Cash America International Management Discusses Q4 2013 Results - Earnings Call Transcript

Jan.23.14 | About: Cash America (CSH)

Cash America International (NYSE:CSH)

Q4 2013 Earnings Call

January 23, 2014 8:00 am ET

Executives

Daniel R. Feehan - Chief Executive Officer, President and Director

Thomas A. Bessant - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Bob Ramsey - FBR Capital Markets & Co., Research Division

William R. Armstrong - CL King & Associates, Inc., Research Division

John Hecht - Stephens Inc., Research Division

John J. Rowan - Sidoti & Company, LLC

David M. Scharf - JMP Securities LLC, Research Division

Elizabeth O. Pierce - Ascendiant Capital Markets LLC, Research Division

Henry J. Coffey - Sterne Agee & Leach Inc., Research Division

Daniel Furtado - Jefferies LLC, Research Division

Tulu Yunus - Nomura Securities Co. Ltd., Research Division

R. Gregg Hillman

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Cash America International Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, Thursday, January 23, 2014. I would now like to turn the conference over to Dan Feehan, President and Chief Executive Officer. Please go ahead, Mr. Feehan.

Daniel R. Feehan

Thank you very much. Good morning, ladies and gentlemen. Welcome to our earnings call for the final quarter of 2013. Our Chief Financial Officer, Tom Bessant, has joined me this morning and will start us off with a financial review of the fourth quarter. And I will then provide some color commentary following Tom's report.

Before proceeding, I'd like to remind you that all our statements made during this call that relate to future results and events are forward-looking statements based on current expectations. Actual results and events could differ materially from those projected in the forward-looking statements because of a number of risks and uncertainties, which are discussed in our SEC filings and in the cautionary statement on our website under Investor Relations. We assume no obligation to update our forward-looking statements.

I also want to mention before we proceed that a reconciliation of any non-GAAP information provided on this call to the most directly comparable GAAP information is available on the Investor Relations section of our website. Non-GAAP financial information is not meant as a substitute for GAAP results, but is included solely for informational and comparative purposes.

Now with that, I'll turn the call over to Tom for a financial review of Q4.

Thomas A. Bessant

Thanks, Dan, and welcome to our listeners this morning. Overall, the fourth quarter shaped up consistent with my expectations and I'll provide plenty of details momentarily. However, I'd first like to start the call with the detailed explanation of the unusual items affecting the financial results for Cash America for the fourth quarter period ended December 31, 2013.

As announced in our press release from this morning, we have unusual items in both the current fourth quarter and the prior year fourth quarter, so I'll walk you through the details of those items, as a matter of reference. As Dan mentioned, if you look at Page 20, you'll see a full reconciliation of these items.

Cash America reported consolidated net income attributable to the company for the fourth quarter ended December 31, 2013 of $27.3 million equivalent to $0.91 per share, compared to $24.5 million or $0.79 per share reported in the fourth quarter of 2012.

During the 2013 period, there were 4 items which amount to approximately $0.10 per share of unusual expenses, which would bring the adjusted earnings level to $30.1 million and $1.01 per share, which is in the middle of the company's previously provided guidance for the fourth quarter ended 2013.

The unusual items in the current quarter include costs related to the closing of 28 lending locations which offer only the consumer loan product in our Texas markets, resulting in approximately $865,000 in after-tax costs or $0.03 per share. In addition, the company incurred a regulatory penalty assessed by the CFPB of $5 million, which is not tax-deductible. However, the pretax amount of the penalty was offset by a change in the remaining estimated liability related to the Ohio voluntary refund expense recorded in the fourth quarter of 2012 of approximately $5 million. Therefore, the Q4 2013 impact of the regulatory penalty is only the nondeductible tax effect of the CFPB fine or $1.8 million, equivalent to $0.06 per share.

And lastly, during the quarter, the company redeemed $5.9 million of convertible notes, creating $164,000 in after-tax expense for the early extinguishment of debt equivalent to $0.01 per share. These amounts combined with a $0.10 per share of unusual items in the fourth quarter of 2013. The company also incurred additional expenses related to significantly higher health care costs and acquisition transaction costs, which burdened after-tax earnings by $1.9 million or $0.06 per share, although these figures are not included in the $0.10 of unusual items identified in the press release.

In the prior year's fourth quarter results, the company incurred unusual expense items related to the reorganization of its Mexico-based pawn business, including the closing of 113 locations, generating an after-tax charge of $7 million equivalent to $0.23 per share and incurred expenses in its voluntary refund to customers in Ohio, which created an after-tax burden of $8.4 million, equivalent to $0.27 per share. The combination of these 2 items in the fourth quarter of 2012 equals $0.50 per share.

As a result of the impact of the preceding items, Cash America would have reported adjusted earnings per share on a non-GAAP basis of $1.01 in the fourth quarter of 2013 compared to the adjusted earnings per share on a non-GAAP basis of $1.29 in the fourth quarter of 2012, down 22%.

While the consolidated results of the quarter are down year-over-year, the financial performance of the company was in line with expectations we communicated in our October conference call as we entered the fourth quarter.

We fully expected performance of our e-commerce segment to post continued gain in asset levels and earnings which were realized, as the e-commerce segment posted a 15% increase in net revenue year-over-year and an increase in operating income of 11%, including a $2.5 million allocation of CFPB fine during the period.

Excluding the e-commerce share of the $2.5 million fine, the e-commerce segment operating income would have been up 18% year-over-year. The reason the e-commerce segment is not benefiting from the change in estimate of the Ohio refund is that, that expense was incurred by the Domestic Retail Services segment in the prior year.

As we entered the fourth quarter, we also did not expect the strong growth from the e-commerce business to fully offset the lower year-over-year contribution from the company's domestic pawn lending business, which was challenged by lower gross profit dollars due primarily to the significant year-over-year change in the price of gold and lower levels of scrap gold volume during the quarter and the competitive retail selling environment.

The pawn business benefited from the acquisition of 34 lending locations during the quarter, and was successful selling retail merchandise but still posted a 6% decrease in net revenue during the fourth quarter 2013 compared to the prior year.

Reported operating income for the Domestic Retail business was down 5%, however, the business did benefit from the $2.5 million difference between the $5 million change in estimated expense related to the Ohio refund, which brought $5 million of income into Domestic Retail Services, but was partially offset by the $2.5 million allocation of the CFPB fine.

Adjusting the Domestic Retail Services operating income for the $2.5 million benefit and adding back the $1.4 million in expense related to the closing of the 28 consumer loan stores in Domestic Retail Services in the quarter and adding back the $13.4 million related to the Ohio voluntary refund in the prior year, the business posted a 28% decrease in operating income during the fourth quarter. I'll provide more details on the pawn business metrics later in my prepared comments.

Now before doing so, I'll return to the e-commerce business and touch on some of the high points related to the financial metrics achieved during the quarter. The gross consumer loan balance in the e-commerce segment increased 8% sequentially from the third quarter of 2013 to fourth quarter of 2013, finishing at $428.5 million, which also represents a 19% year-over-year increase as of December 31.

