Cash America 2012 Annual Report Download - page 100

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Interest Expense
Interest expense increased $3.6 million, or 14.1%, to $29.1 million in 2012 compared to $25.5 million in 2011.
The average amount of debt outstanding increased $53.4 million to $519.8 million during 2012 from $466.4 million in
2011, primarily due to borrowings associated with two acquisitions in the second half of 2012. The Company’s effective
blended borrowing rate decreased to 4.8% in 2012 from 4.9% in 2011. The Company incurred non-cash interest expense
of $3.8 million in 2012 compared to $3.6 million in 2011 from the 2009 Convertible Notes due 2029 (the “2009
Convertible Notes”) and debt issuance costs. See “Item 8. Financial Statements and Supplementary Data—Note 13” for
further discussion of the 2009 Convertible Notes.
Income Taxes
The Company’s effective tax rate was 45.4% in 2012 compared to 37.9% in 2011. During 2012, the Company
recorded a deferred tax asset of $9.3 million related to the Company’s excess tax basis over its basis for financial
reporting purposes in the stock of Creazione. The Company expects the basis difference will reverse in the foreseeable
future as a result of the liquidation of the remaining assets of Creazione. In addition, the Company recorded a valuation
allowance of $21.8 million, including $12.0 million related to the net deferred tax assets at its Mexico-based pawn
operations (see “General—Recent Developments—Reorganization of Mexico-based Pawn Operations and Purchase of
Noncontrolling Interest” above for further information related to the Mexico Reorganization), $0.5 million related to the
net deferred tax assets in Mexico generated by the e-commerce segment, and $9.3 million related to the deferred tax
asset associated with the Creazione stock basis difference. Without the effect of these items the Company’s effective tax
rate for 2012 would have been 38.6%. The increase of 0.7% over the 2011 rate was primarily due to increased losses
from foreign operations subject to lower foreign statutory tax rates.
Net Loss Attributable to the Noncontrolling Interest
Net loss attributable to the noncontrolling interest increased by $5.0 million from 2011 to 2012, primarily due to
increased losses in foreign retail services operations and expenses related to the Mexico Reorganization.
Prior to 2012, the Company had 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. On January 1, 2012, the labor force of the Mexico pawn operations was transferred from Huminal to a
wholly-owned subsidiary of Creazione. However, Prenda Fácil qualifies as the primary beneficiary of Huminal in
accordance with FASB ASC 810. Therefore, the results and balances of Huminal are consolidated and allocated to net
income attributable to noncontrolling interests. Upon completing the purchase of the noncontrolling interest in
Creazione in September 2012, Huminal became the only remaining noncontrolling interest reported by the Company.