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

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

(Exact name of registrant as specified in its charter)

Texas		75-2018239
(State or other jurisdiction of		(I.R.S. Employer
Incorporation or organization)		Identification No.)
1600 West 7th Street
Fort Worth, Texas		76102
(Address of principal executive offices)		(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
	(Do not check if a smaller reporting company)

     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:

     29,574,690 of the Registrants’ common shares, $.10 par value, were issued and outstanding as of October 15, 2010.

 

 

CASH AMERICA INTERNATIONAL, INC.

INDEX TO FORM 10-Q

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets – September 30, 2010 and 2009 and December 31, 2009			1
Consolidated Statements of Income – Three and Nine Months Ended September 30, 2010 and 2009			2
Consolidated Statements of Equity – September 30, 2010 and 2009			3
Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2010 and 2009			4
Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2010 and 2009			5
Notes to Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			45
Item 4. Controls and Procedures			45
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			46
Item 1A. Risk Factors			46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			48
Item 3. Defaults upon Senior Securities			48
Item 4. (Removed and Reserved)			48
Item 5. Other Information			48
Item 6. Exhibits			49
SIGNATURE			50
EX-2.2
EX-2.3
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

     This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements give current expectations or forecasts of future events and reflect the views and assumptions of senior management of Cash America International, Inc. (the “Company”) with respect to the business, financial condition and prospects of the Company. When used in this report, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “anticipates,” “may,” “forecast,” “project” and similar expressions or variations as they relate to the Company or its management are intended to identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties that are beyond the ability of the Company to control and, in some cases, predict. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. Key factors that could cause the Company’s actual financial results, performance or condition to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following:

	•		changes in pawn, consumer credit, tax and other laws and government rules and regulations applicable to the Company’s business,
	•		changes in demand for the Company’s services,
	•		the continued acceptance of the online channel by the Company’s online loan customers,
	•		the actions of third parties who provide, acquire or offer products and services to, from or for the Company,
	•		fluctuations in the price of gold,
	•		changes in competition,
	•		the ability of the Company to open new locations in accordance with its plans,
	•		changes in economic conditions,
	•		real estate market fluctuations,
	•		interest rate fluctuations,
	•		changes in foreign currency exchange rates,
	•		changes in the capital markets,
	•		the ability to successfully integrate newly acquired businesses into the Company’s operations,
	•		the loss of services of any of the Company’s executive officers,
	•		the effect of any current or future litigation proceedings on the Company,
	•		acts of God, war or terrorism, pandemics and other events,
	•		the effect of any of such changes on the Company’s business or the markets in which the Company operates, and
	•		other risks and uncertainties described in this report or from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”).

     The foregoing list of factors is not exhaustive and new factors may emerge or changes to these factors may occur that would impact the Company’s business. Additional information regarding these and other factors may be contained in the Company’s filings with the SEC, especially on Forms 10-K, 10-Q and 8-K. If one or more events related to these or other risks or uncertainties materialize, or if management’s underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. The Company disclaims any intention or obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of this report. All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements.

PART I. FINANCIAL INFORMATION

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(Unaudited)

		September 30,								December 31,
		2010				2009				2009
Assets
Current assets:
Cash and cash equivalents		$	52,427			$	28,532			$	46,004
Pawn loans			196,278				190,478				188,312
Consumer loans, net			129,480				93,472				108,789
Merchandise held for disposition, net			120,244				116,890				113,824
Pawn loan fees and service charges receivable			37,593				36,228				36,544
Prepaid expenses and other assets			48,066				21,155				32,129
Deferred tax assets			28,872				23,894				21,536
Total current assets			612,960				510,649				547,138
Property and equipment, net			203,409				188,363				193,737
Goodwill			515,345				493,384				493,492
Intangible assets, net			24,939				28,787				27,793
Other assets			6,897				7,829				7,495
Total assets		$	1,363,550			$	1,229,012			$	1,269,655
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses		$	94,543			$	73,804			$	87,368
Accrued supplemental acquisition payment			—				—				2,291
Customer deposits			9,619				9,547				8,837
Income taxes currently payable			8,746				5,258				8,699
Current portion of long-term debt			25,493				17,512				25,493
Total current liabilities			138,401				106,121				132,688
Deferred tax liabilities			50,156				40,103				42,590
Noncurrent income tax payable			2,275				4,051				2,009
Other liabilities			9,005				3,929				5,479
Long-term debt			405,233				429,096				403,690
Total liabilities		$	605,070			$	583,300			$	586,456
Equity:
Cash America International, Inc. equity:
Common stock, $0.10 par value per share, 80,000,000 shares authorized, 30,235,164 shares issued			3,024				3,024				3,024
Additional paid-in capital			165,473				166,278				166,761
Retained earnings			610,545				500,150				532,805
Accumulated other comprehensive income (loss)			6,433				(1,607	)			1,181
Treasury shares, at cost (1,060,326 shares, 965,371 shares and 933,082 shares at September 30, 2010 and 2009, and at December 31, 2009, respectively)			(33,097	)			(27,759	)			(26,836	)
Total Cash America International, Inc. stockholders’ equity			752,378				640,086				676,935
Noncontrolling interest			6,102				5,626				6,264
Total equity			758,480				645,712				683,199
Total liabilities and equity		$	1,363,550			$	1,229,012			$	1,269,655