Fueling this growth is continued expansion of the installment loan portfolio and line of credit products. The line of credit products were up almost 200% to $125.8 million compared to $42.7 million at the end of the fourth quarter of 2012, as the business continues to see growth in both its U.S. portfolio, which was up 55% year-over-year, and success with its midyear introduction of this product into the U.K. portfolio, which finished the quarter at nearly $60 million and did not exist at all in the fourth quarter of 2012.

The popularity of the line of credit product in the United Kingdom has led to a decrease in the short-term single pay product in that market.

The total installment loan portfolio in the e-commerce segment increased sequentially 10% from Q3 2013 reaching $180 million, which is up 48% from the balance at the end of Q4 2012.

As of the end of the fourth quarter, the installment loan portfolio and the line of credit portfolio combined to total approximately $306 million and represented 71% of the e-commerce consumer loan portfolio.

The e-commerce business segment benefited from a decrease in losses as a percentage of fees in the fourth quarter of 2013, as this figure finished the quarter at 43% compared to 45.8% for the same period in 2012. In addition, sequentially, losses as a percentage of fees dropped from 45.3% in the third quarter of 2013 to 43% in the fourth quarter of 2013.

While we continue to see significant growth in the portfolios, we are enjoying a more seasoned group of customers creating this moderation in loss rates and expansion in marginal profitability.

So to summarize, as a result of the growth in earning assets coming off the third quarter, the e-commerce business segment reported a 15% increase in net revenue, which reached $119.3 million and posted an unadjusted increase in operating income of 11% or $37.7 million before adjusting out the additional $2.5 million expenses related to its allocation of the CFPB penalty for Q4 2013 compared to the prior year. And of course, as I said earlier, when excluding this amount, the e-commerce segment would've posted an 18% increase in operating income for the fourth quarter.

Moving over to the activities in the Domestic Retail Services side of the business. The U.S. pawn loan balance finished the quarter up 7% to $256.8 million, largely due to the benefits related to the acquisitions completed during 2013. Service charges on pawn loans increased 6% during the fourth quarter, and the company continued to enjoy higher yields on pawn loans as the portfolio continues to perform well.

As expected, during the fourth quarter, gross profit margins in the retail selling environment were challenged by the competitive environment, and retail gross profit margin decreased to 34% compared to 36.7% in the fourth -- prior year fourth quarter.

Total retail sales, excluding commercial sale of gold, was up 17% to $125.8 million, but the lower retail gross profit margin only increased the gross profit dollars 8% to $42.8 million.

Offsetting the progress in the retail sales side was the expected decrease, year-over-year, in net profit from the liquidation of gold and diamond, which were down $13.3 million during the fourth quarter, creating a decrease in aggregate gross profit from the sale of all merchandise of $10 million.

So while performance of the pawn portfolio is very good, the liquidation of scrap gold created a decrease in net revenue from lending activities in the United States of $8.8 million, down 6% year-over-year.

Also contributing to the decrease in the pawn lending net revenue is a $3.1 million decrease in net consumer loan fees in the Retail Services segment, partially due to the closing of locations during the period.

As expected, domestic inventory turnover decreased year-over-year to 2.3x from 2.9x, and we anticipate moderate levels of inventory turnover as the business cycles away from the routine scrapping of gold merchandise on a monthly basis to more of a classic retail business cycle in stores.

We came into the fourth quarter with higher levels of inventory and while we had good sell-through during the fourth quarter, we will be well-positioned for the first quarter selling season with a 26% increase in total inventory levels as we start 2014. However, on a per-store basis, inventory is only up about 14%.

Same-store domestic net revenue is down 11% in the fourth quarter, which is a slight improvement from the 13% decrease posted in the third quarter of 2013. Same-store pawn loan balances were down 3% at the end of the fourth quarter of 2013, which is also a small improvement from the down 5% posted at the end of the third quarter of 2013.

We continue to emphasize lending activities but expect that these levels of same-store decreases will cause headwinds in the first 6 months of 2014 for our U.S. pawn business.

Comparing the year-over-year operating income of the U.S. pawn business is full of intricacies because of the unusual items in both 2013 and 2012. On a reported basis, operating income was down 5% to $43.5 million. But this includes the $2.5 million benefit from the netting of the CFPB fine and the Ohio expense estimate change. And it includes the $1.4 million in store closure expenses incurred during the quarter.

Adjusting for these components, we create operating income on an adjusted basis of $42.5 million for Q4 2013. The prior year operating income of $45.6 million includes $13.4 million in expenses related to the voluntary refund in Ohio. Adding this back to the prior year would create $59 million in operating income, which creates the 28% year-over-year decrease in domestic pawn operating activities I mentioned earlier.

Before moving on to our views of the future, I'd like to point out that the company made investments in share repurchase activities during the prior year, which reduced share count by approximately 1.25 million shares between open market purchases and the redemption of convertible bonds, representing approximately 4% of the diluted shares at the beginning of 2013.

This represents an investment of over $67 million during the year, and is in addition to the $165 million invested in acquisitions and $61 million in CapEx in 2013.

The company has absorbed this capital deployment of nearly $300 million, plus the sizable increase in working capital, while only increasing its funded debt by $160 million due to the strong cash flow inherent in the business. The company finished the year with approximately $740 million in total debt, $69 million in cash and with a comfortable 2.2x debt-to-EBITDA ratio.

Transitioning to the outlook for the first quarter of 2014 and the full year, we expect similar trends and metrics that we saw coming into the fourth quarter, specifically the continued growth of the e-commerce business spurred by higher asset levels and continued expectation of marginal improvement in profitability through lower loss rates to contribute year-over-year gains in the e-commerce business.

However, offsetting those gains with the continued reduced levels of gross profit dollars on the disposition of goods expected to be incurred by the domestic pawn lending business, as we have not yet cycled through the year-over-year comparison the high levels of gold prices.

The higher level of pawn loan balances as we finished the year will provide some relief, but not enough to offset the proceeds from the disposition of merchandise, leading to an expected decrease in net revenue for the pawn-related business in the first quarter. These are trends we expected when we initiated our full year guidance in October, and we have communicated in prior disclosures.

Our expectation for EPS for the first quarter of 2014 is between $1.15 and $1.25 per share, compared to $1.40 per share in the prior year. We are leaving our full year guidance for 2014 in place and we will be able to provide more color on the remainder of the year after we get through the first quarter 2014 and the traditional tax refund season and assess our asset balances and outlook for the remainder of the year.

That concludes the financial part of the presentation. Now I'll turn the call back over to Dan.

Daniel R. Feehan

Thanks, Tom. I'm sure your heads are probably swimming with all the reconciling items in the financial report, so I'll be brief providing my perspective on the quarter and discussing overall health of the business entering 2014.

With the exception of the unusual items Tom just mentioned, our fourth quarter performance did align very closely with my personal expectations for the quarter and with the, obviously, the guidance that we had previously issued.

