Edgar Filing: CASH AMERICA INTERNATIONAL INC

e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-9733

(Exact name of registrant as specified in its charter)


Texas (State or other jurisdiction of incorporation or organization)		75-2018239 (I.R.S. Employer Identification No.)


1600 West 7^th Street Fort Worth, Texas (Address of principal executive offices)		76102 (Zip Code)

(817) 335-1100
(Registrant’s telephone number, including area code)

NONE
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

29,202,886 common shares, $.10 par value, were outstanding as of October 16, 2007

CASH AMERICA INTERNATIONAL, INC.

INDEX TO FORM 10-Q


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets — September 30, 2007, 2006 and December 31, 2006		1
	Consolidated Statements of Income — Three and Nine Months Ended September 30, 2007 and 2006		2
	Consolidated Statements of Stockholders’ Equity — September 30, 2007 and 2006		3
	Consolidated Statements of Comprehensive Income — Three and Nine Months Ended September 30, 2007 and 2006		3
	Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2007 and 2006		4
	Notes to Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 4.	Controls and Procedures		40

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		41
Item 1A.	Risk Factors		41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		41
Item 6.	Exhibits		42

SIGNATURE			43
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Chief Executive Officer Pursuant to Section 906
Certification of Chief Financial Officer Pursuant to Section 906

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)


	September 30,						December 31,
	2007			2006			2006
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	26,412		$	30,241		$	25,723
Pawn loans		136,722			133,734			127,384
Cash advances, net		82,785			70,253			79,975
Merchandise held for disposition, net		98,751			83,179			87,060
Finance and service charges receivable		25,528			23,846			25,377
Other receivables and prepaid expenses		15,349			11,539			16,128
Deferred tax assets		22,455			14,657			16,324

Total current assets		408,002			367,449			377,971
Property and equipment, net		147,813			110,983			119,261
Goodwill		283,554			193,379			238,499
Intangible assets, net		24,569			27,078			27,477
Other assets		3,017			12,296			13,036

Total assets	$	866,955		$	711,185		$	776,244


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	104,784		$	52,045		$	91,217
Customer deposits		8,211			7,470			7,464
Income taxes currently payable		16			2,456			2,691
Current portion of long-term debt		12,786			16,786			16,786

Total current liabilities		125,797			78,757			118,158
Deferred tax liabilities		15,854			11,688			12,770
Other liabilities		1,621			1,578			1,625
Long-term debt		251,427			200,617			202,963

Total liabilities		394,699			292,640			335,516

Stockholders’ equity:
Common stock, $.10 par value per share, 80,000,000 shares authorized, 30,235,164 shares issued		3,024			3,024			3,024
Additional paid-in capital		162,837			160,234			161,683
Retained earnings		337,909			267,004			287,962
Accumulated other comprehensive income (loss)		(4	)		21			20
Notes receivable secured by common stock		—			(382	)		(18	)
Treasury shares, at cost (1,088,493 shares, 682,800 shares and 565,840 shares at September 30, 2007 and 2006, and December 31, 2006, respectively)		(31,510	)		(11,356	)		(11,943	)

Total stockholders’ equity		472,256			418,545			440,728

Total liabilities and stockholders’ equity	$	866,955		$	711,185		$	776,244

See notes to consolidated financial statements.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
	(Unaudited)
Revenue
Finance and service charges	$	41,386		$	39,404		$	117,011		$	109,047
Proceeds from disposition of merchandise		91,366			74,426			277,342			234,172
Cash advance fees		95,417			48,401			260,880			123,235
Check cashing fees, royalties and other		3,343			3,686			13,032			12,346

Total Revenue		231,512			165,917			668,265			478,800
Cost of Revenue
Disposed merchandise		57,693			46,281			172,402			141,909

Net Revenue		173,819			119,636			495,863			336,891
Expenses
Operations		74,695			58,263			221,672			177,178
Cash advance loss provision		43,612			17,503			118,688			32,738
Administration		16,450			13,580			43,976			40,447
Depreciation and amortization		8,265			6,946			23,698			19,802

Total Expenses		143,022			96,292			408,034			270,165

Income from Operations		30,797			23,344			87,829			66,726
Interest expense		(4,378	)		(3,162	)		(12,119	)		(8,010	)
Interest income		145			435			999			1,202
Foreign currency transaction gain		5			67			63			245
Gain from termination of contract		—			—			—			2,167
Gain on sale of foreign notes		6,260			—			6,260			—

Income before Income Taxes		32,829			20,684			83,032			62,330
Provision for income taxes		12,213			7,743			29,973			23,088

Net Income	$	20,616		$	12,941		$	53,059		$	39,242


Earnings Per Share:
Basic	$	0.70		$	0.44		$	1.78		$	1.32
Diluted	$	0.68		$	0.42		$	1.74		$	1.29
Weighted average common shares outstanding:
Basic		29,535			29,707			29,745			29,652
Diluted		30,235			30,548			30,464			30,515
Dividends declared per common share	$	0.035		$	0.025		$	0.105		$	0.075

See notes to consolidated financial statements.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)


	September 30,
	2007						2006
	Shares			Amounts			Shares			Amounts
				(Unaudited)
Common stock
Balance at end of period		30,235,164		$	3,024			30,235,164		$	3,024

Additional paid-in capital
Balance at beginning of year					161,683						156,557
Exercise of stock options					(1,201	)					(813	)
Issuance of shares under restricted stock units plan					(751	)					(353	)
Stock-based compensation					2,277						2,057
Income tax benefit from stock based compensation					829						2,786

Balance at end of period					162,837						160,234

Retained earnings
Balance at beginning of year					287,962						229,975
Net income					53,059						39,242
Dividends declared					(3,112	)					(2,213	)

Balance at end of period					337,909						267,004

Accumulated other comprehensive income (loss)
Balance at beginning of year					20						(5	)
Unrealized derivatives (loss) gain					(20	)					26
Foreign currency translation loss, net of taxes					(4	)					—

Balance at end of period					(4	)					21

Notes receivable secured by common stock
Balance at beginning of year					(18	)					(2,488	)
Payments on notes receivable					18						2,106

Balance at end of period					—						(382	)

Treasury shares, at cost
Balance at beginning of year		(565,840	)		(11,943	)		(999,347	)		(12,347	)
Purchases of treasury shares		(624,305	)		(22,246	)		(150,321	)		(4,891	)
Exercise of stock options		67,154			1,928			438,126			5,529
Issuance of shares under restricted stock units plan		34,498			751			28,742			353

Balance at end of period		(1,088,493	)		(31,510	)		(682,800	)		(11,356	)

Total Stockholders’ Equity				$	472,256					$	418,545

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
				(Unaudited)
Net income	$	20,616		$	12,941		$	53,059		$	39,242

Other comprehensive income (loss):
Interest rate cap valuation adjustments		(1	)		(68	)		(20	)		41
Foreign currency translation (loss) gain, net of taxes		(11	)		24			(4	)		(15	)

Other comprehensive (loss) income, net		(12	)		(44	)		(24	)		26

Total Comprehensive Income	$	20,604		$	12,897		$	53,035		$	39,268

See notes to consolidated financial statements.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


	Nine Months Ended
	September 30,
	2007			2006
	(Unaudited)

Cash Flows from Operating Activities
Net income	$	53,059		$	39,242
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,698			19,802
Cash advance loss provision		118,688			32,738
Stock-based compensation		2,277			2,057
Gain from termination of contract		—			(2,167	)
Foreign currency transaction gain		(62	)		(245	)
Gain on sale of foreign notes		(6,260	)		—
Changes in operating assets and liabilities —
Merchandise held for disposition		1,461			2,476
Finance and service charges receivable		(845	)		(1,790	)
Prepaid expenses and other assets		(252	)		315
Accounts payable and accrued expenses		4,159			14,270
Customer deposits, net		747			1,100
Current income taxes		(1,846	)		3,793
Excess income tax benefit from stock-based compensation		(829	)		(2,786	)
Deferred income taxes, net		(3,036	)		(3,054	)

Net cash provided by operating activities		190,959			105,751


Cash Flows from Investing Activities
Pawn loans made		(321,061	)		(297,972	)
Pawn loans repaid		165,141			158,983
Principal recovered through dispositions of forfeited loans		134,840			110,532
Cash advances made, assigned or purchased		(866,873	)		(499,312	)
Cash advances repaid		746,891			456,997
Acquisitions, net of cash acquired		(38,564	)		(48,931	)
Purchases of property and equipment		(48,883	)		(32,004	)
Proceeds from property insurance		1,316			1,247
Proceeds from termination of contract/sale of assets		—			2,198
Proceeds from sale of foreign notes		16,529			—

Net cash used by investing activities		(210,664	)		(148,262	)


Cash Flows from Financing Activities
Net borrowings under bank lines of credit		61,250			68,194
Payments on notes payable		(16,786	)		(16,786	)
Loan costs paid		(282	)		(12	)
Proceeds from exercise of stock options		727			4,716
Excess income tax benefit from stock-based compensation		829			2,786
Repayments of notes receivable secured by common stock		18			2,106
Treasury shares purchased		(22,246	)		(4,891	)
Dividends paid		(3,112	)		(2,213	)

Net cash provided by financing activities		20,398			53,900

Effect of exchange rates on cash		(4	)		—

Net increase in cash and cash equivalents		689			11,389
Cash and cash equivalents at beginning of year		25,723			18,852

Cash and cash equivalents at end of period	$	26,412		$	30,241


Supplemental Disclosures
Non-cash investing and financing activities —
Pawn loans forfeited and transferred to merchandise held for disposition	$	147,529		$	122,443
Pawn loans renewed	$	56,996		$	59,198
Cash advances renewed	$	221,719		$	20,834

See notes to consolidated financial statements.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Cash America International, Inc. and its majority-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

The financial statements as of September 30, 2007 and 2006 and for the three and nine month periods then ended are unaudited but, in management’s opinion, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such interim periods. Operating results for the three and nine month periods are not necessarily indicative of the results that may be expected for the full fiscal year.

Certain amounts in the consolidated financial statements for the three and nine months ended September 30, 2006 have been reclassified to conform to the presentation format adopted in 2007. These reclassifications have no effect on the net income previously reported.

These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2006 Annual Report to Shareholders.

Revenue Recognition

Pawn Lending • Pawn loans are made on the pledge of tangible personal property. The Company accrues finance and service charges revenue only on those pawn loans that it deems collectible based on historical loan redemption statistics. Pawn loans written during each calendar month are aggregated and tracked for performance. The gathering of this empirical data allows the Company to analyze the characteristics of its outstanding pawn loan portfolio and estimate the probability of collection of finance and service charges. For loans not repaid, the carrying value of the forfeited collateral (“merchandise held for disposition”) is stated at the lower of cost (cash amount loaned) or market. Revenue is recognized at the time that merchandise is sold. Interim customer payments for layaway sales are recorded as customer deposits and subsequently recognized as revenue during the period in which the final payment is received.

Cash Advances • Cash advances provide customers with cash in exchange for a promissory note or other repayment agreement supported, in most cases, by that customer’s personal check or authorization to debit that customer’s account via an Automated Clearing House (“ACH”) transaction for the aggregate amount of the payment due. The customer may repay the cash advance either in cash, or, as applicable, by allowing the check to be presented for collection, or by allowing the customer’s checking account to be debited through an ACH for the amount due. The Company accrues fees and interest on cash advances on a constant yield basis ratably over the period of the cash advance, pursuant to its terms. (Although cash advance transactions may take the form of loans or deferred check deposit transactions, the transactions are referred to throughout this discussion as “cash advances” for convenience.)

The Company provides a cash advance product in some markets under a credit services organization program, in which the Company assists in arranging loans for customers from independent third-party lenders. The Company also guarantees the customer’s payment obligations in the event of default if the customer is approved for and accepts the loan. The borrower pays fees to the Company under the credit services organization program (“CSO fees”) for performing services on the borrower’s behalf, including credit services, and for agreeing to guaranty the borrower’s payment obligations to the lender. As a result of providing the guaranty, the CSO fees are deferred and amortized over the term of the loan and recorded as cash advance fees in the accompanying consolidated statements of income. The contingent loss on the guaranteed loans is accrued

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and recorded as a liability. See Note 4.

Check Cashing Fees, Royalties and Other • The Company records check cashing fees derived from both check cashing locations it owns and many of its lending locations in the period in which the check cashing service is provided. It records royalties derived from franchise locations on an accrual basis. Revenues derived from other financial services such as money order commissions, prepaid debit card fees, etc. are recognized when earned.

