Cash America 2013 Annual Report Download - page 104

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E-commerce
Operations and administration expenses for the e-commerce segment increased $44.1 million, or 18.8%, to
$278.5 million during 2013 compared to 2012. Marketing expenses increased $26.5 million, or 24.4%, to $135.3 million
in 2013 compared to 2012, primarily due to the Company’s efforts to expand its customer base in both domestic and
foreign markets. Online and other marketing costs, excluding lead purchase costs, increased $23.5 million, primarily due
to higher expenses for television marketing and sponsored-search expenses. In addition, lead purchase expenses
increased $3.0 million. Personnel expenses increased $10.5 million, or 13.2%, primarily due to the addition of new
personnel to support the e-commerce segment’s growth and incentive accruals due to the strong financial performance of
the e-commerce segment. The increase in other expenses was primarily due to increased software maintenance expenses,
an increase in loan underwriting and processing expenses and a $2.5 million expense related to the Regulatory Penalty.
Corporate
Corporate administration expenses increased $3.5 million, or 5.3%, to $70.3 million in 2013, primarily due to
higher personnel expenses related to incentive and compensation increases.
Depreciation and Amortization Expenses
Consolidated depreciation and amortization expenses decreased $2.2 million, or 2.9%, primarily due to a
decrease in depreciation and amortization expenses in the retail services segment. Depreciation and amortization
expenses in the retail services segment decreased $8.0 million, or 16.7%, to $39.6 million, primarily due to the reduction
in assets and impairment charges taken in 2012 from the Mexico Reorganization, partially offset by acquisitions in the
third and fourth quarters of 2012 and in 2013. Depreciation and amortization expenses in the e-commerce segment
increased $3.9 million, or 29.2%, to $17.1 million, primarily due to increased expenditures for capitalized software and
equipment to support product innovations and the acceleration of depreciation related to the phase-out of certain loan
platforms in 2013. Depreciation and amortization expenses for corporate operations increased $1.9 million, or 13.4%, to
$16.5 million.
Interest Expense
Interest expense increased $7.2 million, or 24.7%, to $36.3 million in 2013 as compared to $29.1 million in
2012. During 2013, the average amount of debt outstanding increased $80.8 million, to $600.6 million from $519.8
million during 2012, primarily due to pawn-related acquisitions that occurred during third and fourth quarters of both
2012 and in 2013. In addition, the Company issued $300.0 million of 5.75% senior unsecured notes due 2018 (the “2018
Senior Notes”) in May 2013. Following the issuance of the 2018 Senior Notes, the Company decreased the outstanding
indebtedness under its domestic and multi-currency line of credit (the “Domestic and Multi-currency Line of Credit”),
which had a lower effective interest rate than the 2018 Senior Notes. As a result, the Company’s effective blended
borrowing cost increased to 5.5% in 2013 compared to 4.8% in 2012.
Income Taxes
The Company’s effective tax rate was 17.7% in 2013 compared to 45.4% in 2012. The decrease in the overall
effective tax rate in 2013 was primarily due to the recognized income tax benefit of $33.2 million associated with the
Creazione Deduction. For additional information see “Recent Developments—2013 Business Developments—Income
Taxes.” In addition, during 2013 the Company released reserves established for unrecognized tax benefits of $1.0
million related to the pre-2008 Mexico tax returns of Creazione as a result of the expiration of the statute of limitations.
Additionally, in the third quarter of 2012, the Company recorded a $12.6 million valuation allowance related to the
deferred tax assets of its Mexico subsidiaries. Without the impact of these items, the Company’s effective tax rate would
have been 37.5% and 39.0% for 2013 and 2012, respectively. The effective tax rate for 2012 was also negatively
impacted by significant losses in the Company’s Mexico-based pawn operations, which were taxed at a lower rate than
the domestic operations. Given the significance of the one-time items that affected the 2013 effective tax rate, that rate
should not be viewed as indicative of the effective tax rate for future periods.