I can't offer a lot in terms of insightful new color commentary given the fact that the fundamental trends of the business have not really changed from the trends we've been discussing for most of 2013. Our Retail Services segment, the common themes that we have been talking about all year include 5 key items. Number one would be the cautious consumer behavior, resulting in historically tepid loan and retail demand; two is the transitional shift towards higher proportion of general merchandise in our pawn loan and inventory portfolios; three, as Tom mentioned, was a substantive year-over-year decline in the amount of gross profit from the commercial sales of scrap gold and diamonds that we reported on a quarterly basis, driven by both the degradation and the volume of gold scrap and the amount of margin on sales, given the drop in gold prices this year; four would be the lower year-over-year retail margins associated with our design strategy of driving more jewelry through our in-store retail channel and less through the scrap channel; and five has been tight control of operating expenses, which we've been successful at throughout the year, including here in Q4.

Now our experiences here in the quarter for the Retail Services group have not varied much from these trends. Although, I would tell you that I was personally encouraged by the same-store retail sales increase we enjoyed during the fourth quarter, which is a period that I've seen one research firm describe as the worst seasonally-adjusted holiday performance period in the last 10 years, obviously, excluding 2008.

Yet much like majority of all retailers in the country, this fourth quarter for us was a heavy promotional period, primarily around our stated strategy again of driving more jewelry across the counter in retail sales. I was also encouraged by an unexpected surge in pawn loan demand late in the quarter. We certainly don't have enough supporting data to lead us to believe our consumer is breaking out of an extended borrowing and spending funk. But for me, it's beginning to feel like we may be poised for a change in consumer sentiment that could possibly begin driving greater strength in our U.S. pawn business than we've seen in the past 2 years.

And I've said before that renewed same-store pawn loan growth will be the catalyst for renewed earnings growth in our Retail Services segment. We're not there yet, but I'm beginning to get somewhat of a sixth sense that a shift could be coming at some point in 2014, so we'll keep our fingers crossed.

I also expect that many of the consumer-focused initiatives that we have mapped out in the last half of 2013 and began implementing in Q4 will soon begin showing positive and sustainable advancements for our U.S. pawnshop business. Those initiatives are generally scoped around a handful of key objectives, including: revamping our in-store processes and procedures to maximize the customer-facing time for our managers and assistant managers; enhancing our online capabilities for product knowledge, tools and retail channeling; and revamping our store-level incentive compensation programs to drive more aggressive customer service and better align pay-for-performance and accountability in our field organization.

At the minimum, I do expect that the second half of 2014 will see us finally fully wrap the very difficult year-over-year comparisons for gross profit on commercial dispositions, which has been in a steady year-over-year quarterly decline since the first quarter 2012.

In this fourth quarter of 2013, we finally reached what I view as a steady-state for our commercial disposition activities, with commercial sales representing something in the range of 15% to 20% of our total disposition activities. And that just happens to be a level that we traditionally enjoyed for many, many years prior to the run-up in gold prices beginning in 2006.

Now the commercial disposition gross profit that we enjoyed in the first half of 2013, namely the $15 million we reported in Q1 of '13 and the $9 million we reported in the second quarter, will be very tough to beat in the first 2 quarters of 2014, primarily due to lower expected volumes of scrap in those quarters. But I do expect us to turn the corner in Q3 of 2014 and begin posting positive year-over-year comps for commercial profits in the second half of the year.

I'm also pleased with the acquisitions that we've made over the last 18 months. During this period, we've invested approximately $230-plus million in 4 separate transactions, acquiring approximately 109 pawnshop locations in the U.S. Our most recent deal, as Tom mentioned, was for 34 stores in Georgia and North Carolina that we closed this past December. And as I've told you before, we believe this current transitional period for the U.S. pawn business is a good time to be buyers of pawnshops, the shops that have a solid competitive position in the markets and are poised for growth, as the confidence of our pawn consumers strengthen in future periods.

Now moving on to the e-commerce segment, or Enova as we know it, we've been regularly discussing 4 major themes in that business throughout the year. First, is the migration of our product offerings away from single pay traditional payday loan products into products that offer greater flexibility for our consumers, including a variety of installment loan products, lines of credit and open-ended credit agreement products in both the U.S. and the U.K.

Second has been the refinement of our underwriting models and collection activities that led to lower loss rates for the full year in both our domestic and foreign businesses.

Third has been the migration of our customer acquisition activities toward greater reliance upon our organic channels of SEO, PPC, TV and mail and less reliance upon the lead generation channels.

And fourth has been product model adjustments in the U.K. associated with guidance from the OFT and potential rule-making by the FCA.

Again, much like the Retail Services segment, these themes in the e-commerce group carried forward through the fourth quarter. In examining those results for the quarter, you will see that the short-term loan products, as Tom mentioned a minute ago, now only represent 29% of Enova's combined ending consumer loan balances at December 31. That number is down from the 54% at the end of December 2012. So over that year, we have migrated to a balance of only 29% of our portfolio in the short-term products. That 29% is also down sequentially from the third quarter when that percentage was 33%.

And we've been successful in making this transition while also building on the overall loan portfolio, which is up substantially in 2013, as Tom reported. Additionally, I'd like to point out that Enova passed the fund milestone in the fourth quarter this year, having served its 3 millionth customer.

Also, as Tom mentioned, the consumer loan loss provision as a percentage of total revenue for the fourth quarter is down approximately 280 basis points from the rate recorded in the fourth quarter of 2012 and the loss rate for the full year is down approximately 200 basis points from the full year of 2012. Part of this improvement can be attributed to mix of our portfolio, part can be attributed to the seasoning of certain short-term and installment portfolios, but a significant portion of the improvement is attributed to the work of our analytics team and collections group.

The third theme regarding the migration of customer acquisition activities towards organic channels was greatly accelerated in the fourth quarter, mostly out of necessity following the August and September disruption in the lead generation market associated with the topic we discussed in the Q3 call.

You will recall us mentioning that certain actions taken by the state of New York and some federal agencies to clamp down on online lenders suspected of operating illegally or on an unlicensed basis resulted in limiting access to the ACH network for some online lenders which, in turn, impacted the business models of both small and large lead providers.

While we had to scramble a bit to address this abrupt change in the lead market, I was personally thrilled to see our team at Enova react very quickly in advancing one of our long-term and long-standing objectives of becoming more self-reliant on organic means of acquiring customers. And we do expect to advance this objective further in 2014.

Finally, I thought we would escape this quarter without any new regulatory issues surfacing in the U.K. but late in the quarter we learned, along with the public at large, of a banking bill amendment passed by parliament that requires the FCA to implement a rate cap for high-cost short-term credit products by January of 2015.

The language of the amendment requires the cap to provide an appropriate degree of protection for borrowers from excessive charges, but at this point, there is no clear specifics on what the cap will look like or at what point the FCA might provide clarity.

So I'd like to close out my comments with a brief reflection on the full year of '13 and our outlook for 2014. Now with the value of complete hindsight at this point, I think it's pretty clear that we entered 2013 with pretty lofty expectations for generating adjusted earnings growth over our performance in 2012.

We fully expected our e-commerce segment to post another solid year of revenue and earnings growth in 2013 in pursuit of our strategy around product innovation for longer-term, more flexible and more cost efficient loan products. Enova exceeded those expectations and topped the financial performance plan that was factored into our original 2013 EPS guidance.