Allowance for Losses on Cash Advances

In order to manage the portfolio of cash advances effectively, the Company utilizes a variety of underwriting criteria, monitors the performance of the portfolio, and maintains either an allowance or accrual for losses.

The Company maintains either an allowance or accrual for losses on cash advances (including fees and interest) at a level that it estimates to be adequate to absorb credit losses inherent in the outstanding combined Company and third-party lender portfolio (the portion owned by independent third-party lenders). The allowance for losses on Company-owned cash advances offsets the outstanding cash advance amounts in the consolidated balance sheets. Active third-party lender-originated cash advances are not included in the consolidated balance sheets. An accrual for contingent losses on third-party lender-owned cash advances that are guaranteed by the Company is maintained and included in “Accounts payable and accrued expenses” in the consolidated balance sheets.

The Company aggregates and tracks cash advances written during each calendar month to develop a performance history. The Company stratifies the outstanding combined portfolio by age, delinquency, and stage of collection when assessing the adequacy of the allowance or accrual for losses. It uses historical collection performance adjusted for recent portfolio performance trends to develop the expected loss rates used to establish either the allowance or accrual. Increases in either the allowance or accrual are created by recording a cash advance loss provision in the consolidated statements of income. The Company charges off all cash advances that have been in default for 60 days, or sooner if deemed uncollectible. Recoveries on losses previously charged to the allowance are credited to the allowance when collected.

The Company’s online distribution channel periodically sells selected cash advances that have been previously written off. Proceeds from these sales are recorded as recoveries on losses previously charged to the allowance for losses.

Income Taxes

Beginning January 1, 2007, the Company has accounted for uncertainty in income taxes recognized in the financial statements in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 requires that a more-likely-than-not threshold be met before the benefit of a tax position may be recognized in the financial statements and prescribes how such benefit should be measured. It also provides guidance on derecognition, classification, accrual of interest and penalties, accounting in interim periods, disclosure and transition. It requires that the new standard be applied to the balances of assets and liabilities as of the beginning of the period of adoption and that a corresponding adjustment be made to the opening balance of retained earnings. See Note 2.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recent Accounting Pronouncements

In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and emphasizes that fair value is a market-based measurement, not an entity-specific measurement. It establishes a fair value hierarchy and expands disclosures about fair value measurements in both interim and annual periods. SFAS 157 will be effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company does not expect SFAS 157 to have a material effect on the Company’s consolidated financial position or results of operations.

In February 2007, FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”) and requires an entity to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. SFAS 159 will be effective for fiscal years beginning after November 15, 2007. The Company does not expect SFAS 159 to have a material effect on the Company’s consolidated financial position or results of operations.

2. Income Taxes

The Company adopted the provisions of FIN 48 on January 1, 2007. As of that date, the Company had no unrecognized tax benefits and thus had accrued no interest or penalties on such benefits, nor did the Company anticipate a significant increase in unrecognized tax benefits during the subsequent 12 months. As of January 1, 2007, the Company’s 2003 through 2006 tax years were open to examination by the Internal Revenue Service and major state taxing jurisdictions. There were no material changes in these items during the three and nine months ended September 30, 2007.

While the Company typically does not incur significant interest or penalties on income tax liabilities, it is the Company’s policy to classify such amounts as interest expense and administrative expense, respectively. The Company did not change its policy on classification of interest and penalties upon adoption of FIN 48.

3. Acquisitions

Pursuant to its business strategy of expanding its reach into new markets with new customers and new financial services, on September 15, 2006, the Company, through its wholly-owned subsidiary Cash America Net Holdings, LLC, purchased substantially all of the assets of The Check Giant LLC (“TCG”). TCG offered short-term cash advances exclusively over the internet under the name “CashNetUSA.” The Company paid an initial purchase price of approximately $35.9 million in cash and transaction costs of approximately $2.9 million, and has continued to use the CashNetUSA trade name in connection with its online operations.

The Company also agreed to pay up to five supplemental earn-out payments during the two-year period after the closing. The amount of each supplemental payment will be based on a multiple of earnings attributable to CashNetUSA’s business for the twelve months preceding the date of determining each scheduled supplemental payment. Each supplemental payment will be reduced by amounts previously paid. The supplemental payments are to be paid in cash within 45 days of the payment measurement date. The Company may, at its option, pay up to 25% of each supplemental payment in shares of its common stock based on an average share price as of the measurement date thereby reducing the amount of the cash

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

payment. Substantially all of these supplemental payments will be accounted for as goodwill.

The first supplemental payment of approximately $33.8 million, which was paid in February 2007 in cash, was based on the trailing twelve months earnings of CashNetUSA through December 31, 2006 and reflects adjustments for amounts previously paid. There was no supplemental payment due or owed with respect to the trailing twelve months earnings of CashNetUSA as of March 31, 2007. Another supplemental payment is scheduled in November 2007 and will be based on the trailing twelve months earnings of CashNetUSA as of September 30, 2007. As of September 30, 2007, the Company has accrued for the payment of approximately $43.3 million as an addition to goodwill and accounts payable based on the defined multiple of trailing twelve months earnings through September 30, 2007. Pursuant to the terms of the purchase agreement with CashNetUSA, payments determined at the March 31 and September 30, 2007 measurement dates were calculated at 5.5 times trailing twelve month earnings. Subsequent measurement dates of March 31 and September 30, 2008 will be calculated at 5 times trailing twelve month earnings.

During the nine months ended September 30, 2007, the Company also acquired five pawnshops and made payment on a pawnshop over which it acquired management control in December 2006. The aggregate cash payments for these acquisitions were $3.7 million.

4. Cash Advances, Allowance for Losses and Accruals for Losses on Third-Party Lender-Owned Cash Advances

The Company offers cash advance products through its cash advance locations, most of its pawnshops and over the internet. The cash advance products are generally offered as single payment cash advance loans. These cash advance loans typically have terms of 7 to 45 days and are generally payable on the customer’s next payday. The Company originates cash advances in some of its locations and online and arranges for customers to obtain cash advances from independent third-party lenders in other locations and online. In a cash advance transaction, a customer executes a promissory note or other repayment agreement typically supported by that customer’s personal check or authorization to debit the customer’s checking account via an ACH transaction. Customers may repay the amount due with cash, by allowing their check to be presented for collection, or by allowing their checking account to be debited via an ACH transaction.

The Company provides services in connection with single payment cash advances originated by independent third-party lenders, whereby the Company acts as a credit services organization on behalf of consumers in accordance with applicable state laws (the “CSO program”). The CSO program includes arranging loans with independent third-party lenders, assisting in the preparation of loan applications and loan documents, and accepting loan payments. To assist the customer in obtaining a loan through the CSO program, the Company also, as part of the credit services it provides to the customer, guarantees, on behalf of the customer, the customer’s payment obligations to the third-party lender under the loan. A customer who obtains a loan through the CSO program pays the Company a fee for the credit services, including the guaranty, and enters into a contract with the Company governing the credit services arrangement. Losses on cash advances acquired by the Company as a result of its guaranty obligations are the responsibility of the Company. As of September 30, 2007, the CSO program was offered in Texas and Florida. The Company discontinued the CSO program in Michigan in February 2007, and now offers only cash advances underwritten by the Company to customers in that state.

If the Company collects a customer’s delinquent payment in an amount that is less than the amount the Company paid to the third-party lender pursuant to the guaranty, the Company must absorb the shortfall. If the amount collected exceeds the amount paid under the guaranty, the Company is entitled to the excess and recognizes the excess amount in income. Since the Company may not be successful in collecting delinquent amounts, the Company’s cash advance loss provision includes amounts estimated to be adequate to absorb credit losses from cash advances in the aggregate cash advance portfolio, including those expected

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

to be acquired by the Company as a result of its guaranty obligations. The estimated amounts of losses on portfolios owned by the third-party lenders are included in “Accounts payable and accrued expenses” in the consolidated balance sheets.

Cash advances outstanding at September 30, 2007 and 2006, were as follows (in thousands):


	September 30,
	2007		2006

Funded by the Company
Active cash advances and fees receivable	$	69,005	$	54,741
Cash advances and fees in collection		28,817		20,146

Total Funded by the Company		97,822		74,887
Purchased by the Company from third-party lenders		15,888		6,455

Company-owned cash advances and fees receivable, gross		113,710		81,342
Less: Allowance for losses		30,925		11,089

Cash advances and fees receivable, net	$	82,785	$	70,253

Changes in the allowance for losses for the Company-owned portfolio and the accrued loss for the third-party lender-owned portfolio during the three and nine months ended September 30, 2007 and 2006 were as follows (in thousands):


	Three Months Ended						Nine Months Ended
	September 30,						September 30
	2007			2006			2007			2006
Allowance for company-owned cash advances
Balance at beginning of period	$	32,173		$	7,541		$	19,513		$	6,309
Cash advance loss provision		43,604			17,641			118,011			32,859
Charge-offs		(48,283	)		(16,266	)		(117,133	)		(35,924	)
Recoveries		3,431			2,173			10,534			7,845

Balance at end of period	$	30,925		$	11,089		$	30,925		$	11,089


Accrual for third-party lender-owned cash advances

Balance at beginning of period	$	1,824		$	891		$	1,155		$	874
Increase (decrease) in loss provision		8			(138	)		677			(121	)


Balance at end of period	$	1,832		$	753		$	1,832		$	753

Cash advances assigned to the Company for collection were $81.3 million and $26.5 million, for the nine months ended September 30, 2007 and 2006, respectively.

The Company sells selected cash advances originated from its online distribution channel which had been previously written off. These sales generated proceeds of $1.4 million and $2.6 million for the three and nine months ended September 30, 2007, respectively, which were recorded as recoveries on losses previously charged to the allowance for losses.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Earnings Per Share Computation

The following table sets forth the reconciliation of numerators and denominators for the basic and diluted earnings per share computation for the three and nine months ended September 30, 2007 and 2006 (in thousands, except per share amounts):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006

Numerator:
Net income available to common stockholders	$	20,616	$	12,941	$	53,059	$	39,242


Denominator:
Weighted average common shares outstanding		29,316		29,548		29,530		29,496
Weighted average vested RSUs		164		102		159		96
Weighted average shares in non-qualified savings plan		55		57		56		60

Total weighted average basic shares		29,535		29,707		29,745		29,652

Effect of shares applicable to stock option plans		346		465		363		493
Effect of RSU compensation plans		354		370		356		369
Weighted average shares for earn-out contingency		—		6		—		1

Total weighted average diluted shares		30,235		30,548		30,464		30,515


Earnings per share:
Net income — Basic	$	0.70	$	0.44	$	1.78	$	1.32

Net income — Diluted	$	0.68	$	0.42	$	1.74	$	1.29

The shares held in the Company’s non-qualified savings plan have been reclassified into the basic earnings per share computation as the distribution of substantially all of those shares is not contingent upon future services. All prior periods presented have been restated to reflect this reclassification. There is no impact to the previously reported basic earnings per share.

6. Long-Term Debt

The Company’s long-term debt instruments and balances outstanding at September 30, 2007 and 2006, were as follows (in thousands):


	September 30,
	2007		2006
Line of credit up to $250,000 due 2012	$	142,927	$	139,331
6.21% senior unsecured notes due 2021		25,000		—
6.09% senior unsecured notes due 2016		35,000		—
6.12% senior unsecured notes due 2015		40,000		40,000
7.20% senior unsecured notes due 2009		17,000		25,500
7.10% senior unsecured notes due 2008		4,286		8,572
8.14% senior unsecured notes due 2007		—		4,000

Total debt		264,213		217,403
Less current portion		12,786		16,786

Total long-term debt	$	251,427	$	200,617

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In March 2007, the Company amended the line of credit to extend the final maturity two years to February 2012 and modified certain terms of the credit agreement. Interest on the line of credit is charged, at the Company’s option, at either LIBOR plus a margin or at the agent’s base rate. The margin on the line of credit varies from 0.875% to 1.875% (1.125% at September 30, 2007), depending on the Company’s cash flow leverage ratios as defined in the agreement. The Company also pays a fee on the unused portion ranging from 0.25% to 0.30% (0.25% at September 30, 2007) based on the Company’s cash flow leverage ratios. The weighted average interest rate (including margin) on the line of credit at September 30, 2007 was 6.5%.