See notes to consolidated financial statements.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Revenue
Pawn loan fees and service charges		$	63,968			$	59,920			$	181,756			$	167,159
Proceeds from disposition of merchandise			116,998				114,786				372,731				354,719
Consumer loan fees			134,869				98,209				359,176				263,119
Other			3,525				3,209				10,840				11,599
Total Revenue			319,360				276,124				924,503				796,596
Cost of Revenue
Disposed merchandise			73,796				75,542				234,158				229,578
Net Revenue			245,564				200,582				690,345				567,018
Expenses
Operations			105,809				89,368				304,259				261,284
Consumer loan loss provision			51,136				37,690				129,963				91,642
Administration			27,838				21,875				78,832				66,031
Depreciation and amortization			10,422				10,219				31,355				30,953
Total Expenses			195,205				159,152				544,409				449,910
Income from Operations			50,359				41,430				145,936				117,108
Interest expense			(5,647	)			(5,436	)			(16,510	)			(15,591	)
Interest income			161				7				320				26
Foreign currency transaction gain (loss)			74				(150	)			(100	)			(19	)
Equity in loss of unconsolidated subsidiary			(61	)			—				(61	)			—
Income before Income Taxes			44,886				35,851				129,585				101,524
Provision for income taxes			17,408				13,103				49,145				37,732
Net Income			27,478				22,748				80,440				63,792
Net loss (income) attributable to the noncontrolling interest			430				(270	)			390				(797	)
Net Income Attributable to Cash America International, Inc.		$	27,908			$	22,478			$	80,830			$	62,995
Earnings Per Share:
Net Income attributable to Cash America International, Inc. common stockholders:
Basic		$	0.95			$	0.76			$	2.73			$	2.12
Diluted		$	0.90			$	0.73			$	2.56			$	2.06
Weighted average common shares outstanding:
Basic			29,462				29,702				29,601				29,757
Diluted			31,038				30,698				31,598				30,524
Dividends declared per common share		$	0.035			$	0.035			$	0.105			$	0.105

See notes to consolidated financial statements.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

(Unaudited)

		September 30,
		2010								2009
		Shares				Amounts				Shares				Amounts
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							166,761								160,007
Shares issued under stock based plans							(6,279	)							(6,019	)
Stock-based compensation expense							2,856								2,351
Income tax benefit from stock based compensation							2,135								517
Issuance of convertible debt							—								9,422
Balance at end of period							165,473								166,278
Retained earnings
Balance at beginning of year							532,805								440,252
Net income attributable to Cash America International, Inc.							80,830								62,995
Dividends paid							(3,090	)							(3,097	)
Balance at end of period							610,545								500,150
Accumulated other comprehensive income
Balance at beginning of year							1,181								(3,964	)
Unrealized derivatives (loss) gain, net of tax							(114	)							31
Foreign currency translation gain, net of tax							3,529								2,326
Marketable securities unrealized gain, net of tax							1,837								—
Balance at end of period							6,433								(1,607	)
Treasury shares, at cost
Balance at beginning of year			(933,082	)			(26,836	)			(818,772	)			(24,278	)
Purchases of treasury shares			(409,565	)			(14,503	)			(392,852	)			(10,543	)
Shares issued under stock based plans			282,321				8,242				246,253				7,062
Balance at end of period			(1,060,326	)			(33,097	)			(965,371	)			(27,759	)
Total Cash America International, Inc. stockholders’ equity							752,378								640,086
Noncontrolling interests
Balance at beginning of year							6,264								4,694
(Loss) income attributable to noncontrolling interests							(390	)							797
Foreign currency translation gain, net of tax							228								135
Balance at end of period							6,102								5,626
Total equity						$	758,480							$	645,712

See notes to consolidated financial statements.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Net income		$	27,478			$	22,748			$	80,440			$	63,792
Other comprehensive gain (loss), net of tax:
Unrealized derivatives gain (loss)(1)			4				(30	)			(114	)			31
Foreign currency translation gain (loss)(2)			4,464				(2,318	)			3,757				2,461
Marketable securities unrealized gain (3)			344				—				1,837				—
Total other comprehensive gain (loss), net of tax			4,812				(2,348	)			5,480				2,492
Comprehensive income		$	32,290			$	20,400			$	85,920			$	66,284
Net loss (income) income attributable to the noncontrolling interest			430				(270	)			390				(797	)
Foreign currency translation (gain) loss, net of tax, attributable to the noncontrolling interest			(164	)			133				(228	)			(135	)
Comprehensive loss (income) attributable to the noncontrolling interest			266				(137	)			162				(932	)
Comprehensive Income attributable to Cash America International, Inc.		$	32,556			$	20,263			$	86,082			$	65,352

See notes to consolidated financial statements.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

(Unaudited)

		Nine Months Ended
		September 30,
		2010				2009
Cash Flows from Operating Activities
Net Income		$	80,440			$	63,792
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			31,355				30,953
Amortization of discount on convertible debt			2,485				1,155
Consumer loan loss provision			129,963				91,642
Stock-based compensation			2,856				2,351
Deferred income taxes, net			(651	)			6,146
Other			257				820
Changes in operating assets and liabilities
Merchandise held for disposition			(33,726	)			(12,530	)
Pawn loan fees and service charges receivable			(873	)			(3,110	)
Finance and service charges on consumer loans			(3,392	)			(1,628	)
Prepaid expenses and other assets			(6,918	)			(7,103	)
Accounts payable and accrued expenses			10,657				(3,787	)
Excess income tax benefit from stock-based compensation			(2,135	)			(517	)
Current income taxes			2,272				8,381
Other operating assets and liabilities			960				1,640
Net cash provided by operating activities			213,550				178,205
Cash Flows from Investing Activities
Pawn loans made			(468,609	)			(459,391	)
Pawn loans repaid			289,487				262,448
Principal recovered through dispositions of forfeited pawn loans			199,999				180,833
Consumer loans made or purchased			(1,204,255	)			(882,408	)
Consumer loans repaid			1,056,838				783,453
Acquisitions, net of cash acquired			(23,012	)			(42,481	)
Purchases of property and equipment			(37,466	)			(29,418	)
Investments in marketable securities			(5,652	)			—
Other investing activities			(120	)			517
Net cash used in investing activities			(192,790	)			(186,447	)
Cash Flows from Financing Activities
Net repayments under bank lines of credit			(16,304	)			(74,622	)
Issuance of long-term debt			25,000				115,000
Net proceeds from re-issuance of treasury shares			1,963				1,043
Loan costs paid			(290	)			(3,943	)
Payments on notes payable and other obligations			(9,121	)			(18,500	)
Excess income tax benefit from stock-based compensation			2,135				517
Treasury shares purchased			(14,503	)			(10,543	)
Dividends paid			(3,090	)			(3,097	)
Net cash (used in) provided by financing activities			(14,210	)			5,855
Effect of exchange rates on cash			(127	)			914
Net increase (decrease) in cash and cash equivalents			6,423				(1,473	)
Cash and cash equivalents at beginning of year			46,004				30,005
Cash and cash equivalents at end of period		$	52,427				28,532
Supplemental Disclosures
Non-cash investing and financing activities
Pawn loans forfeited and transferred to merchandise held for disposition		$	172,422			$	175,700
Pawn loans renewed		$	89,391			$	81,510
Consumer loans renewed		$	298,734			$	246,996

See notes to consolidated financial statements.

