 2007 authorization. In addition, 23,901 shares were acquired as partial payments of
taxes for shares issued under stock-based compensation plans for an aggregate amount of $0.8 million.
During 2008, stock options for 56,805 shares were exercised which generated $0.7 million of additional
equity. In connection with the purchase of Prenda Fácil, the Company issued 391,236 shares of its common
stock, which reduced the cash portion of the purchase price.
On February 29, 2008, the Company exercised the $50.0 million accordion feature contained in its
existing line of credit. As a result, the committed amount under the line of credit increased from $250.0
million to $300.0 million. This line of credit extends through March 2012 with no interim mandatory
reductions in availability or scheduled payments. On May 7, 2008, the Company established a line of credit
facility up to £7.5 million with a foreign commercial bank. The balance outstanding at December 31, 2008
was £5.0 million (approximately $7.3 million). This line of credit provides working capital to the
Company’s online lending operations to customers residing in the United Kingdom. On June 30, 2008, the
Company established a letter of credit facility with a group of banks to permit the issuance of up to $12.8
million in letters of credit.
On December 11, 2008, the Company issued $38.0 million of senior unsecured long-term notes, due
in November 2012, pursuant to a Credit Agreement dated November 21, 2008. Interest is charged, at the
Company’s option, at either LIBOR plus a margin of 3.50% or at the agent’s base rate plus a margin of
3.50%. The notes are payable through scheduled quarterly payments of $3.0 million beginning on March
31, 2010, with any outstanding principal due at maturity on November 21, 2012. The notes may be prepaid
without penalty at any time after November 20, 2009. Net proceeds received from the issuance of the notes
were used for the Prenda Fácil acquisition. The weighted average interest rate (including margin) on the
$38.0 million term notes at December 31, 2008 was 4.75%.
On December 11, 2008, the Company issued $10.0 million of senior unsecured long-term notes, due
in November 2012 pursuant to a Credit Agreement dated December 5, 2008. Interest is charged, at the
Company’s option, at either LIBOR plus a margin of 10.0% or at the agent’s base rate plus a margin of
10.0%. The notes are payable in full at maturity on November 21, 2012, and may be prepaid without
penalty at any time. Net proceeds received from the issuance of the notes were used for the Prenda Fácil
acquisition. The weighted average interest rate (including margin) on the $10.0 million term notes at
December 31, 2008 was 11.25%.
The credit agreements and the Company’s senior unsecured notes require that the Company
maintain certain financial ratios. The Company is in compliance with all covenants and other requirements
set forth in its debt agreements. A significant decline in demand for the Company’s products and services
may cause the Company to reduce its planned level of capital expenditures and lower its working capital
needs in order to maintain compliance with the financial ratios in those agreements. A violation of the credit
agreement or the Company’s senior unsecured note agreements could result in an acceleration of the
Company’s debt and increase the Company’s borrowing costs and could adversely affect the Company’s
ability to renew its existing credit facility or obtain new credit on favorable terms in the future. The
Company does not anticipate a significant decline in demand for its services and has historically been
successful in maintaining compliance with and renewing its debt agreements.