1. Separation from Cash America
\nOn April 10, 2014, the Board of Directors of Cash America International, Inc., or (“Cash America”), authorized management to review potential strategic alternatives, including a tax-free spin-off, for the separation of Enova International, Inc. and its subsidiaries (collectively, the “Company”). After evaluating alternatives for the Company, Cash America’s management recommended that Cash America’s Board of Directors pursue a tax-free spin-off for the separation. On October 22, 2014, after receiving a private letter ruling from the Internal Revenue Service, an opinion from Cash America’s tax counsel and a solvency opinion from an independent financial advisor, Cash America’s Board of Directors approved the spin-off. The distribution of approximately 80% of the Company’s outstanding common stock occurred at 12:01 am ET on November 13, 2014 (the “Spin-off”). Cash America’s shareholders received 0.915 shares of the Company’s stock for every one share of Cash America common stock held at the close of business November 3, 2014, which was the record date for the distribution. Following the Spin-off, the Company became an independent, publicly traded company, and the Company’s shares of common stock are listed on the New York Stock Exchange under the symbol “ENVA.”
\nSince 2011, the Company has owned all of the assets and incurred all of the liabilities related to Cash America’s e-commerce business, with some limited exceptions, in which case such assets were transferred to the Company and such liabilities were assumed by the Company pursuant to a Separation and Distribution Agreement upon completion of the Spin-off. On the Spin-off date, the Company entered into several other agreements with Cash America that govern the relationship between the Company and Cash America after completion of the Spin-off and provide for the allocation between the Company and Cash America of various assets, liabilities, rights and obligations (including insurance and tax-related assets and liabilities). The Company’s guarantees of Cash America’s long-term indebtedness were also released on such date. These agreements also include arrangements with respect to transitional services to be provided by Cash America to the Company and vice versa.
2. Nature of the Company
\nThe Company operates an internet-based lending platform to serve customers in need of cash to fulfill their financial responsibilities. Through a network of direct and indirect marketing activities, the Company offers funds to its customers through a variety of unsecured consumer loan products. The business is operated strictly through the internet to provide a convenient, fully-automated financial solution to its customers. As of December 31, 2014, the Company offered or arranged loans to customers under the names “CashNetUSA,” “NetCredit” and “Headway Capital” in 35 states in the United States, under the names “QuickQuid,” “Pounds to Pocket” and “OnStride Financial” in the United Kingdom, under the name “DollarsDirect” in Australia and Canada, under the name “Simplic” in Brazil and under the name “YouXinYi” in China.
\nThe Company originates, guarantees or purchases consumer and small business loans (collectively referred to as “consumer loans” throughout this discussion). Consumer loans provide customers with cash in their bank account or deposited onto a debit card, typically in exchange for an obligation to repay the amount advanced plus fees and/or interest. Consumer loans include short-term loans, line of credit accounts and installment loans.
\nShort-term loans include unsecured short-term loans written by the Company or by a third-party lender through the Company’s credit services organization and credit access business programs (“CSO programs” as further described below) that the Company guarantees. Line of credit accounts include draws made through the Company’s line of credit product. Installment loans are longer-term multi-payment loans that generally require the pay-down of portions of the outstanding principal balance in multiple installments.
\nThrough the Company’s CSO programs the Company provides services related to a third-party lender’s consumer loan products in some markets by acting as a credit services organization or credit access business on behalf of consumers in accordance with applicable state laws. Services offered under the CSO programs include credit-related services such as arranging loans with independent third-party lenders and assisting in the preparation of loan applications and loan documents (“CSO loans”). Under the CSO programs, the Company guarantees consumer loan payment obligations to the third-party lender in the event that the customer defaults on the loan. CSO loans are not included in the Company’s financial statements, but the Company has established a liability for the estimated losses in support of the guarantee on these loans in its consolidated balance sheets.
\n\n
3. Significant Accounting Policies
\nBasis of Presentation
\nOn September 7, 2011, Cash America formed a new company, Enova International, Inc. On September 13, 2011, Cash America contributed to the Company all of the stock of its wholly-owned subsidiary, Enova Online Services, Inc., in exchange for 33 million shares of the Company’s common stock.