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES

1. Significant Accounting Policies

Basis of Presentation

     The consolidated financial statements include all of 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, 2010 and 2009 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 statement 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.

     As more fully described in Note 6, in the second quarter of 2010 the Company realigned its operating segments. Certain amounts in the consolidated financial statements for the three and nine months ended September 30, 2009 have been reclassified to conform to the presentation format adopted in the second quarter of 2010. These reclassifications have no impact on consolidated results previously reported.

     The Company has a contractual relationship with a third-party entity, Huminal, S.A. de C.V., a Mexican sociedad anónima de capital variable (“Huminal”), to compensate and maintain the labor force of its Mexico pawn operations, of which the Company is a majority owner due to the December 16, 2008 acquisition (the “Prenda Fácil acquisition”) by the Company of 80% of the outstanding stock of Creazione Estilo, S.A. de C.V., SOFOM, E.N.R., a Mexican sociedad anónima de capital variable, sociedad financiera de objeto múltiple, entidad no regulada, operating under the name “Prenda Fácil” (referred to as “Prenda Fácil”). The Company has no ownership interest in Huminal; however, Prenda Fácil qualifies as the primary beneficiary of Huminal in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification” or “ASC”) 810-10-50, Variable Interest Entities. Therefore, the results and balances of Huminal are allocated to net income attributable to noncontrolling interests.

     These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Foreign Currency Translations

     The functional currencies for the Company’s subsidiaries that serve residents of the United Kingdom, Australia, Canada and Mexico are the British pound, the Australian dollar, the Canadian dollar and the Mexican peso, respectively. The assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rates in effect at each balance sheet date, and the resulting adjustments are accumulated in other comprehensive income (loss) as a separate component of equity. Revenue and expenses are translated at the monthly average exchange rates occurring during each period.

Revenue Recognition

     Pawn Lending - Pawn loans are short term loans made on the pledge of tangible personal property. Pawn loan fees and service charges revenue are accrued ratably over the term of the loan (generally 30 days) for the portion of those pawn loans deemed collectible. 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

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

characteristics of its outstanding pawn loan portfolio and assess the collectability of the principal balance in addition to pawn loan fees and service charges.

     For loans that are not redeemed, the carrying value of the underlying collateral is stated at the lower of cost or market. With respect to the Company’s domestic pawn operations, collateral underlying unredeemed pawn loans is reflected in “Merchandise held for disposition” on the Company’s consolidated balance sheet. With respect to the Company’s foreign pawn operations, collateral underlying unredeemed pawn loans is not owned by the Company and is held in “Prepaid expenses and other assets” until sold. Revenue is recognized at the time the collateral is sold. If the proceeds exceed the outstanding loan balance, the Company recognizes as revenue the accrued pawn loan fees and service charges, as well as other fees and expenses incurred in relation to the non-payment and sale of the loan collateral on behalf of the customer. If the proceeds from the disposition of the collateral are less than the outstanding loan balance, a loss is recorded for the difference at the time the collateral 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.

     Consumer Loans - The Company offers short-term unsecured loan products referred to as “consumer loans” (formerly referred to as cash advances) and arranges for customers to obtain consumer loans from independent third-party lenders through many of its retail services locations and over the internet. Consumer loan fees include revenue from the loan portfolio owned by the Company and fees paid to the Company for arranging or processing loans from independent third-party lenders for customers through the CSO program (as defined below) and through the Company’s micro line of credit (or “MLOC”) services channel (formerly referred to as the Company’s card services business). Consumer loan fees also include fees generated from the Company’s MLOC services channel and revenues from a longer-term installment loan product offered by the Company that typically has an average term of four to 24 months. Although consumer loan transactions may take the form of loans, deferred check deposit transactions, credit services transactions, or the processing of, and the participation in receivables originated by, a third-party lender’s MLOC product, the transactions are referred to throughout this discussion as “consumer loans” for convenience.

     Consumer loans provide customers with cash, typically 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 electronic Automated Clearing House (“ACH”) transaction for the aggregate amount of the payment due. The customer may repay the consumer loan in cash or by allowing the check to be presented for collection by manual deposit or through an electronic debit ACH for the amount due. The Company accrues fees and interest on consumer loans on a constant yield basis ratably over the term of the loan.

     The Company provides a consumer loan product in some markets by acting as a credit services organization on behalf of consumers in accordance with applicable state laws (the “CSO program”). Under the CSO program, the Company provides consumers with certain credit services, such as arranging loans with independent third-party lenders, assisting in the preparation of loan applications and loan documents and accepting loan payments. The Company also guarantees the customer’s payment obligations in the event of default if the customer is approved for and accepts the loan. A customer who obtains a loan through the CSO program pays the Company a fee for these credit services (“CSO fees”). CSO fees are deferred and amortized over the term of the loan and recorded as “Consumer loan fees” in the accompanying consolidated statements of income. The contingent loss on the guaranteed loans is accrued and recorded as a liability, which approximates the fair value of the liability.

     As of September 30, 2010, $222.5 million of combined gross consumer loans were outstanding, including $47.4 million of active consumer loans owned by third-party lenders that were guaranteed by the Company.

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

     In connection with the Company’s MLOC services channel, the Company provides loan processing services for a third-party bank issued MLOC on certain stored-value debit cards the bank issues (“Processing Program”). The Company also acquires a participation interest in the receivables originated by the bank in connection with the Processing Program and other similar processing programs utilized by the bank. The Company records revenue from its participation interest in the receivables, as well as processing and other miscellaneous fee income originated from its MLOC services channel as consumer loan fees recognized ratably over the loan period.