7. Operating Segment Information

The Company has three reportable operating segments: pawn lending, cash advance and check cashing. The cash advance and check cashing segments are managed separately due to the different operational strategies required and, therefore, are reported as separate segments. Check cashing fees, royalties and other income at pawn lending locations, which were previously included in either proceeds from disposition of merchandise or netted into administration expenses, are reclassified out of those line items. All prior periods in the tables below have been revised to reflect this change. These revisions have not changed the consolidated performance of the Company for any period.

Information concerning the operating segments is set forth below (in thousands):


	Pawn		Cash		Check
	Lending		Advance ⁽¹⁾		Cashing		Consolidated

Three Months Ended September 30, 2007:
Revenue
Finance and service charges	$	41,386	$	—	$	—	$	41,386
Proceeds from disposition of merchandise		91,366		—		—		91,366
Cash advance fees		11,301		84,116		—		95,417
Check cashing fees, royalties and other		698		1,826		819		3,343

Total revenue		144,751		85,942		819		231,512
Cost of revenue — disposed merchandise		57,693		—		—		57,693

Net revenue		87,058		85,942		819		173,819

Expenses
Operations		46,955		27,461		279		74,695
Cash advance loss provision		4,973		38,639		—		43,612
Administration		9,587		6,632		231		16,450
Depreciation and amortization		5,272		2,901		92		8,265

Total expenses		66,787		75,633		602		143,022

Income from operations	$	20,271	$	10,309	$	217	$	30,797


As of September 30, 2007:
Total assets	$	582,072	$	277,986	$	6,897	$	866,955

Goodwill	$	143,665	$	134,579	$	5,310	$	283,554

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Pawn		Cash		Check
	Lending		Advance ⁽¹⁾		Cashing		Consolidated
Three Months Ended September 30, 2006:
Revenue
Finance and service charges	$	39,404	$	—	$	—	$	39,404
Proceeds from disposition of merchandise		74,426		—		—		74,426
Cash advance fees		11,963		36,438		—		48,401
Check cashing fees, royalties and other		743		1,887		1,056		3,686

Total revenue		126,536		38,325		1,056		165,917
Cost of revenue — disposed merchandise		46,281		—		—		46,281

Net revenue		80,255		38,325		1,056		119,636

Expenses
Operations		43,148		14,788		327		58,263
Cash advance loss provision		5,934		11,569		—		17,503
Administration		8,164		5,118		298		13,580
Depreciation and amortization		4,748		2,107		91		6,946

Total expenses		61,994		33,582		716		96,292

Income from operations	$	18,261	$	4,743	$	340	$	23,344

As of September 30, 2006:
Total assets	$	529,258	$	174,621	$	7,306	$	711,185

Goodwill	$	132,142	$	55,927	$	5,310	$	193,379


Nine Months Ended September 30, 2007:
Revenue
Finance and service charges	$	117,011	$	—	$	—	$	117,011
Proceeds from disposition of merchandise		277,342		—		—		277,342
Cash advance fees		31,411		229,469		—		260,880
Check cashing fees, royalties and other		2,438		7,777		2,817		13,032

Total revenue		428,202		237,246		2,817		668,265
Cost of revenue — disposed merchandise		172,402		—		—		172,402

Net revenue		255,800		237,246		2,817		495,863

Expenses
Operations		140,654		80,074		944		221,672
Cash advance loss provision		11,542		107,146		—		118,688
Administration		25,894		17,326		756		43,976
Depreciation and amortization		15,406		7,998		294		23,698

Total expenses		193,496		212,544		1,994		408,034

Income from operations	$	62,304	$	24,702	$	823	$	87,829

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Pawn		Cash		Check
	Lending		Advance⁽¹⁾		Cashing		Consolidated
Nine Months Ended September 30, 2006:
Revenue
Finance and service charges	$	109,047	$	—	$	—	$	109,047
Proceeds from disposition of merchandise		234,172		—		—		234,172
Cash advance fees		31,893		91,342		—		123,235
Check cashing fees, royalties and other		2,046		7,220		3,080		12,346

Total revenue		377,158		98,562		3,080		478,800
Cost of revenue — disposed merchandise		141,909		—		—		141,909

Net revenue		235,249		98,562		3,080		336,891

Expenses
Operations		132,164		44,033		981		177,178
Cash advance loss provision		11,541		21,197		—		32,738
Administration		24,396		14,872		1,179		40,447
Depreciation and amortization		13,568		5,973		261		19,802

Total expenses		181,669		86,075		2,421		270,165

Income from operations	$	53,580	$	12,487	$	659	$	66,726


⁽¹⁾		The Cash Advance segment is comprised of two distribution channels for the same product, a multi-unit, “storefront” platform of 301 units and an online, internet based lending platform. The amounts for the three and nine months ended September 30, 2006 include 15 days of activity, as the internet based lending platform was purchased on September 15, 2006. The following table summarizes the results from each channel’s contributions to the Cash Advance segment as of September 30, 2007:


			Internet		Total Cash
	Storefront		Lending		Advance
Three Months Ended September 30, 2007:
Revenue
Cash advance fees	$	34,249	$	49,867	$	84,116
Check cashing fees, royalties and other		1,826		—		1,826

Total revenue		36,075		49,867		85,942

Expenses
Operations		17,194		10,267		27,461
Cash advance loss provision		11,585		27,054		38,639
Administration		2,780		3,852		6,632
Depreciation and amortization		2,072		829		2,901

Total expenses		33,631		42,002		75,633

Income from operations	$	2,444	$	7,865	$	10,309

As of September 30, 2007:
Total assets	$	122,673	$	155,313	$	277,986

Goodwill	$	44,618	$	89,961	$	134,579

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


			Internet		Total Cash
	Storefront		Lending		Advance
Three Months Ended September 30, 2006:
Revenue
Cash advance fees	$	32,815	$	3,623	$	36,438
Check cashing fees, royalties and other		1,887		—		1,887

Total revenue		34,702		3,623		38,325


Expenses
Operations		14,193		595		14,788
Cash advance loss provision		10,332		1,237		11,569
Administration		4,928		190		5,118
Depreciation and amortization		1,947		160		2,107

Total expenses		31,400		2,182		33,582

Income from operations	$	3,302	$	1,441	$	4,743

As of September 30, 2006:
Total assets	$	122,232	$	52,389	$	174,621

Goodwill	$	44,618	$	11,309	$	55,927


			Internet		Total Cash
	Storefront		Lending		Advance
Nine Months Ended September 30, 2007:
Revenue
Cash advance fees	$	95,240	$	134,229	$	229,469
Check cashing fees, royalties and other		7,772		5		7,777

Total revenue		103,012		134,234		237,246


Expenses
Operations		50,539		29,535		80,074
Cash advance loss provision		28,716		78,430		107,146
Administration		7,935		9,391		17,326
Depreciation and amortization		5,924		2,074		7,998

Total expenses		93,114		119,430		212,544

Income from operations	$	9,898	$	14,804	$	24,702


			Internet		Total Cash
	Storefront		Lending		Advance
Nine Months Ended September 30, 2006:
Revenue
Cash advance fees	$	87,719	$	3,623	$	91,342
Check cashing fees, royalties and other		7,220		—		7,220

Total revenue		94,939		3,623		98,562


Expenses
Operations		43,438		595		44,033
Cash advance loss provision		19,960		1,237		21,197
Administration		14,682		190		14,872
Depreciation and amortization		5,813		160		5,973

Total expenses		83,893		2,182		86,075

Income from operations	$	11,046	$	1,441	$	12,487

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Litigation

On August 6, 2004, James E. Strong filed a purported class action lawsuit in the State Court of Cobb County, Georgia against Georgia Cash America, Inc., Cash America International, Inc. (together with Georgia Cash America, Inc., “Cash America”), Daniel R. Feehan, and several unnamed officers, directors, owners and “stakeholders” of Cash America. The lawsuit alleges many different causes of action, among the most significant of which is that Cash America made illegal payday loans in Georgia in violation of Georgia’s usury law, the Georgia Industrial Loan Act and Georgia’s Racketeer Influenced and Corrupt Organizations Act. Community State Bank (“CSB”) for some time made loans to Georgia residents through Cash America’s Georgia operating locations. The complaint in this lawsuit claims that Cash America was the true lender with respect to the loans made to Georgia borrowers and that CSB’s involvement in the process is “a mere subterfuge.” Based on this claim, the suit alleges that Cash America is the “de facto” lender and is illegally operating in Georgia. The complaint seeks unspecified compensatory damages, attorney’s fees, punitive damages and the trebling of any compensatory damages. A previous decision by the trial judge to strike Cash America’s affirmative defenses based on arbitration was upheld by the Georgia Court of Appeals, and on September 24, 2007, the Georgia Supreme Court declined to review the decision. The case has been returned to the State Court of Cobb County, Georgia. Cash America currently is considering whether any options remain to enforce the arbitration agreement between it and the Plaintiff. If Cash America’s further attempts to enforce the arbitration agreement are unsuccessful, discovery relating to the propriety of continuing this suit as a class action would proceed. Cash America believes that the plaintiffs’ claims in this suit are without merit and is vigorously defending this lawsuit.

Cash America and CSB also commenced a federal lawsuit in the U.S. District Court for the Northern District of Georgia seeking to compel Plaintiffs to arbitrate their claims against Cash America and CSB. The U.S. District Court dismissed the federal action for lack of subject matter jurisdiction, and Cash America and CSB appealed the dismissal of their complaint to the U.S Court of Appeals for the 11th Circuit. The 11th Circuit issued a decision on April 27, 2007 reversing the district court’s dismissal of the action and remanding the action to the district court for a determination of the issue of the enforceability of the parties’ arbitration agreements. Plaintiff requested the 11th Circuit to review this decision en banc and this request has been granted. The en banc rehearing currently is expected to occur in February 2008. The Strong litigation is still at an early stage, and neither the likelihood of an unfavorable outcome nor the ultimate liability, if any, with respect to this litigation can be determined at this time.

On October 23, 2007, a federal class action Complaint, styled Ryan Bonner, individually and on behalf of all others similarly situated, v. Cash America International, Inc., Cash America Net of Nevada, LLC, Cash America Net of Pennsylvania, LLC and Cash America of PA, LLC, d/b/a CashNetUSA.com, was filed in the United States District Court for the Eastern District of Pennsylvania, alleging, among other things, that the Company and three of its subsidiaries located outside Pennsylvania made certain loans to Pennsylvania consumers in violation of Pennsylvania law, including its usury, fair credit extension, and unfair trade practices and consumer protection laws. The Complaint also alleges that the arbitration clause in the relevant loans is unenforceable and seeks a declaratory judgment that the loan agreements issued to Pennsylvania residents are void and unenforceable under Pennsylvania law or, in the alternative, that the arbitration clause in those loan agreements is void and unenforceable. Plaintiff also seeks an injunction barring the Company and the three named subsidiaries from offering, arranging, making or collecting allegedly illegal loans in Pennsylvania, as well as an award of monetary damages (including treble damages), penalties, costs and attorneys’ fees. As of the date of this report, neither the Company nor any of the named subsidiaries have been served with the Complaint. The Company disagrees with the allegations in the Complaint and plans to vigorously defend this lawsuit. Neither the likelihood of an unfavorable outcome nor the ultimate liability, if any, with respect to this claim can be determined at this time.

The Company is a defendant in certain lawsuits encountered in the ordinary course of its business. Certain of these matters are covered to an extent by insurance. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.

9. Gain on Sale of Foreign Notes

In August 2007, the Company received gross proceeds in the amount of $16.8 million on the sale of notes receivable that it had received in 2004 as part of the proceeds from its sale of Svensk Pantbelåning, its former Swedish pawn lending subsidiary. In September 2004, the Company sold Svensk Pantbelåning to Rutland Partners LLP for cash and two subordinated notes receivable. One of the notes receivable was convertible into approximately 27.7% of the parent company of Svensk Pantbelåning on a fully-diluted basis. In August 2007, Rutland Partners LLP sold Svensk Pantbelåning to a third party who also purchased the notes receivable from the Company.

The Company’s total proceeds of $16.8 million represent $12.4 million in the repayment of principal and interest owed on notes receivable and $4.4 million for the value of its conversion rights under the convertible note. For the three months ended September 30, 2007, the Company recognized a pre-tax gain of approximately $6.3 million from the sale of the notes.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

The Company provides specialty financial services to individuals. These services include secured non-recourse loans, commonly referred to as pawn loans, to individuals through its pawn lending operations, unsecured cash advances in selected lending locations and on behalf of independent third-party lenders in other locations, and check cashing and related financial services through many of its lending locations and through franchised and Company-owned check cashing centers. The pawn loan portfolio generates finance and service charges revenue. A related activity of the pawn lending operations is the disposition of collateral from unredeemed pawn loans. In September 2006, the Company began offering cash advances over the internet and began arranging loans on behalf of independent third-party lenders over the internet in November 2006.