\nThe consolidated financial statements of the Company reflect the historical results of operations and cash flows of the Company during each respective period. The financial statements include goodwill and intangible assets arising from businesses previously acquired. Prior to the Spin-off, the financial statements also included the allocation of certain assets and liabilities that were historically held at the Cash America corporate level but which were specifically identifiable or allocable to the Company. Certain transactions with Cash America, such as stock-based compensation and foreign currency transactions, were considered to be effectively settled as net equity transactions with parent in “Retained earnings” in the consolidated balance sheets at the time the transaction was recorded. Prior to May 30, 2014, all intercompany transactions between the Company and Cash America were considered to be effectively settled in the financial statements at the time the transaction is recorded. The net effect of the settlement of these transactions was primarily reflected as a change in “Long-term debt” in the consolidated balance sheets. In addition, the historical financial statements include allocations of costs relating to certain functions historically provided by Cash America, including corporate services such as executive oversight, insurance and risk management, government relations, internal audit, treasury, licensing, and to a limited extent finance, accounting, tax, legal, human resources, compensation and benefits, compliance and support for certain information systems related to financial reporting. The expense allocations have been determined on a basis that Cash America and the Company consider to be reasonable reflections of the utilization of services provided by Cash America. Also see Note 15 for additional information on the Company’s relationship with Cash America. The financial information included herein may not be indicative of the consolidated financial position, operating results, changes in stockholders’ equity and cash flows of the Company in the future, or if the Company had been a separate company during the periods presented.
\nUse of Estimates
\nThe preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for losses on consumer loans, goodwill, long-lived and intangible assets, income taxes, contingencies and litigation. Management bases its estimates on historical experience, empirical data and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.
\nForeign Currency Translations
\nThe functional currencies for the Company’s subsidiaries that serve residents of the United Kingdom, Australia, Canada and Brazil are the British pound, the Australian dollar, the Canadian dollar and the Brazilian real, respectively. The assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rates in effect at each balance sheet date, and the resulting adjustments are recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) as a separate component of stockholders’ equity. Revenue and expenses are translated at the monthly average exchange rates occurring during each period.
\nCash and Cash Equivalents
\nThe Company considers deposits in banks and short-term investments with original maturities of 90 days or less as cash and cash equivalents.
\nIn 2014 the Company deposited $7.9 million in a deposit account with a third-party service provider as a security deposit. For an extended period of time the Company is restricted from drawing on these funds. This deposit has been included in “Other assets” in the consolidated balance sheets and reflected as “Restricted cash deposit” in the consolidated statement of cash flows.
\nRevenue Recognition
\nThe Company recognizes consumer loan fees as revenue for each of the loan products it offers. “Revenue” in the consolidated statements of income include: interest income, finance charges, fees for services provided through the CSO programs (“CSO fees”), service charges, draw fees, minimum fees, late fees, nonsufficient funds fees and any other fees or charges permitted by applicable laws and pursuant to the agreement with the borrower. For short-term loans that the Company offers, interest and finance charges are recognized on an effective yield basis over the term of the loan, and fees are recognized when assessed to the customer. CSO fees are recognized on an effective yield basis over the term of the loan. For line of credit accounts, interest is recognized during the period based upon the balance outstanding and the contractual interest rate, and fees are recognized when assessed to the customer. For installment loans, revenue is recognized on an effective yield basis over the term of the loan and fees are recognized when assessed to the customer. Unpaid and accrued interest and fees are included in “Consumer loans, net” in the consolidated balance sheets.
\nCurrent and Delinquent Consumer Loans
\nThe Company classifies its consumer loans as either current or delinquent. Short-term loans are considered delinquent when payment of an amount due is not made as of the due date. If a line of credit account or installment loan customer misses one payment, that payment is considered delinquent and the balance of the loan is considered current. The Company does not accrue interest on the delinquent payment portion of the loan but does continue to accrue interest on the remaining portion of the loan. If a line of credit account or installment loan customer does not make two consecutive payments, the entire account or loan is classified as delinquent. The Company allows for normal payment processing time before considering a loan delinquent but does not provide for any additional grace period.
