Cash America 2011 Annual Report Download - page 102

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Administration Expense. Administration expense for the retail services segment decreased $0.6 million, or
1.2%, to $52.1 million during 2010 compared to 2009. The decrease was primarily due to a lower amount of overhead
expense allocated to the retail services segment in 2010 as compared to 2009, partially offset by increases in personnel
expenses related to normal personnel additions and merit increases, and slightly higher travel, office and other
miscellaneous administrative expenses.
Administration expense for the e-commerce segment increased $14.2 million, or 40.4%, to $49.4 million during
2010 compared to 2009. Personnel expenses increased $12.2 million, primarily due to a $2.0 million increase in salary
expenses related to normal personnel additions and merit increases, and an $8.6 million increase in short-term and long-
term incentive expense related to the significant increase in segment earnings.
Depreciation and Amortization. Depreciation and amortization expense at the retail services segment increased
$1.1 million, or 3.1%, to $35.4 million during 2010 compared to 2009, mainly due the addition of 84 locations,
excluding locations closed or combined in 2010, (net locations added in 2010 was 37 retail services locations), computer
equipment deployed in advance of the Company’s new proprietary point-of-sale system, and normal facility upgrades
and remodels.
Depreciation and amortization expenses at the e-commerce segment increased $1.3 million, or 17.3%, to $8.6
million, primarily related to systems development in support of new products, as well as normal system upgrades.
Interest Expense. Interest expense increased $1.5 million, or 7.4%, to $22.3 million in 2010, compared to $20.8
million in 2009. The increase was due in part to an increase of 0.8% in the Company’s effective blended borrowing
cost. The Company’s effective blended borrowing cost was 4.9% in 2010, up from 4.1% in 2009, mainly due to the
Company’s offering of the 2009 Convertible Notes during the second quarter of 2009 and the Company’s offering of
Senior Unsecured notes due 2017 during the first quarter of 2010, as relatively lower cost floating rate debt was replaced
by higher cost fixed rate debt. During 2010, the average amount of debt outstanding decreased $15.7 million, to $419.4
million from $435.1 million during 2009. In the fourth quarter of 2010, the Company completed the acquisition of
Maxit, which was primarily funded by borrowings under the Company’s line of credit of approximately $59.6 million,
but did not significantly raise the average amount of debt outstanding for the year. The Company incurred non-cash
interest expense of $3.3 million in 2010 compared to $2.0 million in 2009, from the 2009 Convertible Notes and debt
issuance costs. See “Item 8. Financial Statements and Supplementary Data—Note 11” for further discussion of the 2009
Convertible Notes.
Income Taxes. The Company’s effective tax rate was 37.5% for 2010 compared to 36.7% for 2009. The
Company’s 2009 effective tax rate benefited from lower foreign statutory tax rates on its foreign earnings. The increase
in the Company’s effective tax rate for 2010 was attributable to the decrease in earnings from foreign operations subject
to lower foreign statutory tax rates, as well as increased taxes incurred at a third-party entity, Huminal, S.A. de C.V., a
Mexican sociedad anónima de capital variable (“Huminal”), that compensates and maintains the labor force of Prenda
Fácil. The Company has no ownership interest in Huminal. Therefore, 100% of the net income or loss related to
Huminal is allocated to net income attributable to noncontrolling interests.