On September 15, 2006, the Company, through its wholly-owned subsidiary Cash America Net Holdings, LLC, purchased substantially all of the assets of The Check Giant LLC (“TCG”). TCG offered short-term cash advances exclusively over the internet under the name “CashNetUSA.” The Company paid an initial purchase price of approximately $35.9 million in cash and transaction costs of approximately $2.9 million, and has continued to use the CashNetUSA trade name in connection with its online operations. The Company also agreed to pay up to five supplemental earn-out payments during the two-year period after the closing. The amount of each supplemental payment is based on a multiple of earnings attributable to CashNetUSA’s business for the twelve months preceding the date of determining each scheduled supplemental payment. Each supplemental payment will be reduced by amounts previously paid. The supplemental payments are to be paid in cash within 45 days of the payment measurement date. The Company may, at its option, pay up to 25% of each supplemental payment in shares of its common stock based on an average share price as of the measurement date thereby reducing the amount of the cash payment.

The first supplemental payment of approximately $33.8 million, which was paid in February 2007 in cash, was based on the trailing twelve months earnings of CashNetUSA through December 31, 2006 and reflects adjustments for amounts previously paid. There was no supplemental payment with respect to the trailing twelve months earnings of CashNetUSA as of March 31, 2007. The next supplemental payment is scheduled in November 2007 and will be based on the trailing twelve months earnings of CashNetUSA as of September 30, 2007. As of September 30, 2007, the Company has accrued for a payment of approximately $43.3 million based on the defined multiple of trailing twelve months earnings through September 30, 2007. Pursuant to the terms of the purchase agreement with CashNetUSA, the March 31 and September 30, 2007 measurement dates were calculated at 5.5 times trailing twelve month earnings. Subsequent measurement dates of March 31 and September 30, 2008 will be calculated at 5 times trailing twelve month earnings.

In July 2007, the Company began offering short-term unsecured loans to customers who reside throughout the United Kingdom through its internet distribution platform. Management expects loan volumes to accumulate gradually and provide only nominal levels of asset increases throughout the remainder of 2007.

As of September 30, 2007, the Company had 936 total locations offering products and services to its customers.

As of September 30, 2007, the Company’s pawn lending operations consisted of 495 pawnshops, including 483 Company-owned units and 12 unconsolidated franchised units, located in 22 states in the United States. During the 21 months ended September 30, 2007, the Company acquired 24 operating units, established six locations, and combined or closed three locations for a net increase in Company-owned pawn lending units of 27. In addition, it opened four franchised locations.

At September 30, 2007, the Company’s cash advance operations operated 301 cash advance locations in seven states. During the 21 months ended September 30, 2007, the Company established 22 locations, and combined or closed seven locations for a net increase in cash advance locations of 15. CashNetUSA serves multiple markets through its internet distribution channel and had cash advances outstanding in 31 states and one foreign country at September 30, 2007.

As of September 30, 2007, in Florida and Texas, the Company provides services in connection with single payment cash advances originated by independent third-party lenders, whereby the Company acts as a credit services organization on behalf of consumers in accordance with applicable state laws (the “CSO program”). Under the CSO program, the Company arranges loans with independent third-party lenders, assists in the preparation of loan applications and loan documents, and accepts loan payments. To assist the customer in obtaining a loan through the CSO program, the Company also, as part of the credit services it provides to the customer, guarantees, on behalf of the customer, the customer’s payment obligations to the third-party lender under the loan. A customer who obtains a loan through the CSO program pays the Company a fee for the credit services, including the guaranty, and enters into a contract with the Company governing the credit services arrangement. Losses on cash advances acquired by the Company as a result of its guaranty obligations are the responsibility of the Company. The Company discontinued the CSO program in Michigan in February 2007, and now offers only cash advances underwritten by the Company to customers in that state.

As of September 30, 2007, the Company’s check cashing operations consisted of 135 franchised and five company-owned check cashing centers in 18 states. During the 21 months ended September 30, 2007, the Company opened 17 franchised locations, and combined or closed 13 franchised locations for a net increase of four franchised locations.

RESULTS OF CONTINUING OPERATIONS

The following table sets forth the components of the consolidated statements of income as a percentage of total revenue for the periods indicated.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Revenue
Finance and service charges		17.9	%		23.7	%		17.5	%		22.8	%
Proceeds from disposition of merchandise		39.5			44.9			41.5			48.9
Cash advance fees		41.2			29.2			39.0			25.7
Check cashing fees, royalties and other.		1.4			2.2			2.0			2.6

Total Revenue		100.0			100.0			100.0			100.0

Cost of Revenue
Disposed merchandise		24.9			27.9			25.8			29.7

Net Revenue		75.1			72.1			74.2			70.3


Expenses
Operations		32.3			35.1			33.2			37.0
Cash advance loss provision		18.8			10.5			17.8			6.8
Administration		7.1			8.2			6.6			8.5
Depreciation and amortization		3.6			4.2			3.5			4.1

Total Expenses		61.8			58.0			61.1			56.4

Income from Operations		13.3			14.1			13.1			13.9
Interest expense		(1.9	)		(1.9	)		(1.8	)		(1.7	)
Interest income		0.1			0.3			0.2			0.3
Foreign currency transaction gain		—			—			—			—
Gain from termination of contract		—			—			—			0.5
Gain on sale of foreign notes		2.7			—			0.9			—

Income before Income Taxes		14.2			12.5			12.4			13.0
Provision for income taxes		5.3			4.7			4.5			4.8

Net Income		8.9	%		7.8	%		7.9	%		8.2	%

The following table sets forth certain selected consolidated financial and non-financial data as of September 30, 2007 and 2006, and for each of the three and nine months then ended ($ in thousands unless noted otherwise).


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
PAWN LENDING OPERATIONS:
Pawn loans
Annualized yield on pawn loans		121.4	%		119.3	%		124.1	%		123.3	%
Total amount of pawn loans written and renewed	$	138,100		$	129,269		$	378,058		$	357,170
Average pawn loan balance outstanding	$	135,205		$	131,089		$	126,043		$	118,297
Average pawn loan balance per average location in operation	$	281		$	284		$	263		$	258
Ending pawn loan balance per location in operation	$	283		$	289		$	283		$	289
Average pawn loan amount at end of period (not in thousands).	$	102		$	100		$	105		$	100
Profit margin on disposition of merchandise as a percentage of proceeds from disposition of merchandise		36.9	%		37.8	%		37.8	%		39.4	%
Average annualized merchandise turnover		2.5	x		2.4	x		2.7	x		2.6	x
Average balance of merchandise held for disposition per average location in operation	$	192		$	167		$	182		$	157
Ending balance of merchandise held for disposition per location in operation	$	204		$	180		$	204		$	180

Pawnshop locations in operation —
Beginning of period, owned		480			457			475			456
Acquired		2			5			5			7
Start-ups		1			1			4			2
Combined or closed		—			—			(1	)		(2	)

End of period, owned		483			463			483			463
Franchise locations at end of period		12			11			12			11

Total pawnshop locations at end of period		495			474			495			474

Average number of owned pawnshop locations		482			462			479			459


Cash advances ^(a)
Pawn locations offering cash advances at end of period		429			417			429			417
Average number of pawn locations offering cash advances		427			416			425			423
Amount of cash advances written at pawn locations:
Funded by the Company	$	16,652		$	18,978		$	48,899		$	49,113
Funded by third-party lenders ^{(b) (d)}		49,634			57,062			141,510			151,673

Aggregate amount of cash advances written at pawn locations^{(b) (f)}	$	66,286		$	76,040		$	190,409		$	200,786

Number of cash advances written at pawn locations (not in thousands):
By the Company		54,821			61,516			160,253			154,545
By third-party lenders ^{(b) (d)}		105,873			129,176			308,729			355,651

Aggregate number of cash advances written at pawn locations^(b) ^(f)		160,694			190,692			468,982			510,196

Cash advance customer balances due at pawn locations (gross):
Owned by Company ^(c)	$	8,803		$	8,779		$	8,803		$	8,779
Owned by third-party lenders ^{(b) (d)}		9,179			10,474			9,179			10,474

Aggregate cash advance customer balances due at pawn locations (gross)^(b) ^(f)	$	17,982		$	19,253		$	17,982		$	19,253

(Continued on Next Page)


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2007			2006		2007			2006
CASH ADVANCE OPERATIONS ^(e):
Storefront operations:
Amount of cash advances written:
Funded by the Company	$	187,302		$	168,743	$	522,719		$	431,569
Funded by third-party lenders ^(b) ^(d)		30,212			34,899		84,884			103,995

Aggregate amount of cash advances written ^{(b) (f)}	$	217,514		$	203,642	$	607,603		$	535,564


Number of cash advances written (not in thousands):
By the Company		513,135			482,560		1,438,490			1,235,431
By third-party lenders ^(b) ^(d)		55,090			66,098		159,427			204,114

Aggregate number of cash advances written ^{(b) (f)}		568,225			548,658		1,597,917			1,439,545


Cash advance customer balances due (gross):
Owned by the Company ^(c)	$	51,316		$	46,642	$	51,316		$	46,642
Owned by third-party lenders ^{(b) (d)}		5,259			5,916		5,259			5,916

Aggregate cash advance customer balances due (gross) ^{(b) (f)}	$	56,575		$	52,558	$	56,575		$	52,558


Cash advance locations in operation (excluding online lending) —
Beginning of period		296			291		295			286
Start-ups		7			2		10			10
Combined or closed		(2	)		—		(4	)		(3	)

End of period		301			293		301			293

Average number of cash advance locations		299			292		297			289


Internet lending operations:
Amount of cash advances written:
Funded by the Company	$	157,887		$	15,625	$	435,665		$	15,625
Funded by third-party lenders ^{(b) (d)}		96,096			—		251,880			—

Aggregate amount of cash advances written ^{(b) (f)}	$	253,983		$	15,625	$	687,545		$	15,625


Number of cash advances written (not in thousands):
By the Company		400,942			40,480		1,117,466			40,480
By third-party lenders ^{(b) (d)}		159,711			—		441,402			—

Aggregate number of cash advances written ^{(b) (f)}		560,653			40,480		1,558,868			40,480


Cash advance customer balances due (gross):
Owned by the Company ^(c)	$	53,591		$	25,921	$	53,591		$	25,921
Owned by third-party lenders ^{(b) (d)}		16,631			—		16,631			—

Aggregate cash advance customer balances due (gross) ^{(b) (f)}	$	70,222		$	25,921	$	70,222		$	25,921


Number of states with online lending at end of period		31			27		31			27
Number of countries with online lending at end of period		2			1		2			1

(Continued on Next Page)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
Combined Storefront and Internet lending operations:
Amount of cash advances written:
Funded by the Company	$	345,189	$	184,368	$	958,384	$	447,194
Funded by third-party lenders ^(b) ^(d)		126,308		34,899		336,764		103,995

Aggregate amount of cash advances written ^{(b) (f)}	$	471,497	$	219,267	$	1,295,148	$	551,189


Number of cash advances written (not in thousands):
By the Company		914,077		523,040		2,555,956		1,275,911
By third-party lenders ^(b) ^(d)		214,801		66,098		600,829		204,114

Aggregate number of cash advances written ^{(b) (f)}		1,128,878		589,138		3,156,785		1,480,025


Cash advance customer balances due (gross):
Owned by the Company ^(c)	$	104,907	$	72,563	$	104,907	$	72,563
Owned by third-party lenders ^{(b) (d)}		21,890		5,916		21,890		5,916

Aggregate cash advance customer balances due (gross) ^{(b) (f)}	$	126,797	$	78,479	$	126,797	$	78,479


CONSOLIDATED CASH ADVANCE PRODUCT SUMMARY ^{(a) (b) (e)}:
Amount of cash advances written:
Funded by the Company	$	361,841	$	203,346	$	1,007,283	$	496,307
Funded by third-party lenders ^{(b) (d)}		175,942		91,961		478,274		255,668

Aggregate amount of cash advances written ^{(b) (f)}	$	537,783	$	295,307	$	1,485,557	$	751,975


Number of cash advances written (not in thousands):
By the Company		968,898		584,556		2,716,209		1,430,456
By third-party lenders ^{(b) (d)}		320,674		195,274		909,558		559,765

Aggregate number of cash advances written ^{(b) (f)}		1,289,572		779,830		3,625,767		1,990,221