\nThe Company generally does not accrue interest on delinquent consumer loans and does not resume accrual of interest on a delinquent loan unless it is returned to current status. In addition, delinquent consumer loans generally may not be renewed, and if, during its attempt to collect on a delinquent consumer loan, the Company allows additional time for payment through a payment plan or a promise to pay, it is still considered delinquent. All payments received are first applied against accrued but unpaid interest and fees and then against the principal balance of the loan.
\nAllowance and Liability for Estimated Losses on Consumer Loans
\nThe Company monitors the performance of its consumer loan portfolio and maintains either an allowance or liability for estimated losses on consumer loans (including fees and interest) at a level estimated to be adequate to absorb credit losses inherent in the portfolio. The allowance for losses on the Company’s owned consumer loans reduces the outstanding loan balance in the consolidated balance sheets. The liability for estimated losses related to loans guaranteed under the CSO programs is initially recorded at fair value and is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
\nIn determining the allowance or liability for estimated losses on consumer loans, the Company applies a documented systematic methodology. In calculating the allowance or liability for loan losses, outstanding loans are divided into discrete groups of short-term loans, line of credit accounts and installment loans and are analyzed as current or delinquent. Increases in either the allowance or the liability, net of charge-offs and recoveries, are recorded as a “Cost of revenue” in the consolidated statements of income.
\nThe allowance or liability for short-term loans classified as current is based on historical loss rates adjusted for recent default trends for current loans. For delinquent short-term loans, the allowance or liability is based on a six-month rolling average of loss rates by stage of collection. For line of credit accounts and installment loan portfolios, the Company generally uses a migration analysis to estimate losses inherent in the portfolio. The allowance or liability calculation under the migration analysis is based on historical charge-off experience and the loss emergence period, which represents the average amount of time between the first occurrence of a loss event to the charge-off of a loan. The factors the Company considers to assess the adequacy of the allowance or liability include past due performance, historical behavior of monthly vintages, underwriting changes and recent trends in delinquency in the migration analysis.
\nThe Company fully reserves and generally charges off consumer loans, including accrued interest and/or fees, once the loan or a portion of the loan has been classified as delinquent for 60 consecutive days. If a loan is deemed uncollectible before it is fully reserved, it is charged off at that point. Consumer loans classified as delinquent generally have an age of one to 59 days from the date any portion of the loan became delinquent, as defined above. Recoveries on loans previously charged to the allowance are credited to the allowance when collected.
\nProperty and Equipment
\nProperty and equipment is recorded at cost. The cost of property retired or sold and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the consolidated statements of income. Costs associated with repair and maintenance activities are expensed as incurred. Depreciation expense is generally provided on a straight-line basis, using the following estimated useful lives:
\n\n
| \n Computer hardware and software | \n\n
| \n\n 2 to 5 years | \n
| \n Furniture, fixtures and equipment | \n\n
| \n\n 3 to 7 years | \n
| \n Leasehold improvements (1) | \n\n
| \n\n 2 to 10 years | \n
\n
| \n (1) | \n\n Leasehold improvements are depreciated over the lesser of the estimated useful life, remaining lease term, or 10 years. |
Software Development Costs
\nThe Company applies Accounting Standards Codification (“ASC”) 350-40, Internal Use Software (“ASC 350-40”), to its software purchase and development activities. Under ASC 350-40, eligible internal and external costs incurred for the development of computer applications, as well as for upgrades and enhancements that result in additional functionality of the applications, are capitalized to “Property and equipment” on the consolidated balance sheets. Internal and external training and maintenance costs are charged to expense as incurred or over the related service period. When a software application is placed in service, the Company begins amortizing the related capitalized software costs using the straight-line method based on its estimated useful life, which currently ranges from two to five years.
\nGoodwill
\nGoodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), 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.
\nThe Company uses the income approach to complete its annual goodwill assessment. The income approach uses future cash flows and estimated terminal values for the Company that are discounted using a market participant perspective to determine the fair value, which is then compared to the carrying value to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and economic standpoint. The Company completed its annual assessment of goodwill as of June 30, 2014 and determined that the fair value of its goodwill exceeded carrying value, and, as a result, no impairment existed at that date. Following the separation from Cash America, the Company completed an interim assessment of goodwill, including market capitalization and other qualitative factors, as of December 31, 2014. Consistent with the assessment completed as of June 30, 2014, no impairment existed as of December 31, 2014.
