Cash America 2013 Annual Report Download - page 161

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
136
The components of the provision for income taxes and the income to which it relates for the years ended
December 31, 2013, 2012 and 2011, were as follows (dollars in thousands):
Year Ended December 31,
2013 2012 2011
Income (loss) before income taxes:
Domestic $ 176,077 $214,463 $225,351
Foreign (2,487) (28,143) (7,825)
Income before income taxes 173,590 186,320 217,526
Current provision:
Federal $ 19,908 $ 81,756 $ 51,613
Foreign (689) 603 440
State and local 2,678 5,818 4,744
Total current provision for income taxes 21,897 88,177 56,797
Deferred provision (benefit):
Federal $ 8,456 $ (8,031) $ 27,475
Foreign - 4,811 (2,998)
State and local 401 (301) 1,086
Total deferred provision for income taxes 8,857 (3,521) 25,563
Total provision for income taxes $ 30,754 $ 84,656 $82,360
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The Company recognized income tax expense of $30.8 million for the year ended December 31, 2013
compared to income tax expense of $84.7 million for the year ended December 31, 2012. The decrease in income tax
expense and the effective tax rate for the year ended December 31, 2013 is primarily due to the recognition of the
$33.2 million tax benefit associated with the Creazione Deduction as defined below and by the tax effect of lower
earnings for the year ended December 31, 2013. In addition, the income tax expense in 2012 was negatively impacted
by the recognition of a $12.6 million valuation allowance related to the deferred tax assets of the Company’s Mexico
subsidiaries.
In January 2013, the Company’s Mexico-based pawn operations that were owned by Creazione Estilo, S.A. de
C.V., a Mexican sociedad anónima de capital variable (“Creazione”), and operated under the name Prenda Fácil were
sold by Creazione to another wholly-owned subsidiary of the Company, CA Empeños Mexico, S. de R.L. de C.V., and
began operating exclusively under the name “Cash America casa de empeño.” As of December 31, 2013, Creazione’s
assets had been liquidated and it had entered into formal liquidation proceedings. In connection with the liquidation of
Creazione, the Company will include a deduction on its 2013 federal income tax return for its tax basis in the stock of
Creazione and has recognized an income tax benefit of $33.2 million as a result of the deduction (the “Creazione
Deduction”). The Company believes that it meets the requirements for this deduction and that it should be treated as an
ordinary loss, which has reduced the Company’s cash taxes paid in 2013. The Company has obtained a Private Letter
Ruling from the Internal Revenue Service with respect to one of the various factors that it considered in making this
determination.