Average amount per cash advance written (not in thousands):
Funded by the Company	$	373	$	348	$	371	$	347
Funded by third-party lenders ^{(b) (d)}		549		471		526		474

Aggregate average amount per cash advance ^{(b) (f)}	$	417	$	379	$	410	$	382


Cash advance customer balances due (gross):
Owned by the Company ^(c)	$	113,710	$	81,342	$	113,710	$	81,342
Owned by third-party lenders ^{(b) (d)}		31,069		16,390		31,069		16,390

Aggregate cash advance customer balances due (gross) ^{(b) (f)}	$	144,779	$	97,732	$	144,779	$	97,732


Total locations offering cash advances at end of period (excluding online lending)		730		710		730		710
Average total locations offering cash advances (excluding online lending)		726		708		722		712
Number of states with online lending at end of period		31		27		31		27
Number of countries with online lending at end of period		2		1		2		1

(Continued on Next Page)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
CHECK CASHING OPERATIONS (Mr. Payroll):
Centers in operation at end of year (not in thousands):
Company-owned locations		5			5			5			5
Franchised locations ^(b)		135			133			135			133

Combined centers in operations at end of year ^(b)		140			138			140			138

Revenue from Company-owned locations	$	106		$	126		$	379		$	442
Revenue from franchise royalties and other		561			582			1,902			1,949

Total revenue ^(c)	$	667		$	708		$	2,281		$	2,391

Face amount of checks cashed:
Company-owned locations	$	7,902		$	9,196		$	25,724		$	29,191
Franchised locations ^(b)		291,255			302,366			958,277			968,963

Combined face amount of checks cashed ^(b)	$	299,157		$	311,562		$	984,001		$	998,154

Fees collected from customers:
Company-owned locations ^(c)	$	106		$	124		$	379		$	442
Franchised locations ^(b)		3,968			4,140			13,544			13,774

Combined fees collected from customers ^(b)	$	4,074		$	4,264		$	13,923		$	14,216

Fees as a percentage of checks cashed:
Company-owned locations		1.3	%		1.4	%		1.5	%		1.5	%
Franchised locations ^(b)		1.4			1.4			1.4			1.4

Combined fees as a percentage of checks cashed ^(b)		1.4	%		1.4	%		1.4	%		1.4	%

Average check cashed (not in thousands):
Company-owned locations	$	375		$	379		$	396		$	400
Franchised locations ^(b)		416			402			442			426

Combined average check cashed ^(b)	$	415		$	401		$	441		$	425


^(a)		Includes cash advance activities at the Company’s pawn lending locations.

^(b)		Non-GAAP presentation. For informational purposes and to provide a greater understanding of the Company’s businesses. Management believes information provided with this level of detail is meaningful and useful in understanding the activities and business metrics of the Company’s operations.

^(c)		Amounts recorded in the Company’s consolidated financial statements.

^(d)		Cash advances written by third-party lenders that were arranged by the Company on behalf of the third-party lenders.

^(e)		Includes cash advance activities at the Company’s cash advance storefront locations and through the Company’s internet distribution channel.

^(f)		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.

CRITICAL ACCOUNTING POLICIES

Since January 1, 2007, the Company has accounted for uncertainty in income taxes recognized in the financial statements in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 requires that a more-likely-than-not threshold be met before the benefit of a tax position may be recognized in the financial statements and prescribes how such benefit should be measured. It also provides guidance on derecognition, classification, accrual of interest and penalties, accounting in interim periods, disclosure and transition. It requires that the new standard be applied to the balances of assets and liabilities as of the beginning of the period of adoption and that a corresponding adjustment be made to the opening balance of retained earnings. See Note 2 of Notes to Consolidated Financial Statements.

There have been no other changes of critical accounting policies since December 31, 2006.

RECENT ACCOUNTING PRONOUNCEMENTS

OVERVIEW

Components of Consolidated Net Revenue. Consolidated net revenue is total revenue reduced by the cost of merchandise sold in the period. It represents the income available to satisfy expenses and is the measure management uses to evaluate top line performance. The components of consolidated net revenue are pawn related net revenue, consisting of finance and service charges from pawn loans plus profit from the disposition of merchandise; cash advance fees and other revenue. Other revenue is comprised mostly of check cashing fees, but includes royalties and other revenue items. Growth in cash advance fees has increased the related contribution of the cash advance products to consolidated net revenue during the three and nine months ended September 30, 2007 compared to the same periods of 2006. The growth in cash advance fees is primarily attributable to higher average cash advance balances, the addition of new units and the addition of cash advances made over the internet beginning in mid-September 2006. Net revenue from pawn lending activities contributed 43.2% and 56.4% of net revenue for the three months ended September 30, 2007 and 2006; and 44.8% and 59.8% for the nine months ended September 30, 2007 and 2006, respectively. The following graphs show consolidated net revenue and depict the mix of the components of net revenue for the three and nine months ended September 30, 2007 and 2006:

Contribution to Increase in Net Revenue. The Company’s net revenue increased 45.3% and 47.2% for the three and nine months ended September 30, 2007 compared to the prior year same periods. Cash advance fees have contributed the majority of the increase primarily because of the acquisition in September 2006 and subsequent growth in revenue of a subsidiary offering cash advances over the internet. In addition, higher average balances owed by customers, and the growth and development of newly opened cash advance locations contributed to the increase. As illustrated below, these increases represented 86.8% and 86.6% of the Company’s overall increase in net revenue from the three and nine months ended September 30, 2006 to the three and nine months ended September 30, 2007 and 51.8% and 52.5% of the overall increase from the three and nine months ended September 30, 2005 to the three and nine months ended September 30, 2006. The increase in pawn-related net revenue in the aggregate, combined finance and service charges and profit from the disposition of merchandise, contributed 13.8% and 13.0% of the year over year increase in net revenue for the first three and nine months of 2007 compared to 43.4% of the growth in the same periods of 2006.

While the percent of contribution to the growth in consolidated net revenue generated by pawn lending operations is a smaller percentage than the prior year, net revenue from pawn lending activities increased 11.1% and 10.3% for the three and nine month periods ended September 30, 2007 compared to the prior year. The disproportionate growth in net revenue from cash advance activities is mostly due to the inclusion of the operations of the online distribution channel acquired in September 2006 that were not in the full comparable periods through September 2006. These trends are depicted in the following graphs:

Quarter Ended September 30, 2007 Compared To Quarter Ended September 30, 2006

Consolidated Net Revenue. Consolidated net revenue increased $54.2 million, or 45.3%, to $173.8 million during the three months ended September 30, 2007 (the “current quarter”) from $119.6 million during the three months ended September 30, 2006 (the “prior year quarter”). The following table sets forth net revenue by operating segment for the three months ended September 30, 2007 and 2006 ($ in thousands):


	Three Months Ended September 30,
	2007		2006		Inc./(Dec.)
Cash advance operations — storefront	$	36,075	$	34,702	$	1,373		4.0	%
Cash advance operations — internet lending		49,867		3,623		46,244		127.6

Total cash advance operations		85,942		38,325		47,617		124.2
Pawn lending operations		87,058		80,255		6,803		8.5
Check cashing operations		819		1,056		(237	)	(22.4	)

Consolidated net revenue	$	173,819	$	119,636	$	54,183		45.3	%

The components of consolidated net revenue are finance and service charges from pawn loans, which increased $2.0 million; profit from the disposition of merchandise, which increased $5.5 million; cash advance fees generated from pawn locations, cash advance locations and via the internet distribution channel, which increased $47.0 million; and combined segment revenue from check cashing fees, royalties and other, which decreased $343,000.

Finance and Service Charges. Finance and service charges from pawn loans increased $2.0 million, or 5.0%, from $39.4 million in the prior year quarter to $41.4 million in the current quarter. The increase is due primarily to higher year over year loan balances attributable to the increased amount of pawn loans written through existing and new locations added during 2006 and 2007. An increase in the average balance of pawn loans outstanding contributed $132,000 of the increase and the higher annualized yield, which is a function of the blend in permitted rates for fees and service charges on pawn loans in all operating locations of the Company of the pawn loan portfolio, contributed $1.9 million of the increase. In addition, the Company’s decision to reduce the maximum loan term from 90 days to 60 days in approximately 200 pawn locations caused an enhancement to loan yields as the average balance of loans outstanding declined and customer payments of finance and service charges occurred earlier than in prior periods.

The average balances of pawn loans outstanding during the current quarter increased by $4.1 million, or 3.1%, compared to the prior year quarter. The increase was driven by a 3.9% increase in the average amount per loan outstanding that was partially offset by a 0.7% decrease in the average number of pawn loans outstanding during the current quarter. Management believes that the decrease in the average number of pawn loans outstanding could be related to the fact that higher advance rates on loans secured by gold collateral, such as jewelry, can allow customers to reduce the number of loans needed to achieve their needs.

Pawn loan balances at September 30, 2007 were $136.7 million, which was 2.2% higher than at September 30, 2006. Annualized loan yield was 121.4% in the current quarter, compared to 119.3% in the prior year quarter. Same store pawn loan balances at September 30, 2007 were $0.7 million, or 0.5%, lower than at September 30, 2006, primarily due to the reduced maximum loan term in certain locations.

Profit from Disposition of Merchandise. Profit from disposition of merchandise represents the proceeds received from disposition of merchandise in excess of the cost of disposed merchandise. The following table summarizes the proceeds from disposition of merchandise and the related profit for the current quarter compared to the prior year quarter ($ in thousands):


	Three Months Ended September 30,
	2007									2006
	Merch-			Refined						Merch-			Refined
	andise			Gold			Total			andise			Gold			Total
Proceeds from dispositions	$	61,483		$	29,883		$	91,366		$	55,712		$	18,714		$	74,426
Profit on disposition	$	24,848		$	8,825		$	33,673		$	22,484		$	5,661		$	28,145
Profit margin		40.4	%		29.5	%		36.9	%		40.4	%		30.3	%		37.8	%
Percentage of total profit		73.8	%		26.2	%		100.0	%		79.9	%		20.1	%		100.0	%

The total proceeds from disposition of merchandise and refined gold increased $16.9 million, or 22.8%, and the total profit from the disposition of merchandise and refined gold increased $5.5 million, or 19.6%. Overall gross profit margin decreased from 37.8% in the prior year quarter to 36.9% in the current quarter, primarily due to an increase in the proportionate share of lower profit margin refined gold sales than in the prior year quarter. Proceeds from disposition of merchandise (including jewelry sales), excluding refined gold, increased $5.8 million, or 10.4%, in the current quarter compared to the prior year quarter. Excluding the effect of the disposition of refined gold, the profit margin on the disposition of merchandise was 40.4% for both the current quarter and the prior year quarter. The profit margin on the disposition of refined gold decreased to 29.5% in the current quarter compared to 30.3% in the prior year quarter. The increase in gross profit dollars on the disposition of refined gold during the current quarter is primarily attributable to the 32% higher number of ounces of gold sold and a 20% higher price per ounce. Cost of goods sold increased as a result of a 24% rise in cost per ounce leading to a lower gross profit margin on refined gold compared to the prior year quarter.

The higher level of retail sales activity and refined gold sales was supported by higher levels of merchandise available for disposition entering the current quarter and by the net addition of 20 pawn locations since September 30, 2006. The consolidated merchandise turnover rate was 2.5 times during the current quarter compared to 2.4 times during the prior year quarter. Management expects that profit margin on the disposition of merchandise in the near term will likely remain at or slightly below current levels mainly due to higher inventory levels and an increase in the percentage mix of refined gold sales, which typically have lower gross profit margins.

The table below summarizes the age of merchandise held for disposition before valuation allowance of $2.1 million at September 30, 2007 and $2.0 million at September 30, 2006 ($ in thousands).


	2007					2006
	Amount		%			Amount		%
Merchandise held for 1 year or less —
Jewelry	$	60,747		60.3	%	$	49,908		58.6	%
Other merchandise		30,405		30.1			27,156		31.9

		91,152		90.4			77,064		90.5

Merchandise held for more than 1 year —
Jewelry		6,008		6.0			5,125		6.0
Other merchandise		3,709		3.6			3,010		3.5

		9,717		9.6			8,135		9.5

Total merchandise held for disposition	$	100,869		100.0	%	$	85,199		100.0	%

Cash Advance Fees. Cash advance fees increased $47.0 million, or 97.1%, to $95.4 million in the current quarter from $48.4 million in the prior year quarter. The increase in revenue from cash advance fees is predominately due to the increase in customers through the Company’s offering of the product through its online distribution channel, and to a lesser extent, the increase and growth of storefront locations. As of September 30, 2007, the cash advance products were available in 732 lending locations, including 431 pawnshops and 301 cash advance locations, and through the online distribution channel. Of these lending locations, 319 arrange for customers to obtain cash advance products from independent third-party lenders for a fee. Cash advance fees from same stores decreased $174,000, or 0.4%, to $44.0 million in the current quarter as compared to $44.1 million in the prior year quarter primarily due to significantly lower volumes in pawn lending locations that offer the cash advance product.