\nAs of December 31, 2014, the Company had $255.9 million of goodwill, all of which is expected to be deductible for tax purposes.
\nLong-Lived Assets Other Than Goodwill
\nAn evaluation of the recoverability of property and equipment and intangible assets subject to amortization is performed whenever the facts and circumstances indicate that the carrying value may be impaired. An impairment loss is recognized if the future undiscounted cash flows associated with the asset and the estimated fair value of the asset are less than the asset’s corresponding carrying value. The amount of the impairment loss, if any, is the excess of the asset’s carrying value over its estimated fair value.
\nThe Company amortizes intangible assets subject to amortization on the basis of their expected periods of benefit, generally three to five years. The costs of start-up activities and organization costs are charged to expense as incurred.
\nHedging and Derivatives Activity
\nThe Company periodically uses foreign currency forward contracts, which are considered derivative instruments, to minimize the effects of foreign currency risk in the United Kingdom and Australia related to the operations of the Company. The forward contracts are not designated as hedges as defined by ASC 815, Derivatives and Hedging; therefore, any changes in the fair value of the forward contracts are recognized in “Foreign currency transaction loss” in the consolidated statements of income. See Note 14.
\nNon-Marketable Equity Securities
\nThe Company accounts for its non-marketable equity securities in accordance with ASC 325, Investments—Other. Non-marketable equity securities are recorded on a cost basis. The Company evaluates non-marketable equity securities for impairment on a quarterly basis. If an impairment of an equity security is determined to be other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary-impairment is identified. Non-marketable equity securities are held in “Other assets” on the consolidated balance sheets.
\nAs of December 31, 2014, the Company owned a $6.7 million investment in the preferred stock of a privately-held developing consumer financial services entity. The entity is not currently profitable and has historically funded its operations through a series of capital contributions from investors. The Company’s impairment evaluation of this investment as of December 31, 2014 determined that an impairment loss was not probable as of that date. The Company will continue to evaluate the impairment risk of this entity by monitoring and assessing the entity’s ability to raise capital or generate profits to fund its future operations.
\nMarketing Expenses
\nMarketing expenses consist of online marketing costs such as sponsored search and advertising on social networking sites, and offline marketing costs such as television, radio and direct mail advertising. In addition, marketing expenses include lead purchase costs paid to marketers in exchange for providing information or applications from potential customers interested in using the Company’s services. Online marketing and lead purchase costs are expensed as incurred. The production costs associated with offline marketing are expensed as incurred. Other marketing costs are expensed as incurred.
\nThe Company also has an agreement with an independent third party pursuant to which the Company pays a portion of the net revenue received from the customers referred to the Company by such third party. Prior to the Spin-off, the Company had an arrangement with Cash America pursuant to which the Company paid either a lead purchase fee or a portion of the net revenue received from the customers referred to the Company by Cash America. These referral fees were included in “Marketing” in the consolidated statements of income.
\nOperations and Technology Expenses
\nOperations and technology expenses include all expenses related to the direct operations and technology infrastructure related to loan underwriting and processing. This includes call center and operations personnel costs, software maintenance expense, underwriting data from third-party vendors, and telephony costs.
\nGeneral and Administrative Expenses
\nGeneral and Administrative expenses primarily include the Company’s corporate personnel costs, as well as legal, occupancy, and other related costs. In addition, general and administrative expenses include expense allocations for certain corporate service functions historically provided by Cash America, such as executive oversight, insurance and risk management, government relations, internal audit, treasury, licensing, and to a limited extent finance, accounting, tax, legal, human resources, compensation and benefits, compliance and support for certain information systems related to financial reporting. Cash America allocated these expenses to the Company based on the Company’s share of Cash America’s corporate services expenses incurred for the consolidated entity. Actual corporate services costs that may have been incurred if the Company had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. The Company believes that the expenses in these financial statements are reported on a basis that fairly represents the utilization of the services provided. These financial statements do not necessarily reflect the financial position or results of operations that would have existed if the Company had been operated as a stand-alone entity during the periods covered and may not be indicative of future results of operations and financial position. See Note 15 for additional information.