Allowance for Losses on Consumer Loans

     See Note 3 for a discussion of the Company’s allowance for losses on consumer loans.

Goodwill and Other Intangible Assets

     In accordance with ASC 350-20-35, Goodwill – Subsequent Measurement and ASC 350-30-35, Intangibles — Goodwill and Other — Subsequent Measurement, the Company performs an impairment review of goodwill and intangible assets with an indefinite life at least annually. This review is performed for each reporting unit as of June 30. The Company realigned its reportable segments in the second quarter of 2010. The Company completed its June 2010 test both before and after the realignment of its reportable segments and determined that there was no evidence of impairment of goodwill or other indefinite lived intangible assets. As a result, the Company allocated a portion of the goodwill relating to its previously reported cash advance segment to the retail services segment based on the relative fair values of those reporting units. See Note 6.

     The Company amortizes intangible assets with an estimable life on the basis of their expected periods of benefit, generally three to ten years. The costs of start-up activities and organization costs are charged to expense as incurred.

     All of the amounts of goodwill recorded in the Company’s acquisitions, except for the acquisition of Prenda Fácil, are expected to be deductible for tax purposes.

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

Recent Accounting Pronouncements

     In July 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (“ASU 2010-20”). ASU 2010-20 will expand the existing disclosure requirements surrounding the Company’s pawn and consumer loans and the allowance for loan losses. The objectives of the enhanced disclosures are to provide information that will enable readers of financial statements to understand the nature of credit risk in these loans and how that risk is analyzed in determining the related allowance for loan losses. The new disclosures are required for interim and annual reporting periods ending on or after December 15, 2010. The Company does not anticipate the adoption of ASU 2010-20 will have a material effect on its financial position or results of operations.

     In January 2010, FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (“ASU 2010-06”), which updates ASC 820-10-20, Fair Value Measurements and Disclosures. ASU 2010-06 requires new disclosures for fair value measurements and provides clarification for existing disclosure requirements. More specifically, ASU 2010-06 requires (a) an entity to disclose separately the amounts of significant transfers in and out of Level 1 and 2 fair value measurements from one measurement date to another and to describe the reasons for the transfers and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e., the activity must be presented on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). ASU 2010-06 clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring Level 2 and Level 3 fair value measurements. The Company adopted ASU 2010-06 as of January 1, 2010, and the adoption did not have a material effect on the Company’s financial position or results of operations.

     In December 2009, FASB issued ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”), which updates ASC 810-10, Consolidations. ASU 2009-17 clarifies the definition of a variable interest entity and updates the definition of the primary beneficiary of a variable interest entity. The Company adopted ASU 2009-17 as of January 1, 2010, and the adoption did not have a material effect on the Company’s financial position or results of operations.

2. Acquisitions

Prenda Fácil

     Pursuant to its business strategy of expanding storefront operations for the pawn business in the United States and Latin America, the Company, through its wholly-owned subsidiary, Cash America of Mexico, Inc., completed the Prenda Fácil acquisition in December 2008. The Company paid an aggregate initial consideration of $90.5 million, net of cash acquired, of which $82.6 million was paid in cash, including acquisition costs of approximately $3.6 million. The remainder of the initial consideration was paid in the form of 391,236 shares of the Company’s common stock with a fair value of $7.9 million as of the closing date. The Company also agreed to pay a supplemental earn-out payment in an amount based on a five times multiple of the consolidated earnings of Prenda Fácil’s business as specifically defined in the Stock Purchase Agreement (generally Prenda Fácil’s earnings before interest, income taxes, depreciation and amortization expenses) for the twelve-month period ending June 30, 2011, reduced by amounts previously paid. If the calculation of the supplemental payment produces an amount that is zero or less, there would be no supplemental payment. Any earned supplemental payment is expected to be paid in cash on or before August 15, 2011 and will be accounted for as goodwill. As of September 30, 2010, no supplemental payment has been accrued with respect to the June 30, 2011 determination date. The Company paid post-closing acquisition costs of $0.3 million, resulting in a total of $82.9 million paid in cash for

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

the acquisition, net of cash acquired. As further described in Note 6, the activities of Prenda Fácil are included in the results of the Company’s retail services segment.

Primary Innovations, LLC

     Pursuant to its business strategy of expanding its product offerings and offering new credit alternatives, the Company, through its wholly-owned subsidiary, Primary Cash Holdings, LLC (now known as Primary Innovations, LLC, or “Primary Innovations”), on July 23, 2008, purchased substantially all the assets of Primary Business Services, Inc., Primary Finance, Inc., Primary Processing, Inc. and Primary Members Insurance Services, Inc. (collectively, “PBSI”), a group of companies in the business of, among other things, providing loan processing services for, and participating in receivables associated with, a bank issued MLOC made available by the bank on certain stored-value debit cards the bank issues. The Company paid approximately $5.6 million in cash, of which approximately $4.9 million was used to repay a loan that the Company had made to PBSI, and transaction costs of approximately $0.3 million. The Company also agreed to pay up to eight supplemental earn-out payments during the four-year period after the closing. Through the end of the current period, the Company has made supplemental payments of approximately $23.8 million. The amount of the February 2010 and August 2010 payments and each subsequent supplemental payment were and will be based on a multiple of 3.5 times the earnings attributable to Primary Innovations’ business, as defined in the Asset Purchase Agreement, for the twelve-month period ending on the scheduled supplemental payment measurement date, reduced by amounts previously paid. As of September 30, 2010, no additional supplemental payment has been accrued for the December 31, 2010 measurement date based on the amounts previously paid in connection with the initial purchase price and the previous supplemental payments. All of the supplemental payments associated with the earn-out will be accounted for as goodwill and will be payable in cash. The remaining supplemental payments will be calculated as described above based on measurement dates (each December 31 and June 30) through June 30, 2012, with each payment, if any, due approximately 45 days after the measurement date. The total of all payments to the sellers cannot exceed $50.0 million pursuant to the terms of the asset purchase agreement. As further described in Note 6, the activities of Primary Innovations are included in the results of the Company’s e-commerce segment.

Other

     During the first quarter of 2010, the Company acquired three domestic retail services locations for approximately $1.9 million.

