Cash America 2014 Annual Report Download - page 34

19
The Company is subject to impairment risk, and goodwill impairment charges could have a Material Adverse
Effect.
At December 31, 2014, the Company had goodwill totaling $487.6 million and intangible assets, net of
accumulated amortization, of $45.8 million on its consolidated balance sheet. Of this amount of intangible assets,
the Company had licenses and trademarks with carrying values of $9.7 million and $5.3 million, respectively, as of
December 31, 2014 and 2013 that were indefinite-lived intangible assets and not amortized. Goodwill represents the
excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each
business combination. Accounting for goodwill and intangible assets requires significant management estimates and
judgment. Events may occur in the future, and the Company may not realize the value of its goodwill or intangible
assets. The Company tests goodwill and intangible assets with an indefinite life for potential impairment annually as
of June 30 and between annual tests if an event occurs or circumstances change that would more likely than not
reduce the fair value of a reporting unit below its carrying amount.
The Enova Spin-off in November 2014 was considered a triggering event for purposes of goodwill
assessment. Following the Enova Spin-off and as of December 31, 2014, the estimated fair value of the retail
services reporting unit was re-calculated to incorporate changes in strategy, observed business trends and outlook.
The estimated fair value of the retail services reporting unit declined since the June 30, 2014 annual assessment, but
it continued to exceed its underlying carrying value. However, the excess fair value over the carrying value had
been reduced to approximately 3% at December 31, 2014. A change in assumptions, such as an increase in the
weighted-average cost of capital, could cause the carrying value of the retail services reporting unit to exceed its fair
value at December 31, 2014, which could have resulted in an impairment loss. If all assumptions were held
constant, a one percentage point increase in the weighted average cost of capital would have decreased the
estimated fair value of the reporting unit to approximately $90.6 million below the carrying value, which would
have required the Company to perform additional analysis in accordance with ASC 350 to determine if an
impairment existed and could have resulted in an impairment loss.
As part of the goodwill assessment, the Company also considers market capitalization, which is the
observable market value of the Company based on the quoted market prices of the Company's common stock. The
Company compares the market capitalization to its carrying value of equity. Following the Enova Spin-off and as of
December 31, 2014, the Company’s market capitalization was observed to be lower than the carrying value of
equity. The Company believes the observable market value at December 31, 2014 is not a reliable indicator of the
Company’s fair value, due to the very short time frame since the date of the Enova Spin-off, a likely transition of a
significant number of investors occurring due to the magnitude of the event, and the disruption of the Company’s
share price following the event. Management believes this disruption is temporary but acknowledges the need to
monitor and re-evaluate any future discrepancies between these values and consider the implications for an
impairment of goodwill in future periods.
The Company is considered to be at risk for a future impairment of its goodwill in the event of a decline in
general economic, market or business conditions or any significant unfavorable changes in the Company's
forecasted revenue, expenses, cash flows, weighted-average cost of capital and/or market transaction multiples. The
Company will continue to monitor for events and circumstances that could negatively impact the key assumptions
in determining the fair value of the retail services reporting unit. Should a review indicate impairment, a write-
down of the carrying value of the goodwill or intangible asset would occur, resulting in a non-cash charge, which
could have a Material Adverse Effect and could also lead to the Company’s inability to comply with certain
covenants in the Company’s financing documents, which could cause a default under those agreements.
The Company’s success is dependent, in part, upon its executive officers, and if the Company is not able to
attract and retain qualified executive officers or to successfully replace its current Chief Executive Officer who
has announced his intention to retire, it could have a Material Adverse Effect.
The Company’s success depends, in part, on its executive officers, which is comprised of a relatively small
group of individuals. Many members of the senior management team have significant industry experience,
including the Company’s Chief Executive Officer who has previously announced that he intends to retire from the
Company in April 2015. The Company believes that its senior management would be difficult to replace. Because