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Advance America (AEA) Settles Class Action Lawsuit in Georgia; Announces Plans to Close Operations in New Hampshire

February 9, 2009 6:04 PM EST
Advance America, Cash Advance Centers, Inc. (NYSE: AEA) has settled a class action lawsuit in Georgia that resolves all claims against the Company in connection with originating, marketing, or servicing any loan in that state.

If approved, the settlement will require the Company to make a minimum payment of approximately $2.0 million from which (1) a settlement pool will be established to pay claims; and (2) attorney fees and other costs related to the litigation and settlement administration will be paid. The value of individual claims will vary between $30 and $90. If claims made plus costs exceed $2.0 million, then the Company will be required to pay additional funds into the settlement pool up to an aggregate cap of $3.7 million.

Separately, the Company plans to close the 24 centers it operated in the State of New Hampshire. The decision to close the centers in New Hampshire comes after approval of legislation that went into effect on January 1, 2009 that effectively prohibits the offering of the cash advance product in that state, and follows the Company's previously announced decision to discontinue offering its line of credit product in New Hampshire as a result of an agreement with the state's Bank Commissioner.

For the twelve months ended December 31, 2008, total revenues and center gross profit generated from the Company's operations in New Hampshire, were approximately $8.1 million and $3.4 million, respectively. The Company estimates that the costs associated with closing its operations in New Hampshire will be approximately $1.2 million, $0.7 million of which will be recognized during the fourth quarter of 2008.

Finally, due in part to these previously mentioned charges, and primarily due to government affairs expenditures related to ballot initiatives in Ohio and Arizona, which are not deductible for tax purposes, the Company expects to have a higher effective tax rate for 2008 than in prior years. The Company expects its effective tax rate for the full year 2008 to be 46.6%, approximately 340 basis points higher than the effective tax rate reported for the first nine months of 2008.

Advance America, Cash Advance Centers, Inc. is a provider of payday cash advance services in the United States. As of December 31, 2007, the Company operated 2,813 centers in 35 states in the United States, 12 centers in the United Kingdom and 7 centers in Canada.[SM]

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