     See Note 10 for a description of the Company’s acquisition of substantially all of the assets of Maxit Financial, LLC (“Maxit”) in October 2010.

3. Allowances and Accruals for Losses on Consumer Loans

     In order to manage the portfolio of consumer loans effectively, the Company utilizes a variety of underwriting criteria, monitors the performance of the portfolio and maintains either an allowance or accrual for losses on consumer loans (including fees and interest) at a level estimated to be adequate to absorb credit losses inherent in the portfolio. The portfolio includes balances outstanding from all consumer loans, including short-term single payment loans, participation interests in receivables acquired through the MLOC services channel, and multi-payment installment loans. In addition, the Company maintains an accrual for losses related to loans guaranteed under CSO programs. The allowance for losses on Company-owned consumer loans offsets the outstanding loan amounts in the consolidated balance sheets. See Note 1 for a discussion of the Company’s consumer loan products.

     The Company stratifies the outstanding combined consumer loan portfolio by age, delinquency, and stage

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

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 recorded as a consumer loan loss provision expense in the consolidated statements of income. The Company charges off all consumer loans once they have been in default for 60 consecutive days, or sooner if deemed uncollectible. Recoveries on losses previously charged to the allowance are credited to the allowance when collected.

     The allowance deducted from the carrying value of consumer loans was $45.6 million, $24.7 million, and $27.4 million at September 30, 2010 and 2009, and December 31, 2009, respectively. The accrual for losses on consumer loan guaranty obligations was $2.8 million at both September 30, 2010 and 2009, and $2.9 million at December 31, 2009, and is included in “Accounts payable and accrued liabilities” on the Company’s consolidated balance sheet.

     The components of Company-owned consumer loans and receivables at September 30, 2010 and 2009, and December 31, 2009 were as follows (in thousands):

		Balance at
		September 30,								December 31,
		2010				2009				2009
Consumer loans and fees receivable		$	129,532			$	96,766			$	107,765
Loans purchased under guarantees			24,338				14,946				16,821
Loans purchased under participation agreements			21,196				6,448				11,553
Company-owned consumer loans and fees receivable, gross			175,066				118,160				136,139
Less: Allowance for losses			45,586				24,688				27,350
Consumer loans and fees receivable, net		$	129,480			$	93,472			$	108,789

     Changes in the allowance for losses for the Company-owned portfolio and the accrued loss for third-party lender-owned portfolios during the three and nine months ended September 30, 2010 and 2009 were as follows (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Allowance for losses for Company-owned consumer loans:
Balance at beginning of period		$	36,723			$	22,163			$	27,350			$	21,495
Consumer loan loss provision			51,671				36,933				130,117				90,961
Charge-offs			(48,935	)			(38,749	)			(131,768	)			(101,890	)
Recoveries			6,127				4,341				19,887				14,122
Balance at end of period		$	45,586			$	24,688			$	45,586			$	24,688
Accrual for third-party lender-owned consumer loans:
Balance at beginning of period		$	3,325			$	2,059			$	2,944			$	2,135
Increase (decrease) in loss provision			(535	)			757				(154	)			681
Balance at end of period		$	2,790			$	2,816			$	2,790			$	2,816

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

4. Earnings Per Share Computation

     Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the period. Restricted stock units issued under the Company’s equity plans are included in diluted shares upon the granting of the awards even though the vesting of shares will occur over time.

     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, 2010 and 2009 (in thousands, except per share amounts):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Numerator:
Net income attributable to Cash America International, Inc.		$	27,908			$	22,478			$	80,830			$	62,995
Denominator:
Total weighted average basic shares(a)			29,462				29,702				29,601				29,757
Shares applicable to outstanding option award agreements			133				283				144				263
Shares applicable to unvested restricted stock unit award agreements			408				444				407				437
Convertible debt(b)			1,035				269				1,446				67
Total weighted average diluted shares			31,038				30,698				31,598				30,524
Net income — basic		$	0.95			$	0.76			$	2.73			$	2.12
Net income — diluted		$	0.90			$	0.73			$	2.56			$	2.06

     There were no anti-dilutive shares for the three and nine months ended September 30, 2010 and 2009.

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

5. Long-Term Debt

     The Company’s long-term debt instruments and balances outstanding at September 30, 2010 and 2009, and December 31, 2009 were as follows (in thousands):

		Balance at
		September 30,								December 31,
		2010				2009				2009
USD line of credit up to $300,000 due 2012		$	173,358			$	199,325			$	189,663
GBP line of credit up to £7,500 due 2009			—				8,392				—
6.21% senior unsecured notes due 2021			25,000				25,000				25,000
6.09% senior unsecured notes due 2016			35,000				35,000				35,000
6.12% senior unsecured notes due 2012			40,000				40,000				40,000
7.26% senior unsecured notes due 2017			25,000				—				—
Variable rate senior unsecured note due 2012			28,880				38,000				38,000
5.25% convertible senior unsecured notes due 2029			103,488				100,891				101,520
Total debt		$	430,726			$	446,608			$	429,183
Less current portion			25,493				17,512				25,493
Total long-term debt		$	405,233			$	429,096			$	403,690

     The Company’s $300.0 million domestic line of credit (the “USD Line of Credit”) matures in March 2012. Interest on the USD Line of Credit is charged, at the Company’s option, at either the London Interbank Offered Rate (“LIBOR”) plus a margin or at the agent’s base rate. The margin on the USD Line of Credit varies from 0.875% to 1.875% (1.125% at September 30, 2010), depending on the Company’s cash flow leverage ratios as defined in the amended agreement. The Company also pays a fee on the unused portion ranging from 0.25% to 0.30% (0.25% at September 30, 2010) based on the Company’s cash flow leverage ratios. The weighted average interest rate (including margin) on the USD Line of Credit at September 30, 2010 and 2009 and December 31, 2009 was 1.46%, 1.92% and 1.91% respectively.