With our Retail Services segment, our 2013 financial plan assumed we would see a shift in consumer behavior back to more traditional levels for loan demand and retail sales. And to be completely honest, we did not have a great deal of substantive evidentiary data telling us that trends would likely change. But we safely believed our pawn customer had to emerge at some point from the funk that we began seeing late in the second quarter of 2012.

We also had assumed gold prices would remain stable throughout the year. And even more impactful, we assumed the volume of scrap in 2013 would be relatively flat with the volume that we had in 2012, which itself was down almost 13% from 2011.

Unfortunately, our limited visibility into these critically key assumptions was proven to be off the mark as our actual 2013 performance in the Retail Services segment fell short of our expectations for these key assumptions.

The gross profit on commercial sales alone in 2013 ended down approximately $48 million behind 2012 and $44 million short of our plan established at the beginning of the year. Applying a standard typical tax rate to those numbers, those sharp falls equate to about $1 per share declined from 2012 to 2013 and almost $0.90 relative to our financial plan for 2013.

So coming off these experiences in '13, we've taken a more conservative approach with our financial plan for 2014, which underpins the earnings guidance first established in October and confirmed by Tom in his comments. We will not be modeling any changes in consumer behavior for our pawnshop business, either now or in future guidance updates, until we see solid evidence of such change nor are we modeling an improvement from the Retail Services initiatives I mentioned earlier, although I would be surely disappointed if such improvements failed to materialize.

Driving improvement in our domestic pawnshop business is a top priority for our organization and for me, personally, in 2014.

Our 2014 financial plan for the e-commerce segment assumes revenue growth generally consistent with what we experienced in 2013 as we move deeper into new product innovation in both the U.S. and U.K. and potentially new international territories.

We have built in some operating losses we expect to incur with the expansion of our installment loan products, particularly associated with the new and existing near prime products. And actual earnings impact from product innovation could easily fall short of our estimates if we are delayed in launching some of our products or exceed our estimates of the early results encourage us to move more quickly in capturing an early mover advantage. And we'll obviously keep you posted on our progress with these developments throughout the quarterly earnings call in 2014.

With that brief commentary, I'd like to close out our prepared remarks and turn it over to question-and-answer period. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] And our first question, from the line of Bob Ramsey from FBR Capital Markets.

Bob Ramsey - FBR Capital Markets & Co., Research Division

I want to talk a little bit about the U.S. online growth, which seems to be accelerating year-over-year. I know you talked a little bit in the introductory comments about trying to move quickly given some of the online disruption and about focusing more on organic lead gen or customer generation channels.

I was wondering if you could share any info on sort of the increasing use of non-lead gen and any stats around that and sort of talk about what you see as the outlook for continued growth? Is this quarter's year-over-year pace a good pace? Do you see continued opportunity for acceleration or just sort of how you're thinking about the U.S. online business?

Daniel R. Feehan

Bob, I think the best way for me to phrase that is that really safe to say that I am particularly bullish on our U.S. prospects in the online space. Again, as I mentioned on our prepared remarks, we were -- had some good early success using our organic activity on the SEO, PPC front and again, saw some interesting results from TV and some direct mail campaigns that we've introduced. So I'm encouraged, certainly encouraged by that.

We will be expanding our near prime product offering here in the U.S., the NetCredit trademark product and website that is designed, as I've mentioned on a number of calls in the previous quarters, designed to attract a customer with a little more favorable credit profile than what we have traditionally dealt with here in the U.S. We've been successful getting our line of credit product launched in some key states, which has added portfolio and revenue growth to the U.S. business. And you're going to see us, again, expand in a couple of other significant states with installment loan products here in 2014.

So again, I think there's a good opportunity for us to continue to grow our domestic business. And I would expect that the -- back to the question on customer acquisition strategies, that our organic channels will be providing more and more of that business going forward. That should have strong implications again on our independence going forward and not being reliant upon the lead generation market. And it could have longer-term implications for reducing costs associated with acquiring customers. So again, I'm encouraged by that.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Can you quantify at all how much of a shift has happened there already, maybe what has come organic versus purchase leads now versus a year ago or how much of a shift there has been?

Daniel R. Feehan

Yes, we had -- it's interesting. When we first bought Enova back in 2006, it was 100% lead generation primarily. We had probably 200 or 300 basis points of the overall portfolio being generated through organic means. And our expectation was that our organic activity would overtake lead generation pretty quickly. And that just didn't develop, quite frankly. It got to the point where the lead generation market was efficient enough and effective enough that it was providing plenty of business for us and allowing us to scale quickly.

And from that point forward, I'd say until this past year, we were, particularly from an organic perspective, probably only in the 20% -- 15% to 20%, 25% range in terms of generating overall business in the U.S. out of organics channels. That -- I would expect us to get pretty quickly to 50-50 ratio on that and potentially surpass that as we refine some of the things that we're doing today.

So we have a number of key initiatives in Chicago rolling at [ph] around driving more effective SEO and PPC activity. And we're beginning, I think, to learn a lot about how to effectively reach customers through the more traditional means of TV and mail campaigns, et cetera, here in the U.S. So again, I would think in 2014, we'll make substantial strides in shifting that ratio more to organic.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Great. And I know you mentioned loss rates have improved at Enova given mix seasoning in analytics and collections. I know those have all been focuses for some time. What inning are we in, in terms of the opportunity for credit improvement at Enova?

Daniel R. Feehan

It's a great question. I think we've made a lot of strides this year. Again, I think when you look at the growth that we've had this year when you -- particularly, when you see the mix of the growth, more installment, which we know is -- carries higher loss rates as those installment loan portfolios are growing, that we've made a lot of great strides in our analytics and underwriting models, as well as our collection activities.

I think our team has done a great job there. So I think we have opportunities in the future to continue to drive some efficiencies. If I had to pick an inning right now, Bob, just off the top of my head, I'd say maybe we're in the fifth or sixth inning, at best. So I think we've got more opportunities, particularly around our installment portfolios. They are a lot newer for us and we're learning a lot in accumulating a tremendous amount of consumer data.

Obviously, the more data that we have, the more experience we have, the more refined our underwriting models can become. So I'm pretty optimistic that we can continue to drive that efficiency. As we move into more near prime products as well, I think you'll see, traditionally, you'll see our loss rates probably positively impacted in the near prime product as well.

Bob Ramsey - FBR Capital Markets & Co., Research Division

And last question and I'll hop off. With the near prime, obviously, losses should be lower but the yields, I'm guessing, on that product is a little lower, too. How does the provision to fees compare to your other products in near prime versus everything else together?

Daniel R. Feehan

Well, obviously, I think your analysis is absolutely right. I mean, they're lower-yielding products. We would expect lower default rates associated with those and lower loss rates. A key in driving that product profitability is -- gets back to the customer acquisition channels and strategies and making sure that the economic model, with respect to the 2 big costs, which are losses and customer acquisition costs, make sure that we've got the appropriate strategy in place there to make our economic models work.

But again, I think -- when you look at that opportunity for us moving towards near prime, it opens up a tremendous part of the market for us here in the United States. There are tremendous demand, I think, for products in the $2,000, $3,000 installment range, and people that aren't going to pay the kind of yields that our traditional products have produced over the last 4 or 5 years.

