Cash America 2014 Annual Report Download - page 76
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61
Company’s 2018 Senior Notes and a $1.5 million loss associated with the repurchase of $58.6 million principal
amount of 2029 Convertible Notes prior to the Convertible Notes being called in May 2014.
Income Taxes
During 2014, the Company recorded income tax expense of $2.0 million on a pre-tax loss of $8.3 million,
resulting in a negative effective tax rate of (24.5%). The negative effective tax rate was primarily due to 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. During 2013,
the Company recorded an income tax benefit of $15.5 million on pre-tax profits of $44.0 million, resulting in a
negative effective tax rate of (35.3%). The negative effective tax rate was primarily due to the recognized income
tax benefit of $33.2 million associated with the Creazione Deduction as well as the release of reserves established
for unrecognized tax benefits associated with the Company’s Mexico operations. Without the impact of these items,
the Company’s effective tax rate would have been 11.6% and 39.6% for 2014 and 2013, respectively. The lower
effective tax rate for 2014 is primarily due to the pre-tax loss incurred in 2014 and the tax impact of other
permanently non-deductible items. Given the impact of the pre-tax loss incurred in 2014 and the significance of the
one-time items that affected the 2014 effective tax rate, that rate should not be viewed as indicative of the effective
tax rate for future periods.
Net Income from Discontinued Operations
As a result of the Enova Spin-off, the financial results of Enova are presented as discontinued operations for
all applicable periods in this discussion. As the Enova Spin-off occurred on November 13, 2014, the Company’s
results discussed below for 2014 include only revenue and expenses incurred prior to that date.
Net income from discontinued operations increased $25.7 million, or 30.8%, from 2013 to 2014. The
increase was primarily due to a $27.7 million, or 6.2%, increase in net revenue, driven by higher revenue from
Enova’s domestic and foreign line of credit account and installment loan portfolios and lower consumer loan loss
rates across all of Enova’s consumer loan portfolios, including short-term loans, line of credit accounts and
installment loans. Enova’s effective tax rate for 2014 and 2013, respectively, was 36.6% and 35.7%.