     At September 30, 2010 and 2009, borrowings under the Company’s USD Line of Credit consisted of three pricing tranches with maturity dates ranging from one to 30 days. However, pursuant to the credit agreement, the Company routinely refinances these borrowings within this long-term facility. Therefore, these borrowings are reported as part of the line of credit and as long-term debt. The Company had outstanding letters of credit of $26.9 million at September 30, 2010, which are considered usage under the Company’s USD Line of Credit for purposes of determining available borrowings under that line of credit, but are excluded from the long-term debt balance in the consolidated balance sheet.

     In December 2008, the Company issued $38.0 million of senior unsecured long-term variable rate notes, due in November 2012 pursuant to a Credit Agreement dated November 21, 2008. Interest is charged, at the Company’s option, at either LIBOR plus a margin of 3.50% or at the agent’s base rate plus a margin of 3.50%. Beginning March 31, 2010, the notes became payable in quarterly installments of $3.0 million, and any outstanding principal will be due at maturity in November 2012. The notes may be prepaid at the Company’s option anytime after November 20, 2009 without penalty. The weighted average interest rate (including margin) on the $38.0 million term notes at September 30, 2010 was 3.81% and was 3.75% at both September 30, and December 31, 2009.

     On May 19, 2009, the Company completed the offering of $115.0 million aggregate principal amount of 5.25% Convertible Senior Notes due May 15, 2029 (the “2009 Convertible Notes”). The 2009 Convertible Notes

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

are senior unsecured obligations of the Company. The 2009 Convertible Notes bear interest at a rate of 5.25% per year, payable semi-annually on May 15 and November 15 of each year. The 2009 Convertible Notes will be convertible, in certain circumstances, at an initial conversion rate of 39.2157 shares per $1,000 aggregate principal amount of 2009 Convertible Notes (which is equivalent to a conversion price of approximately $25.50 per share), subject to adjustment upon the occurrence of certain events, into either, at the Company’s election: (i) shares of common stock or (ii) cash up to their principal amount and shares of its common stock with respect to the remainder, if any, of the conversion value in excess of the principal amount. The Company may not redeem the 2009 Convertible Notes prior to May 14, 2014. The Company may, at its option, redeem some or all of the 2009 Convertible Notes on or after May 15, 2014 solely for cash. Holders of the 2009 Convertible Notes will have the right to require the Company to repurchase some or all of the outstanding 2009 Convertible Notes, solely for cash, on May 15, 2014, May 15, 2019 and May 15, 2024 at a price equal to 100% of the principal amount plus any accrued and unpaid interest.

     As of September 30, 2010, the principal amount of the 2009 Convertible Notes was $115.0 million, the carrying amount was $103.5 million, and the unamortized discount was $11.5 million. As of September 30, 2010, the carrying amount of the equity component recorded as additional paid-in capital was $9.4 million, net of deferred taxes and equity issuance costs. Accumulated amortization related to the 2009 Convertible Notes was $4.4 million as of September 30, 2010. The 2009 Convertible Notes have an effective interest rate of 8.46%. The non-cash interest expense recognized in the Company’s consolidated statements of income was $0.8 million and $2.5 million for the three and nine months ended September 30, 2010, respectively, and $0.8 million and $1.2 million for the three and nine months ended September 30, 2009, respectively.

     In connection with the issuance of the 2009 Convertible Notes, the Company incurred approximately $3.9 million in issuance costs, which primarily consisted of underwriting fees, legal and other professional expenses. These costs are being amortized to interest expense over five years. The unamortized balance of these costs at September 30, 2010 is included in “Other assets” in the Company’s consolidated balance sheets.

     On January 28, 2010, the Company issued and sold $25.0 million aggregate principal amount of its 7.26% senior unsecured notes (the “2017 Notes”) due January 28, 2017 in a private placement pursuant to a note purchase agreement dated January 28, 2010 by and among the Company and certain purchasers listed therein (the “Note Purchase Agreement”). The 2017 Notes are senior unsecured obligations of the Company. The 2017 Notes are payable in five annual installments of $5.0 million beginning January 28, 2013.

     See Note 9 for a discussion of the Company’s interest rate cap agreements.

     Each of the Company’s credit facility agreements and senior unsecured notes require the Company to maintain certain financial ratios. As of September 30, 2010, the Company was in compliance with all covenants or other requirements set forth in its debt agreements.

6. Operating Segment Information

     During the second quarter of 2010, the Company renamed its Internet Services Division as the E-Commerce Division and realigned its operating segments into two reportable segments: retail services and e-commerce. The retail services segment covers all of the operations of the Company’s Retail Services Division, which is comprised of both domestic and foreign storefront locations that offer some or all of the following services: pawn lending, consumer loans, check cashing and other ancillary services such as money orders, wire transfers and pre-paid debit cards. (Most of these ancillary services are provided through third-party vendors.) The e-commerce segment covers all of the operations of the Company’s E-Commerce Division, which is comprised of the Company’s domestic and foreign online channel (which covers the Company’s internet lending

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

activities, as well as online gold buying activities and other ancillary services) and the Company’s MLOC services channel. The segment realignment was in response to a number of changing factors within the Company’s business. First, the Company’s business strategy at retail services locations now emphasizes a broad array of products such as pawn loans, gold buying, and consumer loans in most locations, such that the previously reported delineation of pawn and consumer loan-centric locations became obsolete. Second, the Company’s management performance assessment, allocation of resources, and operating decisions have migrated to a two segment structure with one Division President overseeing retail services activities and another Division President overseeing e-commerce activities. Third, the Company’s e-commerce products have expanded and now include activities such as MLOC services and online gold buying. Financial information for prior years reflects the current segment structure.

     The Company allocates corporate administrative expenses to each operating segment based on personnel expenses at each segment. In the e-commerce segment, certain administrative expenses are allocated between the domestic and foreign components based on the amount of loans written for each geographic location. For comparison purposes, all prior periods in the tables below reflect the current classification of administrative and operating expenses.