Cash advance fees include revenue from the cash advance portfolio owned by the Company and fees paid to the Company for arranging for cash advance products from independent third-party lenders for customers. (Although cash advance transactions may take the form of loans or deferred check deposit transactions, the transactions are referred to throughout this discussion as “cash advances” for convenience.)

The following table sets forth cash advance fees by operating segment for the three months ended September 30, 2007 and 2006 ($ in thousands):


	Three Months Ended September 30,
	2007		2006		Inc./(Dec.)
Cash advance operations — storefront	$	34,249	$	32,815	$	1,434		4.4	%
Cash advance operations — internet lending		49,867		3,623		46,244		1,276.4

Total cash advance operations		84,116		36,438		47,678		130.8
Pawn lending operations		11,301		11,963		(662	)	(5.5	)

Consolidated cash advance fees	$	95,417	$	48,401	$	47,016		97.1	%

The amount of cash advances written increased by $242.5 million, or 82.1%, to $537.8 million in the current quarter from $295.3 million in the prior year quarter. Included in the amount of cash advances written in the current quarter and the prior year quarter were $175.9 million and $92.0 million, respectively, of cash advances extended to customers by third-party lenders. The average amount per cash advance increased to $417 from $379. The combined Company and third-party lender portfolios of cash advances generated $96.4 million in revenue during the current quarter compared to $50.0 million in the prior year quarter. The outstanding combined portfolio balance of cash advances increased $47.1 million, or 48.2%, to $144.8 million at September 30, 2007 from $97.7 million at September 30, 2006. Those amounts included $113.7 million and $81.3 million at September 30, 2007 and 2006, respectively, which are included in the Company’s consolidated balance sheets. An allowance for losses of $30.9 million and $11.1 million has been provided in the consolidated financial statements for September 30, 2007 and 2006, respectively, which is netted against the outstanding cash advance amounts on the Company’s consolidated balance sheets.

The following table summarizes cash advances outstanding at September 30, 2007 and 2006 and contains certain non-Generally Accepted Accounting Principles (“non-GAAP”) measures with respect to the cash advances owned by third-party lenders that are not included in the Company’s consolidated balance sheets. The Company believes that presenting these non-GAAP measures is meaningful and necessary because management evaluates and measures the cash advance portfolio performance on an aggregate basis ($ in thousands).


	September 30,
	2007			2006
Funded by the Company ^(a)
Active cash advances and fees receivable	$	69,005		$	54,741
Cash advances and fees in collection		28,817			20,146

Total funded by the Company ^(a)		97,822			74,887

Funded by the third-party lenders ^{(b) (c)}
Active cash advances and fees receivable		31,069			17,072
Cash advances and fees in collection		15,888			5,773

Total funded by third-party lenders ^(b) ^(c)		46,957			22,845

Combined gross portfolio ^{(b) (d)}		144,779			97,732
Less: Elimination of cash advances owned by third-party lenders		31,069			16,390

Company-owned cash advances and fees receivable, gross		113,710			81,342
Less: Allowance for losses		30,925			11,089

Cash advances and fees receivable, net	$	82,785		$	70,253


Allowance for loss on Company-owned cash advances	$	30,925		$	11,089
Accrued losses on third-party lender owned cash advances		1,832			753

Combined allowance for losses and accrued third-party lender losses	$	32,757		$	11,842

Combined allowance for losses and accrued third-party lender losses as a % of combined gross portfolio ^(b)		22.6	%		12.1	%


^(a)		Cash advances written by the Company in its pawn and cash advance locations and through the Company’s 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.

Management anticipates continued growth in consolidated cash advance fees for the remainder of 2007, primarily due to increased consumer awareness and demand for the cash advance product, higher outstanding balances at September 30, 2007 compared to September 30, 2006, the continued growth of the internet distribution channel, the growth of balances from new units opened in 2006 and 2007, and additional planned openings in 2007.

Check Cashing Fees, Royalties and Other. Check cashing fees, royalties and other income from all segments decreased $343,000 to $3.3 million in the current quarter, or 9.3%, from $3.7 million in the prior year quarter primarily due to an increase in competition. The components of these fees are as follows (in thousands):


	Three Months Ended September 30,
	2007								2006
	Pawn		Cash		Check				Pawn		Cash		Check
	Lending		Advance		Cashing		Total		Lending		Advance		Cashing		Total
Check cashing fees	$	148	$	1,044	$	106	$	1,298	$	127	$	1,171	$	125	$	1,423
Royalties		134		—		692		826		161		¯		814		975
Other		416		782		21		1,219		455		716		117		1,288

	$	698	$	1,826	$	819	$	3,343	$	743	$	1,887	$	1,056	$	3,686

Operations Expenses. Consolidated operations expenses, as a percentage of total revenue, were 32.3% in the current quarter compared to 35.1% in the prior year quarter. These expenses increased $16.4 million, or 28.2%, in the current quarter compared to the prior year quarter. Pawn lending operating expenses increased $3.8 million, or 8.8%, to $47.0 million, primarily due to the net unit increase in pawn lending operations. The increase in operations expenses for the cash advance operations of $12.7 million, or 85.8%, is primarily attributable to the acquisition of a subsidiary that offers cash advances online, the net addition of cash advance locations and increased marketing and selling expenses.

As a multi-unit operator in the consumer finance industry, the Company’s operations expenses are predominately related to personnel and occupancy expenses. Personnel expenses include base salary and wages, performance incentives, and benefits. Occupancy expenses include rent, property taxes, insurance, utilities, and maintenance. The combination of personnel and occupancy expenses represents 80.4% of total operations expenses in the current quarter and 85.3% in the prior year quarter. Other operations expenses increased $6.1 million, or 71.3%, primarily due to an increase of $5.5 million in marketing and selling expenses. The comparison is as follows ($ in thousands):


	Three Months Ended September 30,
	2007					2006
			% of					% of
	Amount		Revenue			Amount		Revenue
Personnel	$	41,735		18.0	%	$	33,525		20.2	%
Occupancy		18,279		7.9			16,168		9.7
Other		14,681		6.4			8,570		5.2

Total	$	74,695		32.3	%	$	58,263		35.1	%

Administration Expenses. Consolidated administration expenses, as a percentage of total revenue, were 7.1% in the current quarter compared to 8.2% in the prior year quarter. The increase in administration expenses was principally attributable to the acquisition of a subsidiary that offers cash advances online, increased staffing levels, annual salary adjustments and net unit additions. The components of administration expenses for the three months ended September 30, 2007 and 2006 are as follows ($ in thousands):


	Three Months Ended September 30,
	2007					2006
			% of					% of
	Amount		Revenue			Amount		Revenue
Personnel	$	10,942		4.7	%	$	8,913		5.4	%
Other		5,508		2.4			4,667		2.8

Total	$	16,450		7.1	%	$	13,580		8.2	%

Cash Advance Loss Provision. The Company maintains an allowance for losses on cash advances at a level projected to be adequate to absorb credit losses inherent in the outstanding combined cash advance portfolio. The cash advance loss provision is used to increase the allowance carried against the outstanding company owned cash advance portfolio as well as expected losses in the third-party lender-owned portfolios that the Company guarantees as of the end of the period. The allowance is based on historical trends in portfolio performance based on the status of the balance owed by the customer with the full amount of the customer’s obligations being completely reserved when they become 60 days past due. The cash advance loss provision was $43.6 million for the current quarter and $17.5 million for the prior year quarter. The loss provision reflected a $26.1 million increase, principally due to the acquisition of a subsidiary that offers cash advances online, driven by the higher volume of combined cash advances written and portfolio performance trends. The loss provision as a percentage of combined cash advances written increased to 8.1% in the current quarter from 5.9% in the prior year quarter while actual net charge-offs (charge-offs less recoveries) as a percentage of combined cash advances written were 8.3% in the current quarter compared to 4.8% in the prior year quarter. The loss provision as a percentage of cash advance fees increased to 45.7% in the current quarter from 36.2% in the prior year quarter. These increases are mostly attributable to a significant increase in cash advance receivable balances and the inclusion of the cash advance balance from online customers which carry a higher loss rate.

On a sequential basis, the Company experienced an improvement in the loss metrics for its cash advance portfolio. The loss provision as a percent of cash advance fees declined from 48.7% in the second quarter of 2007 to 45.7% in the third quarter of 2007, and the loss provision as a percent of combined cash advances written decreased from 8.4% to 8.1%, respectively. This improvement in portfolio performance and loss rates is generally due to the seasoning of the online cash advance portfolio as the substantial increase in new customers (customers who had never used the product before, which have historically had the highest incidence of charge-offs) has moderated since the early stages of 2007.

During the current period, the Company’s online distribution channel sold selected cash advances which had been previously written off. These sales generated proceeds of $1.4 million in the current period. Those proceeds were recorded as recoveries on losses previously charged to the allowance for losses.

The following table summarizes the cash advance loss provision for the three months ended September 30, 2007 and 2006, respectively, and contains certain non-GAAP measures with respect to the cash advances written by third-party lenders that are not included in the Company’s consolidated balance sheets and related statistics. The Company believes that presenting these non-GAAP measures is meaningful and necessary because management evaluates and measures the cash advance portfolio performance on an aggregate basis including its evaluation of the loss provision for the Company-owned portfolio and the third-party lender-owned portfolio that the Company guarantees ($ in thousands).


	Three Months Ended
	September 30,
	2007			2006
Cash advance loss provision:
Loss provision on Company-owned cash advances	$	43,604		$	17,641
Loss provision on third-party owned cash advances		8			(138	)

Combined cash advance loss provision	$	43,612		$	17,503

Charge-offs, net of recoveries	$	44,854		$	14,093

Cash advances written:
By the Company ^(a)	$	361,841		$	203,346
By third-party lenders ^(b) ^(c)		175,942			91,961

Combined cash advances written ^(b) ^(d)	$	537,783		$	295,307

Combined cash advance loss provision as a % of combined cash advances written ^(b)		8.1	%		5.9	%
Charge-offs (net of recoveries) as a % of combined cash advances written ^(b)		8.3	%		4.8	%


^(a)		Cash advances written by the Company in its pawn and cash advance locations and through the Company’s 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.

Depreciation and Amortization. Depreciation and amortization expense as a percentage of total revenue was 3.6% in the current quarter and 4.2% in the prior year quarter. Total depreciation and amortization expense increased $1.3 million, or 19.0%, primarily due to the increase in operating locations and the amortization of certain intangible assets obtained in acquisitions. Management expects depreciation expense to increase in future periods as a result of future capital expenditures and continued remodeling of existing locations.

Interest Expense. Interest expense as a percentage of total revenue was 1.9% in both the current quarter and in the prior year quarter. Interest expense increased $1.2 million, or 38.5%, to $4.4 million in the current quarter as compared to $3.1 million in the prior year quarter. The increase was primarily due to the higher average floating interest rate borrowings ($140.2 million during the current quarter and $97.0 million during the prior year quarter) and the higher weighted average floating interest rate (6.5% during the current quarter compared to 6.3% during the prior year quarter) and the issuance in December 2006 of $60 million of senior unsecured long-term notes. The average amount of debt outstanding increased during the current quarter to $261.5 million from $179.2 million during the prior year quarter. This increase was primarily attributable to the acquisition of a subsidiary that offers online cash advances in the third quarter of 2006 and the first contingent earn-out payment funded in February 2007. The effective blended borrowing cost was 6.4% in the current quarter and 6.6% in the prior year quarter. In future periods management expects higher levels of debt largely due to the potential funding requirements of the CashNetUSA supplemental acquisition payments.

Interest Income. Interest income was $145,000 in the current quarter compared to $435,000 in the prior year quarter. The interest income is primarily from the two notes receivable denominated in Swedish kronor that the Company held in connection with its 2004 sale of its foreign pawn lending operations. The notes were sold in August 2007. Going forward, interest income will be significantly reduced compared to prior periods.

