Cash America 2010 Annual Report Download - page 118

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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payable semi-annually on May 15 and November 15 of each year. The 2009 Convertible Notes will be convertible, in
certain circumstances, at an initial conversion rate of 39.2157 shares per $1,000 aggregate principal amount of 2009
Convertible Notes (which is equivalent to a conversion price of approximately $25.50 per share), subject to adjustment
upon the occurrence of certain events, into either, at the Company’s election: (i) shares of common stock or (ii) cash up
to their principal amount and shares of its common stock with respect to the remainder, if any, of the conversion value
in excess of the principal amount. The Company may not redeem the 2009 Convertible Notes prior to May 14, 2014.
The Company may, at its option, redeem some or all of the 2009 Convertible Notes on or after May 15, 2014 solely for
cash. Holders of the 2009 Convertible Notes will have the right to require the Company to repurchase some or all of
the outstanding 2009 Convertible Notes, solely for cash, on May 15, 2014, May 15, 2019 and May 15, 2024 at a price
equal to 100% of the principal amount plus any accrued and unpaid interest.
As of December 31, 2010 and 2009, the carrying amount of the 2009 Convertible Notes was $104.2 million
and $101.5 million, respectively, and the unamortized discount was $10.8 million and $13.5 million, respectively. The
discount is being amortized to interest expense over a period of five years, through the first redemption date of May
19, 2014. The total interest expense recognized was $8.7 million and $5.3 million for the years ended December 31,
2010 and 2009, respectively, of which $2.7 million and $1.6 million represented the non-cash amortization of the
discount, and $6.0 million and $3.7 million represented the contractual interest expense for the years ended December
31, 2010 and 2009, respectively. The 2009 Convertible Notes have an effective interest rate of 8.46% at both
December 31, 2010 and 2009, respectively. As of December 31, 2010, the if-converted value of the 2009 Convertible
Notes exceeds the principal amount by approximately $54.0 million.
In connection with the issuance of the 2009 Convertible Notes, the Company incurred approximately $3.9
million for issuance costs, which primarily consisted of underwriting fees, legal and other professional expenses. The
unamortized balance of these costs at December 31, 2010 is included in “Other assets” in the Company’s consolidated
balance sheets. These costs are being amortized to interest expense over five years.
As of both December 31, 2010 and 2009, the carrying amount of the equity component which was recorded as
additional paid-in capital was $9.4 million, net of deferred taxes and equity issuance costs.
On January 28, 2010, the Company issued and sold $25.0 million aggregate principal amount of its 7.26%
senior unsecured notes (the “2017 Notes”) due January 28, 2017 in a private placement pursuant to a note purchase
agreement dated January 28, 2010 by and among the Company and certain purchasers listed therein (the “Note
Purchase Agreement”). The 2017 Notes are senior unsecured obligations of the Company. The 2017 Notes are
payable in five annual installments of $5.0 million beginning January 28, 2013.
See Note 15 for a discussion of the Company’s interest rate cap agreements.
Each of the Company’s credit facility agreements and senior unsecured notes require the Company to maintain
certain financial ratios. As of December 31, 2010, the Company was in compliance with all covenants or other
requirements set forth in its debt agreements.