Cash America 2014 Annual Report Download - page 83

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Interest Expense and Interest Income
In connection with the Company’s reporting of Enova in discontinued operations as a result of the Enova
Spin-off, interest expense for the Company from continuing operations excludes interest in 2013 and 2012 for the
Enova Note Receivable. This interest was included as interest income for both of these years.
The following table shows the Company’s interest income and expense for the years ended December 31,
2014 and 2013 (dollars in thousands):
Year Ended December 31,
2013 2012 Change % Change
Interest expense $36,319 $29,134 $7,185
24.7
%
Interest income 19,862 21,143 (1,281)
(6.1
)%
Interest expense, net $16,457 $7,991 $8,466 105.9
%
Interest expense, net of interest income, increased $8.5 million, or 105.9%, to $16.5 million in 2013 as
compared to $8.0 million in 2012. The Company’s interest income in 2013 and 2012 related primarily to the Enova
Note Receivable. The average amount outstanding for the Enova Note Receivable was lower in 2013 compared to
2012, resulting in a decrease in interest income of $1.3 million in 2013 from 2012. In addition, the Company issued
the $300.0 million in aggregate principal amount of 5.75% Senior Notes, or 2018 Senior Notes, in May 2013.
Following the issuance of the 2018 Senior Notes, the Company decreased the outstanding indebtedness under its
Domestic and Multi-currency Line of Credit, which had a lower effective interest rate than the 2018 Senior Notes.
As a result, the Company’s effective blended borrowing cost increased to 5.5% in 2013 compared to 4.8% in 2012.
Income Taxes
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. During
2012, the Company recorded income tax expense of $46.3 million on pre-tax profits of $81.4, resulting in an
effective tax rate of 56.9%. The effective tax rate was negatively impacted by a $12.6 million valuation allowance
related to the deferred tax assets of the Company’s Mexico subsidiaries. Without the impact of these items, the
Company’s effective tax rate would have been 39.6% and 41.9% for 2013 and 2012, respectively. The effective tax
rate for 2012 was also negatively impacted by significant losses in the Company’s Mexico-based pawn operations,
which were taxed at a lower rate than the domestic operations.
Net Loss Attributable to the Noncontrolling Interest
Net (income) loss attributable to the noncontrolling interest changed by $6.1 million in 2013 from a net loss
attributable to the noncontrolling interest of $5.8 million in 2012 to net income attributable to the noncontrolling
interest of $0.3 million in 2013, primarily due to the Company’s purchase of the outstanding shares held by
minority shareholders in Creazione in September 2012.
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. Net income from discontinued operations increased $16.8 million, or
25.2%, from 2012 to 2013. The increase was primarily due to 19.9% 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 Enova’s entire consumer loan portfolio. Enova’s effective tax rate for 2013 and
2012, respectively, was 35.7% and 36.6%.