Foreign Currency Transaction Gain/Loss. The two Swedish kronor denominated notes were sold in August 2007. Exchange rate changes between the United States dollar and the Swedish kronor resulted in a net gain of $5,000 (net of a loss of $12,000 from foreign currency forward contracts) in the current quarter and $67,000 (including a gain of $6,000 from foreign currency forward contracts) in the prior year quarter. The foreign currency forward contracts totaling 68 million Swedish kronor (approximately $9.9 million at maturity) were established by the Company in 2005 to minimize the financial impact of currency market fluctuations.

Gain on Sale of Foreign Notes. In August 2007, the Company received gross proceeds in the amount of $16.8 million on the sale of notes receivable that it had received in 2004 as part of the proceeds from the sale of Svensk Pantbelåning, its former Swedish pawn lending subsidiary. In September 2004, the Company sold Svensk Pantbelåning to Rutland Partners, LLP for cash and two subordinated notes receivable. One of the notes receivable was convertible into approximately 27.7% of the parent company of Svensk Pantbelåning on a fully-diluted basis. In August 2007, Rutland Partners LLP sold Svensk Pantbelåning to a third party who also purchased the notes receivable from the Company. The Company’s total proceeds of $16.8 million represent $12.4 million in the repayment of principal and interest owed on notes receivable and $4.4 million for the value of its conversion rights under the convertible note. For the three months ended September 30, 2007, the Company recognized a pre-tax gain of approximately $6.3 million from the sale of the notes. Proceeds from the sale were used for general corporate purposes, including the repayment of debt and the repurchase of shares in the open market pursuant to an existing share repurchase authorization.

Income Taxes. The Company’s effective tax rate was 37.2% for the current quarter compared to 37.4% for the prior year quarter.

Nine Months Ended September 30, 2007 Compared To Nine Months Ended September 30, 2006

Consolidated Net Revenue. Consolidated net revenue increased $159.0 million, or 47.2%, to $495.9 million during the nine months ended September 30, 2007 (the “current period”) from $336.9 million during the nine months ended September 30, 2006 (the “prior year period”). The following table sets forth net revenue by operating segment for the nine months ended September 30, 2007 and 2006 ($ in thousands):


	Nine Months Ended September 30,
	2007		2006		Inc./(Dec.)
Cash advance operations — storefront	$	103,012	$	94,939	$	8,073		8.5	%
Cash advance operations — internet lending		134,234		3,623		130,611		3,605.1

Total cash advance operations		237,246		98,562		138,684		140.7
Pawn lending operations		255,800		235,249		20,551		8.7
Check cashing operations		2,817		3,080		(263	)	(8.5	)

Consolidated net revenue	$	495,863	$	336,891	$	158,972		47.2	%

Higher revenue from the Company’s cash advance product, higher finance and service charges from pawn loans and higher profit from the disposition of merchandise accounted for the increase in net revenue.

The components of consolidated net revenue are finance and service charges from pawn loans, which increased $8.0 million; profit from the disposition of merchandise, which increased $12.7 million; cash advance fees generated from pawn locations, cash advance locations and via the internet distribution

channel, which increased $137.6 million; and combined segment revenue from check cashing fees, royalties and other, which increased $686,000.

Finance and Service Charges. Finance and service charges from pawn loans increased $8.0 million, or 7.3%, from $109.0 million in the prior year period to $117.0 million in the current period. The increase is primarily due to higher loan balances attributable to the increased amount of pawn loans written through existing and new locations added during 2006 and 2007. An increase in the average balance of pawn loans outstanding contributed $3.0 million of the increase and the higher annualized yield, which is a function of the blend in permitted rates for fees and service charges on pawn loans in all operating locations of the Company of the pawn loan portfolio, contributed $5.0 million of the increase. In addition, the Company’s decision to reduce the maximum loan term from 90 days to 60 days in approximately 200 pawn locations caused an enhancement to loan yields as the average balance of loans outstanding declined and customer payments of finance and service charges accrued earlier than in prior periods.

The average balance of pawn loans outstanding during the current period increased by $7.7 million, or 6.6%, compared to the prior year period. The increase was driven by a 8.1% increase in the average amount per loan outstanding that was partially offset by a 1.4% decrease in the average number of pawn loans outstanding during the current period. Annualized loan yield was 124.1% in the current period, compared to 123.3% in the prior year period.

Profit from Disposition of Merchandise. Profit from disposition of merchandise represents the proceeds received from disposition of merchandise in excess of the cost of disposed merchandise. The following table summarizes the proceeds from disposition of merchandise and the related profit for the current period compared to the prior year period (dollars in thousands):


	Nine Months Ended September 30,
	2007									2006
	Merch-			Refined						Merch-			Refined
	andise			Gold			Total			andise			Gold			Total
Proceeds from dispositions	$	196,571		$	80,771		$	277,342		$	181,785		$	52,387		$	234,172
Profit on disposition	$	79,872		$	25,068		$	104,940		$	75,182		$	17,081		$	92,263
Profit margin		40.6	%		31.0	%		37.8	%		41.4	%		32.6	%		39.4	%
Percentage of total profit		76.1	%		23.9	%		100.0	%		81.5	%		18.5	%		100.0	%

While the total proceeds from disposition of merchandise and refined gold increased $43.2 million, or 18.4%, the total profit from the disposition of merchandise and refined gold increased $12.7 million, or 13.7%, primarily due to higher levels of retail sales offset by lower gross profit margin on the disposition of refined gold. Overall gross profit margin decreased from 39.4% in the prior year period to 37.8% in the current period as the percentage of lower profit margin refined gold sales was higher than the prior year period which diluted overall margins slightly. In addition, excluding the effect of the disposition of refined gold, the profit margin on the disposition of merchandise (including jewelry sales) was 40.6% and 41.4% for the current period and the prior year period, respectively. The profit margin on the disposition of refined gold decreased to 31.0% in the current period compared to 32.6% in the prior year period primarily due to the increase in cost per ounce. The increase in gross profit dollars on the disposition of refined gold during the current quarter is primarily attributable to the 27% higher number of ounces of gold sold and a 22% higher price per ounce. Cost of goods sold increased as a result of a 28% rise in cost per ounce leading to a drop in the gross profit margin on refined gold compared to the prior year period. Proceeds from disposition of merchandise, excluding refined gold, increased $14.8 million, or 8.1%, in the current period compared to the prior year period.

The higher level of retail sales activity was supported by higher levels of merchandise available for disposition entering the current period and by the net addition of 20 pawn locations since September 30, 2006. The consolidated merchandise turnover rate was 2.7 times during the current period compared to 2.6

times during the prior year period.

Cash Advance Fees. Cash advance fees increased $137.7 million, or 111.7%, to $260.9 million in the current period from $123.2 million in the prior year period. The increase was primarily due to the addition of the online distribution channel and, to a lesser extent, the growth and development of new cash advance units. Cash advance fees from same stores increased $4.8 million, or 4.1%, to $121.5 million in the current period as compared to $116.7 million in the prior year period.

The following table sets forth cash advance fees by operating segment for the nine months ended September 30, 2007 and 2006 ($ in thousands):


	Nine Months Ended September 30,
	2007		2006		Increase
Cash advance operations — storefront	$	95,240	$	87,719	$	7,521		8.5	%
Cash advance operations — internet lending		134,229		3,623		130,606		3,604.9

Total cash advance operations		229,469		91,342		138,127		151.2
Pawn lending operations		31,411		31,893		(482	)	(1.5)	%

Consolidated cash advance fees	$	260,880	$	123,235	$	137,645		111.7	%

The amount of cash advances written increased by $733.6 million, or 97.6%, to $1.5 billion in the current period from $752.0 million in the prior year period. Included in the amount of cash advances written in the current period and the prior year period were $478.3 million and $255.7 million, respectively, of cash advances extended to customers by third-party lenders. The average amount per cash advance increased to $410 from $382. The combined Company and third-party lender portfolios of cash advances generated $129.3 million in revenue during the current period compared to $122.9 million in the prior year period.

Check Cashing Fees, Royalties and Other. Check cashing fees, royalties and other income increased $686,000, or 5.5%, to $13.0 million in the current period, from $12.4 million in the prior year period, primarily due to expanded product offerings and their success in pawn locations and revenue growth in cash advance units. However, this growth has been partially inhibited by an increase in competition. The components of these fees are as follows (in thousands):


	Nine Months Ended September 30,
	2007								2006
	Pawn		Cash		Check				Pawn		Cash		Check
	Lending		Advance		Cashing		Total		Lending		Advance		Cashing		Total
Check cashing fees	$	617	$	4,620	$	380	$	5,617	$	177	$	4,792	$	441	$	5,410
Royalties		394		¯		2,381		2,775		466		¯		2,476		2,942
Other		1,427		3,157		56		4,640		1,403		2,428		163		3,994

	$	2,438	$	7,777	$	2,817	$	13,032	$	2,046	$	7,220	$	3,080	$	12,346

Operations Expenses. Consolidated operations expenses, as a percentage of total revenue, were 33.2% in the current period compared to 37.0% in the prior year period. These expenses increased $44.5 million, or 25.1%, in the current period compared to the prior year period. Pawn lending operating expenses increased $8.5 million, or 6.4%, primarily due to higher personnel costs and increased occupancy expenses partly due to the net increase of 20 pawnshop locations since September 30, 2006, and an increase in store level incentives. Cash advance operating expenses increased $36.0 million, or 81.9%, primarily as a result of the acquisition of a subsidiary that offers cash advances online. The increase in other operations expenses was primarily due to the increase in marketing and selling expenses.

The combination of personnel and occupancy expenses represents 79.0% of total operations expenses in the current period and 84.6% in the prior year period. Other operations expenses increased $19.2 million, or 70.4%, primarily due to an increase of $17.0 million in marketing and selling expenses. The comparison is as follows ($ in thousands):


	Nine Months Ended September 30,
	2007					2006
			% of					% of
	Amount		Revenue			Amount		Revenue
Personnel	$	122,092		18.3	%	$	101,791		21.3	%
Occupancy		53,057		7.9			48,080		10.0
Other		46,523		7.0			27,307		5.7

Total	$	221,672		33.2	%	$	177,178		37.0	%

Administration Expenses. Consolidated administration expenses, as a percentage of total revenue, were 6.6% in the current period compared to 8.5% in the prior year period. The components of administration expenses for the nine months ended September 30, 2007 and 2006 are as follows ($ in thousands):


	Nine Months Ended September 30,
	2007					2006
			% of					% of
	Amount		Revenue			Amount		Revenue
Personnel	$	28,987		4.3	%	$	27,289		5.7	%
Other		14,989		2.3			13,158		2.8

Total	$	43,976		6.6	%	$	40,447		8.5	%

Periodically the Company evaluates its reserves for health and workers’ compensation benefits. During the current period, the Company adjusted reserves downward consistent with past practices which reduced the administrative expenses in the current period. Before the reduction in personnel expense from these credits, the increase in administration expenses was principally attributable to the acquisition of a subsidiary that offers cash advances online, increased staffing levels, annual salary adjustments and net unit additions.

Cash Advance Loss Provision. The cash advance loss provision was $118.7 million for the current period and $32.7 million for the prior year period. The loss provision reflected an $86.0 million increase, principally due to the acquisition of a subsidiary that offers cash advances online, driven by the higher volume of combined cash advances written and portfolio performance trends. The loss provision as a percentage of combined cash advances written increased to 8.0% in the current period from 4.4% in the prior year period while actual net charge-offs (charge-offs less recoveries) as a percentage of combined cash advances written were 7.2% in the current period compared to 3.7% in the prior year period. The loss provision as a percentage of cash advance fees increased to 45.5% in the current period from 26.6% in the prior year period. These increases are mostly attributable to a significant increase in cash advance receivable balances and the inclusion of the cash advance balance from online customers which carry a higher loss rate.

During the current period, the Company’s online distribution channel sold selected cash advances which had been previously written off. These sales generated proceeds of $3.5 million. Included in this amount was $2.6 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.

The following table summarizes the cash advance loss provision for the nine months ended September 30, 2007 and 2006 ($ in thousands):


	Nine Months Ended
	September 30,
	2007			2006

Cash advance loss provision:
Loss provision on Company-owned cash advances	$	118,011		$	32,859
Loss provision on third-party owned cash advances		677			(121	)

Combined cash advance loss provision	$	118,688		$	32,738

Charge-offs, net of recoveries	$	106,599		$	28,079

Cash advances written:
By the Company ^(a)	$	1,007,283		$	496,307
By third-party lenders ^(b) ^(c)		478,274			255,668

Combined cash advances written ^(b) ^(d)	$	1,485,557		$	751,975

Combined cash advance loss provision as a % of combined cash advances written ^(b)		8.0	%		4.4	%
Charge-offs (net of recoveries) as a % of combined cash advances written ^(b)		7.2	%		3.7	%


^(a)		Cash advances written by the Company in its pawn and cash advance locations and through the Company’s 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.