		Retail Services(1)												E-Commerce(2)
		Domestic				Foreign				Total				Domestic				Foreign				Total				Consolidated
Three Months Ended September 30, 2010
Revenue
Pawn loan fees and service charges		$	56,638			$	7,330			$	63,968			$	—			$	—			$	—			$	63,968
Proceeds from disposition of merchandise			116,998				—				116,998				—				—				—				116,998
Consumer loan fees			29,250				—				29,250				77,720				27,899				105,619				134,869
Other			3,184				65				3,249				276				—				276				3,525
Total revenue			206,070				7,395				213,465				77,996				27,899				105,895				319,360
Cost of revenue – disposed merchandise			73,796				—				73,796				—				—				—				73,796
Net revenue			132,274				7,395				139,669				77,996				27,899				105,895				245,564
Expenses
Operations			73,515				4,078				77,593				19,707				8,509				28,216				105,809
Consumer loan loss provision			4,966				—				4,966				32,433				13,737				46,170				51,136
Administration			11,189				2,132				13,321				11,732				2,785				14,517				27,838
Depreciation and amortization			7,041				1,307				8,348				2,004				70				2,074				10,422
Total expenses			96,711				7,517				104,228				65,876				25,101				90,977				195,205
Income (loss) from operations		$	35,563			$	(122	)		$	35,441			$	12,120			$	2,798			$	14,918			$	50,359
As of September 30, 2010
Total assets		$	844,756			$	121,271			$	966,027			$	343,870			$	53,653			$	397,523			$	1,363,550
Goodwill										$	305,063											$	210,282			$	515,345

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

		Retail Services(1)												E-Commerce(2)
		Domestic				Foreign				Total				Domestic				Foreign				Total				Consolidated
Three Months Ended September 30, 2009
Revenue
Pawn loan fees and service charges		$	52,428			$	7,492			$	59,920			$	—			$	—			$	—			$	59,920
Proceeds from disposition of merchandise			114,786				—				114,786				—				—				—				114,786
Consumer loan fees			31,619				—				31,619				54,897				11,693				66,590				98,209
Other			2,718				195				2,913				296				—				296				3,209
Total revenue			201,551				7,687				209,238				55,193				11,693				66,886				276,124
Cost of revenue – disposed merchandise			75,542				—				75,542				—				—				—				75,542
Net revenue			126,009				7,687				133,696				55,193				11,693				66,886				200,582
Expenses
Operations			68,833				3,131				71,964				13,119				4,285				17,404				89,368
Consumer loan loss provision			7,190				—				7,190				25,007				5,493				30,500				37,690
Administration			10,590				1,879				12,469				8,549				857				9,406				21,875
Depreciation and amortization			7,352				966				8,318				1,892				9				1,901				10,219
Total expenses			93,965				5,976				99,941				48,567				10,644				59,211				159,152
Income from operations		$	32,044			$	1,711			$	33,755			$	6,626			$	1,049			$	7,675			$	41,430
As of September 30, 2009
Total assets		$	816,025			$	114,039			$	930,064			$	278,256			$	20,692			$	298,948			$	1,229,012
Goodwill										$	297,906											$	195,478			$	493,384

		Retail Services(1)												E-Commerce(2)
		Domestic				Foreign				Total				Domestic				Foreign				Total				Consolidated
Nine Months Ended September 30, 2010
Revenue
Pawn loan fees and service charges		$	158,580			$	23,176			$	181,756			$	—			$	—			$	—			$	181,756
Proceeds from disposition of merchandise			372,731				—				372,731				—				—				—				372,731
Consumer loan fees			83,576				—				83,576				207,631				67,969				275,600				359,176
Other			9,907				139				10,046				794				—				794				10,840
Total revenue			624,794				23,315				648,109				208,425				67,969				276,394				924,503
Cost of revenue – disposed merchandise			234,158				—				234,158				—				—				—				234,158
Net revenue			390,636				23,315				413,951				208,425				67,969				276,394				690,345
Expenses
Operations			219,568				12,486				232,054				50,120				22,085				72,205				304,259
Consumer loan loss provision			12,971				—				12,971				85,312				31,680				116,992				129,963
Administration			34,571				6,305				40,876				28,932				9,024				37,956				78,832
Depreciation and amortization			21,539				3,681				25,220				5,935				200				6,135				31,355
Total expenses			288,649				22,472				311,121				170,299				62,989				233,288				544,409
Income from operations		$	101,987			$	843			$	102,830			$	38,126			$	4,980			$	43,106			$	145,936
As of September 30, 2010
Total assets		$	844,756			$	121,271			$	966,027			$	343,870			$	53,653			$	397,523			$	1,363,550
Goodwill										$	305,063											$	210,282			$	515,345

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

		Retail Services(1)												E-Commerce(2)
		Domestic				Foreign				Total				Domestic				Foreign				Total				Consolidated
Nine Months Ended September 30, 2009
Revenue
Pawn loan fees and service charges		$	146,297			$	20,862			$	167,159			$	—			$	—			$	—			$	167,159
Proceeds from disposition of merchandise			354,719				—				354,719				—				—				—				354,719
Consumer loan fees			85,661				—				85,661				152,452				25,006				177,458				263,119
Other			10,374				329				10,703				896				—				896				11,599
Total revenue			597,051				21,191				618,242				153,348				25,006				178,354				796,596
Cost of revenue – disposed merchandise			229,578				—				229,578				—				—				—				229,578
Net revenue			367,473				21,191				388,664				153,348				25,006				178,354				567,018
Expenses
Operations			209,792				8,669				218,461				33,449				9,374				42,823				261,284
Consumer loan loss provision			15,632				—				15,632				63,829				12,181				76,010				91,642
Administration			35,368				4,933				40,301				23,057				2,673				25,730				66,031
Depreciation and amortization			22,760				2,697				25,457				5,469				27				5,496				30,953
Total expenses			283,552				16,299				299,851				125,804				24,255				150,059				449,910
Income from operations		$	83,921			$	4,892			$	88,813			$	27,544			$	751			$	28,295			$	117,108
As of September 30, 2009
Total assets		$	816,025			$	114,039			$	930,064			$	278,256			$	20,692			$	298,948			$	1,229,012
Goodwill										$	297,906											$	195,478			$	493,384

7. 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 short-term 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 (without ruling on Cash America’s previously filed motion to compel 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 was returned to the State Court of Cobb County, Georgia, where Cash America filed a motion requesting that the trial court rule on Cash America’s pending motion to compel arbitration and stay the State Court proceedings. The Court denied the motion to stay and ruled that the motion to compel arbitration was rendered moot after the Court struck Cash America’s affirmative defenses based on arbitration. The Georgia