But there's a big market out there for us, and other people are trying to attack that market. And I think there's plenty of business to go around, but you will see lower yields and lower default rates. But again, from a return on invested capital perspective, we would expect to be comparable to what we've experienced in our traditional payday products, long term.

Operator

Our next question, from the line of Bill Armstrong with CL King & Associates.

William R. Armstrong - CL King & Associates, Inc., Research Division

In the U.K. -- so in the U.K., your payday loan originations, obviously, were down substantially, and that was mostly offset by installment loan increases, but not quite. Your total originations were down 11%. So I guess, the question is, is this being driven just by customer demand for these new products and the lack of demand for payday? Is it being driven by regulatory changes and things that you may be doing to steer the customers that way? And should we expect, on a net basis, that -- for total originations to continue to be down year-over-year? Or should we start to see the installment increases start to once again catch up and exceed the losses or the reductions from payday originations?

Thomas A. Bessant

Yes, Bill. So it's Tom. I mean, your observation is correct as it relates to volume. Probably what I would do is look particularly at the asset levels. As I mentioned in my comments, the line of credit product has moved successfully in the foreign business. And that asset's increased very significantly up to $60 million and has offset the decrease in the asset related to the short-term single pay product in the U.K. The line of credit product doesn't have the same volume that the single pay product does because going forward, the only increase in that volume is the incremental increase in the draw amount.

Whereas, the standard single pay product, every time you take out a loan, you get volume numbers. So they're not really comparable unless you look at the assets. And so I think if you look at the shift from prior year, as a combination, was about $110 million and the combination right now is still about $110 million. And the installment loan product has gone up from $75 million to $103 million. So the Flex Credit product or the line of credit product in the U.K. has been very successful. And I'll see if Dan wants to comment on the regulatory aspects of that.

Daniel R. Feehan

Yes, it is predominantly what Tom has mentioned, Bill. We've gone internally, in fact, looking at our metrics more based on asset levels and portfolio balances and growth in those versus the volume issues because again, as Tom mentioned, when you're dealing with -- in U.S., a payday product which turns in 2 weeks; or in the U.K., on a 30-day basis, same asset, you're going to get a lot more origination volume, theoretically, than you're going to get with line of credit or installment products.

So again, we're pretty happy with the progress we're making in the U.K. I don't think there's any question that as people adjusted to the OFT reviews and guidance they were giving on a company-by-company basis in the fourth quarter and in the third and fourth quarters of last year, a number of our competitors struggled with volume issues and we, in the short-term product particularly, struggled a bit ourselves. But what we've seen, and by design, is moving customers into the new Flex Credit product. It's a product that the customers like. The flexibility is substantially better than they like the pure payday QuickQuid product, although there are still people who would prefer that particular product going forward.

But a lot of the growth you've seen shifting or a lot of the growth from line of credit has shifted out of the QuickQuid product into the Flex Credit product. So we don't feel like we're losing -- we're certainly not losing share. We're possibly gaining share in the U.K. Unfortunately, a number of the large competitors over there aren't public and we don't get published numbers from them. But our view is that we've got a reasonably stable business right now with our short- and long-term products there and still looking to grow our business in the U.K. in 2014.

William R. Armstrong - CL King & Associates, Inc., Research Division

Okay. And looking at your e-commerce loan loss provisions, they were down pretty nicely on the domestic side and about flat year-over-year on the e-commerce side. Can you comment on the difference between the 2?

Thomas A. Bessant

Yes, I think what you're seeing there is just more seasoned portfolio in the U.S. market compared to the continued growth in the foreign business. That's the primary driver there. The blended yield on the foreign side is a little bit lower than the domestic side, so it does tend to show a little higher losses as a percentage of fees. But I just think the U.S. portfolio, again just based on its age and its seasoning, continues to perform very well.

Daniel R. Feehan

And the Flex Credit product is relatively new for us there. We've had a lot of movement, again, into that product. And as we've said historically, anytime that we introduce new products, in the early stages of rolling those out, we're pretty conservative with our loss estimates until we get the data that gives us stronger confidence that we fully understand customer behavior and performance. So you're seeing a little bit of that mix impact relative -- in the U.K. particularly, relative to movement into the new Flex Credit product.

William R. Armstrong - CL King & Associates, Inc., Research Division

Got it. And then my last question concerns retail gross margins, they were down almost 300 basis points year-over-year. Could you comment on what were the drivers of the lower gross margin and what the outlook would be for the new year?

Daniel R. Feehan

Yes, I think as I mentioned in the prepared remarks and as I've said on previous calls, Bill, we -- our strategy has been to really drive more of our jewelry across the retail counter and not through the scrap channels. In fully recognizing that in the process, taking a stronger promotional view on driving jewelry across the retail counter, that we would have an impact on our margin -- marginal profitability.

So the math is pretty easy for us and that if we can move something across the retail counter, the 30% or 33% margin as opposed to scrapping it for a 15% margin, then that's a better strategy for us as long as we're in good control of our inventory levels. So I would expect -- that strategy will continue in 2014. We'll continue to offer promotional sections of our showcases throughout our Retail business here in the United States. So again, you should expect margins in 2014 to be softer than you would have traditionally seen them in the Retail business.

William R. Armstrong - CL King & Associates, Inc., Research Division

So really, what I'm hearing then, it's really mix, just because you've got more jewelry in the retail mix now, is that the main thing?

Daniel R. Feehan

I think that's right. I think that's right. And again, it's a matter of given where gold prices are today and where our loan advance rates are today, which dictate our cost basis in our jewelry, for us, we think there's a greater gross profit opportunities selling across the counter. It also has the impact of completing the loan cycle of getting jewelry back in the hands of consumers in our markets that they can pawn in future periods. As opposed to the previous 4 or 5 years, where Cash America loan and every other pawnshop in the company was taking gold out of the market and out of the pawn cycle and liquidating it through the smelter. So again, the mix has an impact, certainly, on our margins going forward.

Operator

Our next question, from the line of John Hecht with Stephens Inc.

John Hecht - Stephens Inc., Research Division

First one just sort of a matter of modeling. Ohio, I'm just trying to understand, was that a kind of a release of prior fees and a new fee? Or was it just from an accounting perspective, kind of, moving from 1 bucket of provisioning to expense?

Thomas A. Bessant

Yes. So John, in the fourth quarter of 2012, when we established the voluntary refund with that customer group, we looked at all those customers and we made estimates of our expected claims at that time. And of course, then we proceeded to reach those customers and refund their money.

At the time we made that estimate, we accrued a liability and we took future claims against that liability. So approximately a year later, we looked at that estimate and we've made a change to that remaining liability, which had about $5 million remaining on the balance sheet. And so we reversed that. Those charges were all in the Domestic Retail Services business in the operating expense category. So that's where they got reversed to. So that was a pickup of $5 million in the Domestic business.

The fine related to the CFPB was allocated, from our perspective, we just allocated it 50% to the e-commerce segment and 50% to the Domestic segment. And so that create -- and that came through on the admin line in operations, but that created a $2.5 million benefit to the Domestic business and it created a $2.5 million extra expense to the e-commerce segment. Now while that nets out at the operating income line, the difference between the 2 is that the CFPB fine is not deductible for tax purposes. So the after-tax impact of that fine of $1.8 million hits the EPS line. But obviously, that's below the operating income line. Does that help you?

