Cash America 2010 Annual Report Download - page 86

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closing of 56 consumer loan storefront locations during the year. Of the $3.2 million, approximately $1.6 million was
charged to personnel expenses related to store closures and the realignment of operations management, and
approximately $1.6 million was charged to occupancy expenses related to lease terminations. Excluding these charges,
total operating expenses would have been $327.5 million, and operations expenses would have increased $32.6
million, or 9.0%, in 2009 compared to 2008.
The Company realigned some of its administrative activities during the first quarter of 2009 to create more
direct oversight of operations, resulting in classifying some expenses that were classified as administration expenses in
prior periods as operating expenses. For comparison purposes, the Company reclassified the same direct expenses
from earlier periods out of administrative expenses and into operations expenses. The amount reclassified in 2008 was
$2.4 million. There was no change in the aggregate amount of expenses related to this reclassification.
Administration Expenses: Total administration expense increased $12.3 million, or 16.3% to $87.9 million in 2009,
compared to $75.6 million in 2008. The increase in administration expenses was mainly due to Prenda Fácil’s labor
costs, the growth of the Company’s online lending channel and normal recurring salary adjustments within
administrative functions. Included in the administration expenses in 2008 were severance and related compensation
expense associated with management realignment activities of $3.3 million.
Depreciation and Amortization: Total depreciation and amortization expense increased $1.9 million, or 4.9%, during
2009 compared to 2008, primarily due to the Prenda Fácil operations and software development at the Company’s
online lending channel, partially offset by a decrease due to closed retail services locations offering consumer loans in
2008.
Interest Expense: Interest expense increased $4.8 million, or 30.1%, to $20.8 million in 2009 as compared to $16.0
million in 2008. The Company’s effective blended borrowing cost was 4.1% in 2009, down from 4.7% in 2008.
During 2009, the average amount of debt outstanding increased $110.3 million to $435.1 million from $324.8 million
during 2008, primarily due to the Prenda Fácil acquisition in the fourth quarter of 2008 and the supplemental earn-out
and true-up payments related to the CashNetUSA acquisition paid in late 2008 ($34.7 million) and early 2009 ($39.7
million). While the effective blended borrowing cost decreased in 2009, the Company’s offering of its 2009
Convertible Notes during the second quarter of 2009 contributed to the increase in interest expense, as relatively lower
cost floating rate debt was replaced by relatively higher cost fixed-rate debt. The Company incurred non-cash interest
expense of $2.0 million in 2009 from the 2009 Convertible Notes. See “Item 8. Financial Statements and
Supplementary Data—Note 10” for further discussion of the 2009 Convertible Notes.
Income Taxes: The Company’s effective tax rate was 36.7% for 2009 compared to 38.9% for 2008. The Company
incurred $4.4 million of nondeductible expenses during 2008, primarily related to development activities supporting a
2008 referendum to overturn Ohio legislation related to short-term consumer loans in that state. If the prior year
expense related to the Ohio referendum activities were deductible, the effective tax rate for 2008 would have been
37.7%. Without the prior year expense, the decrease in the 2009 effective tax rate was mainly attributable to lower
state taxes and to the effect of lower foreign statutory tax rates on the 2009 increase in earnings from foreign
operations.