\nStock-Based Compensation
\nThe Company accounts for its stock-based employee compensation plans in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”). In accordance with ASC 718, the Company recognizes compensation expense over the remaining vesting periods for stock-based awards. During the periods prior to the Spin-off, certain employees received stock-based compensation in the form of restricted stock units from Cash America. These awards are reflected in stock-based compensation or as a net equity transaction with Cash America in the Company’s statement of stockholders’ equity. During the year ended December 31, 2012, certain employees received performance-based stock awards. For these awards, compensation expense was originally based on the number of shares that would have vested if the Company achieved the level of performance that management estimated was the most probable outcome at the grant date. Throughout the requisite service period, management monitored the probability of achievement of the performance condition and adjusted stock-based compensation expense if necessary. See Note 13.
\nIncome Taxes
\nThe provision for income taxes is based on income before income taxes as reported for financial statement purposes. Deferred income taxes are provided for in accordance with the assets and liability method of accounting for income taxes in order to recognize the tax effects of temporary differences between financial statement and income tax accounting.
\nIn the Company’s financial statements, income tax expense and deferred tax balances have been calculated on a separate tax return basis although prior to the Spin-off the Company’s operations were included as part of consolidated and unitary tax returns with Cash America and its affiliated companies. With the exception of certain entities outside of the United States, prior to the Spin-off, the Company settled its current tax balances with Cash America on a quarterly basis through an adjustment to its affiliate line of credit with Cash America.
\nThe Company accounts for uncertainty in income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 requires that a more-likely-than-not threshold be met before the benefit of a tax position may be recognized in the consolidated financial statements and prescribes how such benefit should be measured. It also provides guidance on recognition adjustment, classification, accrual of interest and penalties, accounting in interim periods, disclosure and transition.
\nThe Company performs an evaluation of the recoverability of its deferred tax assets on a quarterly basis. The Company establishes a valuation allowance if it is more likely than not (greater than 50 percent) that all or some portion of the deferred tax asset will not be realized. The Company analyzes several factors, including the nature and frequency of operating losses, the Company’s carryforward period for any losses, the reversal of future taxable temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning strategies to protect against the loss of deferred tax assets. See Note 10 for further discussion.
\nIt is the Company’s policy to classify interest and penalties on income tax liabilities as interest expense and general and administrative expense, respectively.
\nEarnings Per Share
\nBasic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the year. Restricted stock units issued under the Company’s stock-based employee compensation plans are included in diluted shares upon the granting of the awards even though the vesting of shares will occur over time.
\nThe following table sets forth the reconciliation of numerators and denominators of basic and diluted earnings per share computations for the years ended December 31, 2014, 2013 and 2012 (in thousands, except per share amounts):
\n| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Numerator: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Net income | \n\n
| \n\n $ | \n\n 111,671 | \n\n
| \n\n
| \n\n $ | \n\n 78,038 | \n\n
| \n\n
| \n\n $ | \n\n 58,872 | \n\n
| \n
| \n Denominator: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Total weighted average basic shares | \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n
| \n Shares applicable to stock-based compensation | \n\n
| \n\n
| \n\n 8 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Total weighted average diluted shares | \n\n
| \n\n
| \n\n 33,008 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n
| \n Net income – basic and diluted | \n\n
| \n\n $ | \n\n 3.38 | \n\n
| \n\n
| \n\n $ | \n\n 2.36 | \n\n
| \n\n
| \n\n $ | \n\n 1.78 | \n\n
| \n
\n
Stock options to purchase 1,425,196 shares were outstanding as of December 31, 2014, but were not included in the computation of diluted earnings per share because the options’ exercise price during the respective periods was greater than the average market price of the common shares and, therefore, the effect would have been antidilutive. There were no stock options outstanding as of December 31, 2013 and 2012.