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Supreme Court declined to review these orders and remanded the case to the State Court of Cobb County, Georgia. On November 2, 2009, the State Court granted the plaintiff’s request to certify the case as a class action, and Cash America appealed the decision to the appellate court. On October 4, 2010 the appellate court upheld the State Court’s decision on class certification. Cash America is challenging the appellate court’s decision on the class certification issue, and accordingly filed its notice of appeal with the Georgia Supreme Court on October 8, 2010. 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 on September 7, 2004 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 11^th Circuit. The 11^th Circuit issued a panel 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 11^th Circuit to review this decision en banc and this request was granted. The en banc rehearing took place on February 26, 2008. The 11^th Circuit stayed consideration of this matter pending the resolution of the United States Supreme Court case, Vaden v. Discover Bank. In March 2009, the United States Supreme Court determined, in Vaden v. Discover Bank, that the federal courts were able to compel arbitration of a state court action if the underlying issues involved a federal question. Following the United States Supreme Court ruling in Vaden v. Discover Bank, the 11^th Circuit en banc court, without ruling on the case, remanded the case to the 11^th Circuit panel for further consideration in light of the decision in Vaden. The 11^th Circuit panel requested the parties provide additional briefing following the decision in Vaden, which has been completed, and the parties are awaiting the court’s decision. 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 July 26, 2008, the Pennsylvania Department of Banking issued a notice announcing a “change in policy,” effective February 1, 2009. The notice concluded that out-of-state lenders such as the Company were lending “in” Pennsylvania. Accordingly, the notice purported to subject such lenders to the licensing requirements of the Pennsylvania Consumer Discount Company Act (the “CDCA”), which sets the maximum permissible interest at a level well below the interest rate the Company charges on its online consumer loans. On January 8, 2009, the Company brought suit against the Pennsylvania Department of Banking in the Pennsylvania Commonwealth Court, arguing that the notice was invalid because it was adopted in violation of applicable procedural requirements and because it conflicted with the plain language of the CDCA. As a part of these proceedings, the Pennsylvania Department of Banking filed a counterclaim against the Company seeking a declaratory judgment that the Company’s internet lending activities to Pennsylvania consumers are not authorized by Pennsylvania law, however, the Pennsylvania Department of Banking represented that it had “no intent to pursue a retroactive financial remedy” against the Company or any similarly situated lender for loans made prior to the date of the decision by the Commonwealth Court. On July 10, 2009, the Commonwealth Court issued a decision in favor of the Pennsylvania Department of Banking. On July 15, 2009, the Company filed an appeal of this decision with the Pennsylvania Supreme Court, and on October 19, 2010, the Pennsylvania Supreme Court upheld the Commonwealth Court’s decision in favor of the Pennsylvania Department of Banking. As a result of the Commonwealth Court’s initial decision, the Company ceased offering consumer loans in Pennsylvania in July 2009.

     On March 5, 2009, Peter Alfeche filed a purported class action lawsuit in the United States District Court for the Eastern District of Pennsylvania against Cash America International, Inc., Cash America Net of Nevada, LLC (“CashNet Nevada”), Cash America Net of Pennsylvania, LLC and Cash America of PA, LLC, d/b/a

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

CashNetUSA.com (collectively, “CashNetUSA”). The lawsuit alleges, among other things, that CashNetUSA’s online consumer loan lending activities in Pennsylvania were illegal and not in accordance with the Pennsylvania Loan Interest Protection Law or the licensing requirements of the CDCA. The lawsuit also seeks declaratory judgment that several of CashNetUSA’s contractual provisions, including choice of law and arbitration provisions, are not authorized by Pennsylvania law. The complaint seeks unspecified compensatory damages, attorney’s fees and the trebling of any compensatory damages. CashNetUSA filed a motion to enforce the arbitration provision located in the agreements governing the lending activities. The Court has not yet ruled on this motion. The Alfeche 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. CashNetUSA believes that the Plaintiffs’ claims in this suit are without merit and will vigorously defend this lawsuit.

     On April 21, 2009, Yulon Clerk filed a purported class action lawsuit in the Court of Common Pleas of Philadelphia County, Pennsylvania, against CashNet Nevada and several other unrelated third-party lenders. The lawsuit alleges, among other things, that the defendants’ lending activities in Pennsylvania, including CashNet Nevada’s online consumer loan lending activities in Pennsylvania, were illegal and in violation of various Pennsylvania laws, including the Loan Interest Protection Law, the CDCA and the Unfair Trade Practices and Consumer Protection Laws. The complaint seeks payment of potential fines, unspecified damages, attorney’s fees and the trebling of certain damages. The defendants removed the case to the United States District Court for the Eastern District of Pennsylvania where the lawsuit now resides. The case was subsequently reassigned to the same judge presiding in the Alfeche litigation. On August 26, 2009, the Court severed the claims against the other defendants originally named in the litigation. CashNet Nevada filed a motion with the federal court to enforce the arbitration provision located in the agreements governing the lending activities on May 4, 2009, and the Court has not yet ruled on this motion. The Clerk 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. CashNet Nevada believes that the Plaintiffs’ claims in this suit are without merit and will vigorously defend this lawsuit.

     The Company is also 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.

8. Fair Value Measurements

Recurring Fair Value Measurements

     In accordance with ASC 820-10, Fair Value Measurements and Disclosures, the Company’s assets and liabilities, which are carried at fair value, are classified in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

     The Company’s financial assets that are measured at fair value on a recurring basis as of September 30, 2010 and 2009 and December 31, 2009 are as follows (in thousands):

		September 30,				Fair Value Measurements Using
		2010				Level 1				Level 2				Level 3
Financial assets:
Interest rate contracts		$	4			$	—			$	4			$	—
Forward currency exchange contracts			42				—				42				—
Nonqualified savings plan assets			6,498				6,498				—				—
Marketable equity securities			8,480				8,480				—				—
Total		$	15,024			$	14,978			$	46			$	—