John Hecht - Stephens Inc., Research Division

Yes, that's perfect clarity. Second question is on the line of credit product. I wonder if you can give us some details about what's the average size and rate or whatever kind of product details you can give us? And then, along the same lines is, how much of the balance -- I mean, it's been extraordinarily a loan balance growth in that category. How much of that is just the transition or migration from a prior customer? And how much is it new customers? And in that channel, is this an organic loan channel or a lead gen or a combination?

Daniel R. Feehan

So I'll take it in reverse order. It is a combination of both organic and lead gen. And I think if you look at the line of credit product in the U.S., that product is predominantly new customer-oriented based on the states that we're operating in and licensed in the U.S. If you look in the foreign component in the U.K., the move or the growth in the Flex Credit product is both new customers, as well as shifting customers from the QuickQuid product into the line of credit product. So you look at the numbers and see the movement out of the short-term loan in our foreign component into the line of credit product there. So a large portion in the U.K. is probably customers moving into the product they view as more favorable from a flexibility perspective. Tom, do you want to...

Thomas A. Bessant

Yes, I was just going to say, John, the average balance, average loan balance is pretty comparable. It's slightly lower than the standard single pay product, just the average amount outstanding. So the 2 products are comparable from an average loan size.

John Hecht - Stephens Inc., Research Division

Okay. And then -- I mean, and I know some of this is in real-time and some of this had been lingering, but we -- and when you guys referred to this -- the disruption to the under regulated lenders and more recently, a lot of the banks have pulled back their direct deposit products. And I know that there's some disruptions on the front end to lead generators and so forth. But I mean, are you -- what effects are you seeing right now in that? Are you seeing lenders leave the market? Is that presenting market share opportunities? Similarly, are you seeing some stabilization of the lead generators? And I wonder if you could just comment on the trends you're seeing out of that?

Daniel R. Feehan

Yes, John, I think it's still in a state of flux, quite frankly. There have been -- and again, a lot of this is anecdotal stuff because there's not a lot of good, hard data. But our belief is that a number of the -- or most of the offshore guys have probably exited the markets. And initially, when all of this began to unfold in August, September of last year, a number of our competitors who are operating under tribal models quit doing business for a short period of time and quit doing business in certain states that we weren't operating in because it couldn't get a -- no one could get a license to operate in those states and in the terms that people were doing it in, obviously.

But we've seen some of the tribal [ph] folks come back in certain markets. But I think the lead generation market is still pretty disrupted in terms of those guys trying to figure out their business models. You've got to keep in perspective that a good deal of the volume that we're talking about for the offshore and some of the tribal [ph] guys that were impacted by the activities of the federal agencies disrupting the ACH System were in states where we don't operate. So obviously, we're not going to get the benefit of that.

And we've seen benefits in -- some benefits in the states where we do operate. But to date, our view is that, that has been somewhat offset by, again, the disruption in the lead gen market. They're not out spending as much money acquiring leads themselves. And while we've seen some positive impact from lead cost, just aggregate lead cost, we're not seeing quite as nearly the volume of folks coming through the lead generation channel as we were seeing previous to the disruption that took place in August and September.

I think the movement in the bank, with the bank products that has come out in the past few weeks, obviously, it's too early to tell what impact on us we could see from folks that no longer have access to deposit advanced products at some of the major banks. My guess is -- in pure speculation, my guess is those customers will probably, now that they don't have access to their direct deposit advanced products, may get into overdrafts, short-term, before figuring out where else they may go to for their short-term needs. But again, it's way too early for us to have any visibility on what impact that may have on us.

Operator

Our next question, from the line of John Rowan from Sidoti & Company.

John J. Rowan - Sidoti & Company, LLC

Dan, just to kind of square up a couple of comments that you made. So I'm pretty sure that you guys said that same-store pawn loan balances were down 3%. That, that increases in that number are basically the key to get operating revenue from Retail Services back on the upswing. You also said that in the very last part of the quarter, there was an increase in demand for pawn loans.

I was wondering if you had kind of a short window, just that period in which you were talking about where there was an increase in pawn loans, what the same-store pawn loans were on a year-over-year basis? Obviously, I know you haven't said why they're necessarily up. I'm trying to understand the magnitude of the increase on a year-over-year basis and whether or not we're getting toward that positive comp that's going to lead to positive operating income from Retail Services.

Daniel R. Feehan

Yes, it's a great question. But we don't have just the pure end of the year same-store comparisons. We had -- what I'm referencing is our internal models and forecast that we do on a regular basis, forecasting our trends. We update monthly. So coming out of our trending in October, November, we were updating our December forecast for pawn loan growth.

And what we saw -- and again, those trends were what we've been experiencing for an extended period of time in 2013. But what we ended up seeing in December was better performance and better growth to the tune of $3 million to $4 million higher than we were expecting in our forecast in our same-store numbers and at a rate that was higher than what we experienced in December of 2012. So it was, again, it was an unexpected kind of surge based on the forecast that we had in place. And what I was hearing anecdotally from our operators was that customers were seeing -- seemed to be a little more aggressive in December than we had been experiencing. Too short a period to really extrapolate that into a change.

Again, John, as you know, I've been doing this an extraordinarily long period of time and intuitively, I still believe that this customer will be back and will be back with the traditional behaviors that we had seen through most of the 30-year history at Cash America. And I just have an intuitive sense today that we're getting close to that return. I can't tell you it'll be in February or March or April or May or whenever, but I just feel like things are going to look better for us here in 2014 than what we've experienced the last couple of years with consumer behavior.

The fact is that this segment of population continues to grow. The facts are there aren't alternative products out there for them to use. The issue in my mind has been confidence and our future confidence in their employment, confidence in their take-home pay. And when that strengthens in our particular consumer base, I am pretty optimistic that we'll see some growth we haven't experienced on a same-store basis here over the last 2 years.

John J. Rowan - Sidoti & Company, LLC

Okay. Fair enough. Just one quick housekeeping question for Tom. As far as I can tell from your previous comments, all of the onetime items are up in the operations and administration lines. And at the tax rate of about 40%, I'm assuming that's about 200 basis points higher-than-normal just because of the nondeductible nature of the penalty?

Thomas A. Bessant

Yes, that's exactly right. In the current period, yes.

Operator

Our next question, from the line of David Scharf with JMP Securities.

David M. Scharf - JMP Securities LLC, Research Division

Two questions, Dan. First, just staying on the topic of lead gen. I don't need any numbers, but on a comparable basis, can you give us a sense for the customer acquisition cost of your organic leads, that kind of 25%, 30%, including some of the early returns from TV and direct mail versus historically what you've been paying for, for purchase leads?

Daniel R. Feehan

Yes, right now, there's not much difference, David. And again, we're really accelerating our activities on the organic space, particularly -- again, we've made a lot of strides in SEO and PPC areas. But we're also doing a lot of work, TV and direct mail, even some pre-approved mail campaigns. So today, when you just look at the numbers, there's not a substantial difference between our individual customer acquisition costs organically than in the lead gen channel. But I think with our experience, over time, I would hope that, that would improve.

