Cash America 2008 Annual Report Download - page 93

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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
70
1. Nature of the Company
Cash America International, Inc. (the “Company”) is a provider of specialty financial services to
individuals. The Company offers secured non-recourse loans, commonly referred to as pawn loans, to
individuals through its pawn lending operations. The pawn loan portfolio generates finance and service
charges revenue. A related activity of the pawn lending operations is the disposition of merchandise,
primarily collateral from unredeemed pawn loans. The Company also offers unsecured cash advances in
selected lending locations and over the internet and on behalf of independent third-party lenders in other
locations and over the internet. In addition, the Company provides check cashing and related financial
services through many of its lending locations and through its franchised and company-owned check
cashing centers. The Company offers short-term cash advances exclusively over the internet under the
name “CashNetUSA” in the United States and, beginning in July 2007, under the name “QuickQuid” in the
United Kingdom. Additionally, since the July 2008 acquisition of substantially all the assets of Primary
Business Services, Inc., Primary Finance, Inc., Primary Processing, Inc. and Primary Members Insurance
Services, Inc., the Company provides loan processing services for, and participates in receivables associated
with, a bank issued line of credit made available by the bank on certain stored-value debit cards the bank
issues.
As of December 31, 2008, the Company had 994 total locations and an internet-based distribution
platform offering products and services to its customers. The pawn lending operations consisted of 613
pawnshops, including 486 owned units and 15 unconsolidated franchised units in 22 states within the United
States, as well as 112 locations in central and southern Mexico. The cash advance operations consisted of
248 locations in six states, and CashNetUSA, which serves multiple markets through its internet distribution
channel and had cash advances outstanding in 33 states and the United Kingdom. The check cashing
operations consisted of 133 total locations, including 128 franchised and five company-owned check
cashing centers in 16 states.
2. Summary of Significant Accounting Policies
Basis of Presentation x The consolidated financial statements include the accounts of the Company and its
majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated
in consolidation. The Company has a contractual relationship with a third party entity, Huminal, S.A. de
C.V., a Mexican sociedad anónima de capital variable ("Huminal"), to compensate and maintain the labor
force of its Mexico pawn operations, Prenda Fácil. The Company has no ownership interest in Huminal;
however, Prenda Fácil qualifies as the primary beneficiary of Huminal in accordance with FASB
Interpretation No. 46(R), "Consolidation of Variable Interest Entities" (“FIN 46(R)”). Therefore, in
accordance with FIN 46(R), the results and balances of Huminal are included in the consolidated financial
statements of the Company and 100% of their results and balances are eliminated through minority interest.
Use of Estimates x The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
consolidated financial statements and the reported amounts of revenue and expenses during the reporting
periods. On an ongoing basis, management evaluates its estimates and judgments, including those related to
revenue recognition, merchandise held for disposition, allowance for losses on cash advances, long-lived
and intangible assets, income taxes, contingencies and litigation. Management bases its estimates on
historical experience and on various other assumptions that are believed to be reasonable under the
circumstances the results of which form the basis for making judgments about the carrying values of assets
and liabilities. Actual results may differ from these estimates under different assumptions or conditions.