Cash America 2014 Annual Report Download - page 126

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
111
The components of the provision for income taxes and the income to which it relates for the years ended
December 31, 2014, 2013 and 2012, were as follows (dollars in thousands):
Year Ended December 31,
2014 2013 2012
(Loss) Income from continuing operations before income taxes
Domestic $
(7,938
)$47,475 $
108,000
Foreign (408)
(3,490
)
(26,630
)
(Loss) Income from continuing operations before income taxes
(8,346
)43,985 81,370
Current (benefit) provision:
Federal $
(12,823
)$
(20,908
) $ 42,190
Foreign
531
(752)
586
State and local 1,291 2,098 4,844
Total current (benefit) provision for income taxes
(11,001
)
(19,562
)47,620
Deferred provision (benefit):
Federal $12,962 $3,740 $
(5,872
)
Foreign
—
—
4,811
State and local
80
317
(284)
Total deferred provision (benefit) for income taxes 13,042 4,057
(1,345
)
Total provision (benefit) for income taxes $2,041 $
(15,505
) $ 46,275
For the year ended December 31, 2014, the Company recorded income tax expense of $2.0 million on a pre-
tax loss of $8.3 million compared to an income tax benefit of $15.5 million on pre-tax income of $44.0 million for
the year ended December 31, 2013. Despite incurring a pre-tax loss, income tax expense was recorded in 2014
primarily as a result of the tax impact of the write-off of non-deductible goodwill associated with the sale of the
Company’s Mexico-based pawn operations and an additional valuation allowance associated with the current year
losses in Mexico. An income tax benefit was recorded in 2013 primarily due to the recognition of a $33.2 million
tax benefit in 2013 associated with the Creazione Deduction (as explained further below) as well as the release of
reserves established for unrecognized tax benefits associated with the Company’s Mexico operations.
In January 2013, the Company’s Mexico-based pawn operations that were owned by Creazione and
operated under the name Prenda Fácil were sold by Creazione to another wholly-owned subsidiary of the Company,
Empeños, 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 included a deduction on its 2013 federal income tax return for its
tax basis in the stock of Creazione and recognized an income tax benefit of $33.2 million as a result of the
deduction, referred to as the Creazione Deduction. The Company believes that it met the requirements for this
deduction and that it should be treated as an ordinary loss, which reduced the Company’s cash taxes paid in 2013.
The Company obtained a private letter ruling from the IRS with respect to one of the various factors that it
considered in making this determination.
The Company sold the remaining portion of its Mexico pawn operations in August of 2014. Due to the
Company’s withdrawal of operations in Mexico and the anticipated liquidation of Creazione, the Company expects
that its remaining net deferred tax assets in Mexico will not be utilized. As a result, in 2014, the Company wrote off
Creazione’s remaining net deferred tax assets and the associated valuation allowance against those deferred tax
assets.