Also keep in mind, however, that if you remember us discussing this in the past, our models and underwriting standards and algorithms are all around the lifetime value of the customer. And the customer acquisition cost is one component of that analysis. So theoretically, you should be willing -- again, on a theoretical basis, you should be willing from an organic perspective to pay as much as you would in a lead channel if your models are properly oriented around driving your targeted long-term value from a consumer based upon the loss rates and the acquisition costs that you're paying.

So again, I think we have opportunity for some efficiencies. The more important for me, quite frankly, is being self-reliant and not having too much reliance on third-party generation of customers for us. So again, that provides a certain degree of independence for us and sustainability that's appealing to me personally. But from a cost perspective today, there's not a substantial difference. I would hope over time, we may see some but again, I don't think we're -- today, we're not driving our models to assume that's going to happen.

David M. Scharf - JMP Securities LLC, Research Division

Got it, got it. That's helpful. Secondly, shifting to the regulatory developments in the U.K. And I'm just looking at some news from last week that I guess reportedly QuickQuid, Enova's brand out there, along with a few other short-term lenders, have kind of signed up to provide a country-wide database. To the extent this proceeds, I'm wondering if you can give us a little color on whether this was something that you and the other consortium of lenders kind of proactively set forth to do? Whether it was based on any specific ongoing discussions with the FCA and whether we should expect to see additional lenders participate other than the 4 that kind of were mentioned in the press reports?

Daniel R. Feehan

Yes, I'm not sure. Quite frankly, you caught me a little bit at a loss because I'm not sure of the press reports you're referring to. And so again, I'm not clear on what came out that referenced QuickQuid in respect to a nationwide database. And it's not a topic that I've been discussing with our team in Chicago here recently. So I'll have to come back to you on that.

Operator

Our next question, from the line of Liz Pierce from Ascendiant Capital.

Elizabeth O. Pierce - Ascendiant Capital Markets LLC, Research Division

A couple of questions on -- in terms of the tax season maybe, Dan, just if you could give us how you think it started relative to last year. Any signs of delays?

Daniel R. Feehan

Yes, based on the information that we've gathered from the Treasury, we understand that the IRS is not going to be processing returns until end of this month, which looks to us to sort of lay over the timing of last year. So we talked extensively in the first quarter call last April about a delayed tax season in 2012, I mean, 2013 and we would expect a similar delay here in 2014.

So from a year-over-year comparison perspective, in Q1, our expectation today is we're not going to see a substantially different trend than what we saw in 2013. But again, that's based upon information that's been published by the Treasury, and sometimes that information proves to be inaccurate. But it's the best intelligence we have today.

Elizabeth O. Pierce - Ascendiant Capital Markets LLC, Research Division

So I guess, my question really is do you think that had anything to do with what you saw in, like the latter part of December when you saw the pickup kind of in the loan balance? And I just wanted to clarify, was it both numbers or was it also the value on the loan?

Daniel R. Feehan

So it was aggregate activity and aggregate balance. It wasn't an average per loan amount or anything. And I don't think the timing of tax season really had anything at all to do with it.

Elizabeth O. Pierce - Ascendiant Capital Markets LLC, Research Division

Okay. And then skipping over to the U.K. with this new kind of rate situation, do you anticipate that this is -- and have you seen anything to date is going to expedite getting rid of some of the marginal or rogue players? Do you think it's...

Daniel R. Feehan

Well, I think -- yes, and I've said in the past I think all of the activity that the OFT is undertaking and that they'll pass over authority to the FCA in April -- FCA has already published a draft rulebook, which we responded to. All those activities, including a potential rate cap, whatever it may look like in the future, I do think will have an impact on weeding out a lot of the marginal, less sophisticated players in the space. And there are they're quite a few in the U.K. So again, adjusting -- the larger players, such as ourselves, are going to have, in my view, a better opportunity to adjust to whatever rules that ultimately comes out of the FCA and whatever rate cap is established.

Again, from a competitive standpoint, we should be in a position to pick up additional market share relative to those activities. Now it's hard -- it's almost impossible to predict what the business model will look like, obviously, when the final rules come out. But again, I think the larger players are going to be better positioned to adjust to those than any of the periphery players that exist there today.

Elizabeth O. Pierce - Ascendiant Capital Markets LLC, Research Division

Yes, it just would seem that it would expose them so much more rapidly in terms of -- I mean a rate cap is a rate cap and...

Daniel R. Feehan

Yes, that -- and again, we have no idea what that's going to look like. I think based upon the reports that we've seen out of the U.K., I think the -- I think everyone, all the regulatory bodies, including the FCA, was taken a little bit by surprise about this last-minute amendment that was actually attached to a banking bill by Parliament. So there's really no clarity on what that might look like ultimately when they provide guidance on that, and again, it won't be effective until January 2015. But I think you're absolutely right that it'd be very difficult for some of these smaller players to survive.

Elizabeth O. Pierce - Ascendiant Capital Markets LLC, Research Division

And then just granted, obviously, Mexico is still a very small part of the business but can you just kind of give us an update on what's happening in Mexico?

Daniel R. Feehan

Yes, we've got the 47 locations that we started the year with. We've successfully grown our general merchandise pawn balances in those stores, making good progress. We did have a little negative impact in the fourth quarter relative to some inventory we liquidated that had built up on us that we decided to just liquidate at a loss to get out of some inventory that had been sitting around way too long for us, really pre-dates the -- a lot of the activity that we generated here in 2013. But again, I think we're making good progress there.

Not at -- while we're at four-wall profitability in those stores, we're not at profitability overall given the overhead structure that we currently have in place in Mexico. So I think we're probably -- in our minds, we're probably 60%, 65% down the road in terms of what we hope to accomplish with those 47 locations.

We've got additional pawn loan growth we are expecting in 2014 to make those stores more profitable. But I will tell you that we're not -- as we look out in '14, we're not planning any additional expansion, with the exception maybe of a handful of units in Mexico. So we're still keeping it pretty contained at this point, and we'll have a better look at where our ongoing strategy is going to be south of the border later in 2014.

Operator

Our next question is from the line of Henry Coffey with Sterne Agee.

Henry J. Coffey - Sterne Agee & Leach Inc., Research Division

Quick question, the pawnshop business is taking on a -- well, obviously, with a new hand at the tiller, your good self, the pawnshop business is taking on a radically different look than it has in the past: slow growth, acquisitions but obviously, a lot of cash flow.

And then on the other hand, we have the online or the e-commerce business, which is venturing, I mean, the installment loan product that you talked about doing in near prime product for a couple of years, so that it's not -- this isn't sudden, but we're moving in some pretty new directions. How do you reconcile those 2? And given the cash flows that are likely to come out of the pawnshop business, what is the outlook for buybacks? And then I have a second question after this.

Thomas A. Bessant

Yes, Henry, let me take a crack at that. I mean, I think what you saw last year and I mentioned in my comments, there's a pretty effective leveraging of the cash flow of the business. So we saw almost $100 million in increasing gross balances on the e-commerce consumer loan side of the business. And you saw significant acquisitions last year and significant share repurchases. So all that being done, keeping the company's balance sheet well protected.