Depreciation and Amortization. Depreciation and amortization expense as a percentage of total revenue was 3.5% in the current period and 4.1% in the prior year period. Total depreciation and amortization expense increased $3.9 million, or 19.7%, primarily due to 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 1.8% in the current period and 1.7% in the prior year period. Interest expense increased $4.1 million, or 51.3%, to $12.1 million in the current period as compared to $8.0 million in the prior year period. The increase was primarily due to the higher average floating interest rate borrowings ($105.7 million during the current period and $61.9 million during the prior year period) and the higher weighted average floating interest rate (6.4% during the current period compared to 6.0% during the prior year period) and the issuance in December 2006 of $60 million of senior unsecured long-term notes. The average amount of debt outstanding increased during the current period to $235.6 million from $149.7 million during the prior year period primarily attributable to the acquisition of CashNetUSA in the third quarter of 2006 and the first contingent earn-out payment funded in February 2007. The effective blended borrowing cost was 6.5% in the current period and 6.7% in the prior year period.

Interest Income. Interest income was $1.0 million in the current period compared to $1.2 million in the prior year period. The interest income is primarily from the two notes receivable denominated in Swedish kronor that the Company held in connection with its 2004 sale of its foreign pawn lending operations, which were sold in August 2007.

Foreign Currency Transaction Gain/Loss. Exchange rate changes between the United States dollar and the Swedish kronor resulted in a net gain of $63,000 (including a gain of $52,000 from foreign currency forward contracts) in the current period and $245,000 (net of a loss of $469,000 from foreign currency forward contracts) in the prior year period.

Gain on Sale of Foreign Notes. The Company received gross proceeds in the amount of $16.8 million on the sale of notes receivable that it had received in 2004 as part of the proceeds from its sale of Svensk Pantbelåning, its former Swedish pawn lending subsidiary. In September 2004, the Company sold Svensk Pantbelåning to Rutland Partners LLP, for cash and two subordinated notes receivable. One of the notes receivable was convertible into approximately 27.7% of the parent company of Svensk Pantbelåning on a fully-diluted basis. In August 2007, Rutland Partners LLP sold Svensk Pantbelåning to a third party who also purchased the notes receivable from the Company. The Company’s total proceeds of $16.8 million represent $12.4 million in the repayment of principal and interest owed on notes receivable and $4.4 million for the value of its conversion rights under the convertible note. For the three months ended September 30, 2007, the Company recognized a pre-tax gain of approximately $6.3 million from the sale of the notes. Proceeds from the sale were used for general corporate purposes, including the repayment of debt and the repurchase of shares in the open market pursuant to an existing share repurchase authorization.

Gain from Termination of Contract. In the prior year, the Company entered into an agreement with a landlord of a lending location to terminate the lease and vacate the property for $2.2 million ($1.4 million net of related taxes) which was recognized as a gain in that period.

Income Taxes. The Company’s effective tax rate was 36.1% for the current period compared to 37.0% for the prior year period. The decrease in the effective tax rate was primarily attributable to a decrease in state and local income taxes, including a $1.1 million one-time deferred Texas margin tax credit, net of the federal income tax effect of the credit. This credit resulted from a change in Texas law enacted during the second quarter of 2007. Excluding the effect of the one-time Texas deferred tax benefit, the effective tax rate for the current period would have been 37.5%.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s cash flows and other key indicators of liquidity are summarized as follows ($ in thousands):


	Nine Months Ended
	September 30,
	2007			2006
Operating activities cash flows	$	190,959		$	105,751
Investing activities cash flows:
Pawn loans	$	(21,080	)	$	(28,457	)
Cash advances		(119,982	)		(42,315	)
Acquisitions		(38,564	)		(48,931	)
Property and equipment additions		(48,883	)		(32,004	)
Proceeds from property insurance		1,316			1,247
Proceeds from termination of contract		—			2,198
Proceeds from sale of foreign notes		16,529			—
Financing activities cash flows	$	20,398		$	53,900
Working capital	$	282,205		$	288,692
Current ratio		3.2x			4.7x
Merchandise turnover		2.7x			2.6x

Cash flows from operating activities. Net cash provided by operating activities was $191.0 million for the current period. Net cash generated from the Company’s pawn lending operations, cash advance operations and check cashing operations were $52.9 million, $137.4 million and $743,000, respectively. The

improvement in cash flows from operating activities in the current period as compared to the prior year period was primarily due to the improvement in results of the pawn lending operations, the continued growth of a subsidiary that offers cash advances online and to the development of cash advance locations opened in recent periods.

Historically, the Company’s finance and service charge revenue is highest in the fourth fiscal quarter (October through December) primarily due to higher average loan balances. Proceeds from the disposition of merchandise are also generally highest in the Company’s fourth and first fiscal quarters (October through March) primarily due to the holiday season and the impact of tax refunds. The net effect of these factors is that income from operations typically is highest in the fourth and first fiscal quarters and likewise the Company’s cash flow is generally greatest in these two fiscal quarters.

Cash flows from investing activities. The Company’s pawn lending activities used cash of $21.1 million and cash advance activities used cash of $120.0 million during the current period. The Company also invested $48.9 million in property and equipment, including $14.5 million for the development of a new point-of-sale system and $34.4 million for the establishment of new locations, the remodeling of certain locations, as well as development and enhancements to communications and information systems.

During the nine months ended September 30, 2007, the Company’s acquisition of the assets of pawnshops used cash of $3.7 million. Additionally, during the period, the Company made the first supplemental payment of $33.8 million and paid other acquisition costs of approximately $1.1 million in connection with the acquisition of substantially all of the assets of The Check Giant LLC (“TCG”). To the extent that the defined multiple of consolidated earnings attributable to the business acquired from TCG exceeds the total amounts paid through the supplemental payment measurement dates, as defined in the asset purchase agreement, the Company will make additional payments to the sellers. As of September 30, 2007, the Company has accrued to accounts payable approximately $43.3 million for this payment based on the defined multiple of trailing twelve months earnings through September 30, 2007, expected to be paid in cash in November 2007. The next measurement date will be March 31, 2008.

During the nine months ended September 30, 2007, the Company received gross proceeds in the amount of $16.8 million on the sale of notes receivable that it had received in 2004 as part of the proceeds from its sale of Svensk Pantbelåning, its former Swedish pawn lending subsidiary. In September 2004, the Company sold Svensk Pantbelåning to Rutland Partners LLP, for cash and two subordinated notes receivable. One of the notes receivable was convertible into approximately 27.7% of the parent company of Svensk Pantbelåning on a fully-diluted basis. In August 2007, Rutland Partners LLP sold Svensk Pantbelåning to a third party who also purchased the notes receivable from the Company. The Company’s total proceeds of $16.8 million represent $12.4 million in the repayment of principal and interest owed on notes receivable and $4.4 million for the value of its conversion rights under the convertible note. For the three months ended September 30, 2007, the Company recognized a pre-tax gain of approximately $6.3 million from the sale of the notes. Proceeds from the sale were used for general corporate purposes, including the repayment of debt and the repurchase of shares in the open market pursuant to an existing share repurchase authorization.

Management anticipates that capital expenditures for the remainder of 2007 will be approximately $10 to $15 million primarily for the establishment of approximately three to ten combined total of new cash advance-only locations and pawnshops, for the remodeling of selected operating units, and for the continuing development and enhancements to communications and information systems. The additional capital required to make supplemental acquisition payments related to the CashNetUSA acquisition and to pursue other acquisition opportunities is not included in the estimate of capital expenditures because of the uncertainties surrounding such payments or any potential transaction of this nature at this time.

Cash flows from financing activities. During the current period, the Company borrowed $61.3 million under its bank lines of credit. The Company reduced the balance owed on its senior unsecured notes by

$16.8 million through the scheduled principal payments. Additional uses of cash included $3.1 million for dividends paid. On April 20, 2005, the Board of Directors authorized the Company’s repurchase of up to a total of 1,500,000 shares of its common stock (the “2005 authorization”). 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 nine months ended September 30, 2007, 617,600 shares were purchased for an aggregate amount of $21.9 million. In addition, 9,650 shares were acquired as partial payments of taxes for shares issued under stock-based compensation plans for an aggregate amount of $403,000. During the current period, stock options for 67,154 shares were exercised by a member of the board of directors and generated $1.9 million of additional equity. At its regularly scheduled meeting of its Board of Directors on October 24, 2007, the Board established a new authorization for the repurchase of shares in the amount of 1,500,000 and ended the 2005 authorization.

In March 2007, the Company amended its line of credit to extend the final maturity by two years, to February 2012. The line of credit agreement and the 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 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.

Management believes that the borrowings available ($104.2 million at September 30, 2007) under the credit facilities, cash generated from operations and current working capital of $282.2 million should be sufficient to meet the Company’s anticipated capital requirements for the foreseeable future.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk

Market risks relating to the Company’s operations result primarily from changes in interest rates, foreign exchange rates, and gold prices. The Company does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes. There have been no material changes to the Company’s exposure to market risks since December 31, 2006.


Item 4.		Controls and Procedures

Under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of September 30, 2007 (“Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective (i) to ensure that information required to be disclosed in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

There was no change in the Company’s internal control over financial reporting during the quarter ended September 30, 2007, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or internal controls will prevent all possible error and fraud. The Company’s disclosure controls and procedures are, however, designed to provide reasonable assurance of achieving their objectives, and the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s financial controls and procedures are effective at that reasonable assurance level.

PART II. OTHER INFORMATION


Item 1.		Legal Proceedings

See Note 8 of Notes to Consolidated Financial Statements.


Item 1A.		Risk Factors

There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of the Company’s 2006 Form 10-K.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table provides the information with respect to purchases made by the Company of shares of its common stock during each of the months in the first nine months of 2007:


						Total Number of		Maximum Number
	Total Number			Average		Shares Purchased as		of Shares that May
	of Shares			Price Paid		Part of Publicly		Yet Be Purchased
Period	Purchased			Per Share		Announced Plan		Under the Plan ⁽¹⁾
January 1 to January 31		3,025	⁽²⁾	$	40.86		—		1,064,700
February 1 to February 28		32,745	⁽³⁾		42.81		25,000		1,039,700
March 1 to March 31		30,336	⁽⁴⁾		39.70		30,000		1,009,700
April 1 to April 30		325	⁽⁴⁾		42.43		—		1,009,700
May 1 to May 31		35,418	⁽⁴⁾		41.68		35,000		974,700
June 1 to June 30		62,185	⁽⁴⁾		40.47		61,900		912,800
July 1 to July 31		20,168	⁽⁵⁾		37.26		20,000		892,800
August 1 to August 31		396,183	⁽⁵⁾		33.07		395,700		497,100
September 1 to September 30		50,617	⁽⁵⁾		34.44		50,000		447,100

Total		631,002		$	35.39		617,600


⁽¹⁾		On April 20, 2005, the Board of Directors authorized the Company’s repurchase of up to a total of 1,500,000 shares of its common stock. On October 24, 2007, the Board established a new authorization for the repurchase of up to a total of 1,500,000 shares of its common stock and ended the 2005 authorization.

⁽²⁾		Includes 173 shares purchased on behalf of participants relating to the Company’s Non-Qualified Savings Plan and 2,852 shares received as partial tax payments for shares issued under stock-based compensation plans.

⁽³⁾		Includes 947 shares purchased on behalf of participants relating to the Company’s Non-Qualified Savings Plan and 6,798 shares received as partial tax payments for shares issued under stock-based compensation plans.

⁽⁴⁾		Include shares purchased on behalf of participants relating to the Company’s Non-Qualified Savings Plan of 325, 418, and 285 shares for the months of March, April, May and June, respectively.

⁽⁵⁾		Include shares purchased on behalf of participants relating to the Company’s Non-Qualified Savings Plan of 168, 483, and 617 shares for the months of July, August and September, respectively.


Item 6.		Exhibits

	31.1		Certification of Chief Executive Officer

	31.2		Certification of Chief Financial Officer

	32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CASH AMERICA INTERNATIONAL, INC. (Registrant)
	By:	/s/ Thomas A. Bessant, Jr.
		Thomas A. Bessant, Jr.
		Executive Vice President and Chief Financial Officer

Date: October 26, 2007