So going forward, we do -- obviously, as Dan mentioned, we completed 3 significant pawn transactions. I think we've got some digestion to do there. So I wouldn't expect another substantive transaction anytime soon, but you never know. But we'll continue to look at deploying that cash effectively on the working capital side and being opportunistic on the share buyback side.

Henry J. Coffey - Sterne Agee & Leach Inc., Research Division

On the -- I mean, given the immediacy, the immediate impact of a buyback, is there anything -- what are the restrictions in terms of the maximum amount of money you could put out?

Thomas A. Bessant

I mean, last time I looked, I think we've got about 1.5 million shares left on our open market authorization. We finished the year with about $190 million drawn under our $280 million line of credit, so about $90 million in availability. And as you know because you've followed this business for so long, tax refund season is when our working capital needs basically invert. We have a lot of debt payments over the next 3 or 4 months, which provides us a lot of flexibility.

Henry J. Coffey - Sterne Agee & Leach Inc., Research Division

On the -- just to switch gears over to the e-commerce business, we talked about near prime. I know FICO scores is not, obviously, an underwriting tool but can you give us a sense of what you mean by near prime? And how do you think you'll line up with a traditional installment loan product, which is kind of a 600 to 650 FICO with a 36% rate?

Daniel R. Feehan

Yes. So if you look at domestically, our NetCredit offering, we're currently -- with a portfolio that on average is going to be sub-100 APRs and we are actually testing, in a number of markets, 36% products, again, I think getting to 36% is an aspirational level but I don't think it's easy to achieve. But we're beginning to look into that market. I don't think long term, Henry, that we're going to try to compete with customers who are in the 650-plus range.

I mean, we're really talking about the 600 to 625, 635 range of folks we're going to be looking at. Again, I think -- again, aspirationally, we'd like to find an opportunity to provide the most efficient and cost-effective products we can. But there are a lot of implications when you start moving down into those levels of yields, both from a working capital perspective and overall profitability perspective, that we're going to be marching pretty cautiously.

Operator

Our next question is from the line of Dan Furtado from Jefferies & Company.

Daniel Furtado - Jefferies LLC, Research Division

I actually just had one -- well, it's actually a 2-part question. But hitting on the near prime theme, how should investors think about the timing to maturity, how are we on the strategy and then in terms of being material on your financial statements? And then second, is ABS funding part of the longer-term strategy for that segment as well?

Daniel R. Feehan

Yes. So from a timing perspective, again, we launched our NetCredit product here in the U.S. late last year or late in 2012, and we've been gathering data and refining our underwriting models associated with that product throughout 2013. And we really kept the governors on our asset growth there, again, trying to populate our databases so that our underwriting algorithms are as effective as they can possibly be.

Our plan for 2014 is to step on the gas a bit with that product and begin to drive greater asset levels here in the U.S. We're also evaluating -- we don't really have something I would call a near-term product -- or a near prime product in the U.K. We're evaluating the opportunity, maybe, of introducing something there at some point in 2014 as well. Tom, you want to talk about the ABS side?

Thomas A. Bessant

Yes. So just as a magnitude issue, the NetCredit product's probably $25 million to $30 million out of that $500 million portfolio of unsecured loans. So it's not huge. As Dan said, a lot of testing in the current year. As we look at installment products and longer-term near prime products, ABS may make sense for us. We'll continue to evaluate that. Portfolios are now getting to be a size that, that is a reasonable option and have enough time of seasoning to get performance data. I don't see an urgent need right now, but it's certainly something over the next few years we'll be looking at.

Operator

Our next question is from the line of Tulu Yunus from Nomura Securities.

Tulu Yunus - Nomura Securities Co. Ltd., Research Division

Most of my questions have been asked and answered, but just a 2-part question. One is what were the pawn redemption rates this past quarter? And in looking at the average loan balance in your pawn portfolio that was -- in 2013, it was down about 5%, just wondering what your outlook and what's baked into your expectations for '14? Because that would be a key assumption, I would think.

Thomas A. Bessant

Yes. So redemption rates on the pawn side continue to be very high and improving. The portfolio is performing at levels that I've never seen before, very honestly, which means that customers, obviously, have taken out pawn loans with the intention of either redeeming those loans or extending those loans into the future. So redemption levels have fallen.

However, when we're looking at growth in the balance, that's driven by demand. And customers continue, in our opinion, to be conservative. As a result, in our outlook for next year, even though we're finishing the year at 7% more loan balance, we're not expecting big incremental gains during 2014, as Dan mentioned in his comments.

We'll have better visibility on that coming out of Q2 because of the tax refund season and the impact on the drop in balances that we typically see through the March period and then as a matter of evaluating the level of demand as it returns in the second quarter. Things have obviously impact that, obviously, are health care costs, whether other taxes tend to burden customers, unemployment benefits and things of that nature. Right now, we don't have any of that factored into our estimations for 2014.

Operator

Our next question, from the line of Gregg Hillman with First Wilshire.

R. Gregg Hillman

Could you talk -- number one, what's ABS, that acronym that was referred to?

Thomas A. Bessant

Asset based securitization.

R. Gregg Hillman

Okay. And then Tom, for the -- the product mix between e-commerce and Retail Services, what percentage of operating profit were those 2 segments, respectively, in the fourth quarter?

Thomas A. Bessant

In the fourth quarter, on an adjusted basis, Gregg, it was right at 50-50.

R. Gregg Hillman

Okay. And then I guess the de novo, you expect that to increase as a percentage going forward?

Thomas A. Bessant

Well, the e-commerce business is growing at a higher rate than the domestic pawn business is currently. So it has continued to take a bigger or account for a bigger percentage of contribution in the operating income line.

R. Gregg Hillman

Okay. And then Tom, can you explain why it's a lot more difficult to do installment loans over the Internet as opposed to payday loans over the Internet?

Thomas A. Bessant

Well, I think the installment loan product is a much more complicated product from the consumers' perspective, from an underwriting perspective and from a collections perspective. You've got a higher average loan amount, you've got periodic payments. Obviously, your mix between principal and interest tends to fluctuate as the loan gets amortized. Cash America's installment loan product is a fully amortizing loan.

Our goal is to make that loan to that customer and allow that customer the opportunity to fully redeem that loan and pay it off over time. Some installment loan models, typically seen in the storefront side of things, are oriented to renewing the customer and charging incremental fees upon the renewal.

But on the online side, it's a straightforward product. It's more difficult, I think, from an underwriting perspective because it's just a more challenging product because of the multiple payments required and the customer behavior relative to those payments to the extent that they miss a payment or get behind on payments. It's much less automated, if you will, than a single pay product.

Operator

Mr. Feehan, this is the operator, I'll be turning the conferencing back to you with your closing remarks. Please go ahead.

Daniel R. Feehan

Thanks. I appreciate everyone joining us this morning, and I look forward to visiting with you again at the end of the first quarter. Take care.

Operator

Ladies and gentlemen, this does conclude the conference call for today. We thank you, all, for your participation. Have a great day, everyone.

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