\nAdopted Accounting Standards
\nIn November 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-17, Business Combinations (Topic 805) – Pushdown Accounting (“ASU 2014-17”). The primary purpose of ASU 2014-17 is to provide guidance on whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. The amendments should reduce diversity in the timing and content of footnote disclosure. ASU 2014-17 is effective after November 18, 2014. The Company adopted ASU 2014-17 on November 18, 2014, and the adoption did not have a material effect on its financial position or results of operations.
\nIn April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). The amendments in ASU 2014-08 change the criteria for reporting discontinued operations and enhance disclosures in this area. The new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income or loss attributable to a disposal of an individually significant component of an organization that does not qualify for discontinued operations presentation in the financial statements. The Company is required to adopt ASU 2014-08 prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014 and interim periods within those years. Early adoption is permitted. The Company adopted ASU 2014-08 on June 30, 2014, and the adoption did not have a material effect on its financial position or results of operations.
\nIn July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”), which provides guidance on the presentation of unrecognized tax benefits when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this update are effective for fiscal years (and interim periods within those years) beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company prospectively adopted ASU 2013-11 on January 1, 2014, and the adoption did not have a material effect on its financial condition or results of operations.
\nIn March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-05”), which applies to the release of the cumulative translation adjustment into net income when a parent either sells all or a part of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. ASU 2013-05 is effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The Company adopted ASU 2013-05 on January 1, 2014, and the adoption did not have a material effect on its financial condition or results of operations.
\nIn February 2013, the FASB issued ASU No. 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). ASU 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the amount the reporting entity agreed to pay plus additional amounts the reporting entity expects to pay on behalf of its co-obligors. The guidance further provides for disclosure of the nature and amount of the obligation. ASU 2013-04 is effective for interim and annual reporting periods beginning after December 15, 2013. The Company adopted ASU 2013-04 on January 1, 2014, and the adoption did not have a material effect on its financial condition or results of operations.
\nAccounting Standards to be Adopted in Future Periods
\nIn February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis (“ASU 2015-02”) which provides guidance for reporting entities that are required to evaluate whether they should consolidate certain legal entities. In accordance with ASU 2015-02, all legal entities are subject to reevaluation under the revised consolidation model. ASU 2015-02 is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. The Company is still assessing the potential impact of ASU 2015-02 on its financial position and results of operations.
\nIn August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which requires management to evaluate, in connection with financial statement preparation for each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued, and to provide related disclosures. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company does not expect adoption of this guidance will have a material effect on its consolidated financial statements.
\nIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is not permitted. The Company is still assessing the potential impact of ASU 2014-09 on its financial position and results of operations.
\n
4. Consumer Loans, Credit Quality Information and Allowances and Liabilities for Estimated Losses
\nConsumer loan fee revenue generated from the Company’s consumer loans for the years ended December 31, 2014, 2013 and 2012 was as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Interest and fees on short-term loans | \n\n
| \n\n $ | \n\n 257,169 | \n\n
| \n\n
| \n\n $ | \n\n 389,706 | \n\n
| \n\n
| \n\n $ | \n\n 459,835 | \n\n
| \n
| \n Interest and fees on line of credit accounts | \n\n
| \n\n
| \n\n 305,118 | \n\n
| \n\n
| \n\n
| \n\n 170,496 | \n\n
| \n\n
| \n\n
| \n\n 73,532 | \n\n
| \n
| \n Interest and fees on installment loans | \n\n
| \n\n
| \n\n 246,700 | \n\n
| \n\n
| \n\n
| \n\n 203,924 | \n\n
| \n\n
| \n\n
| \n\n 126,202 | \n\n
| \n
| \n Total consumer loan revenue | \n\n
| \n\n
| \n\n 808,987 | \n\n
| \n\n
| \n\n
| \n\n 764,126 | \n\n
| \n\n
| \n\n
| \n\n 659,569 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 850 | \n\n
| \n\n
| \n\n
| \n\n 1,197 | \n\n
| \n\n
| \n\n
| \n\n 1,359 | \n\n
| \n
| \n Total Revenue | \n\n
| \n\n $ | \n\n 809,837 | \n\n
| \n\n
| \n\n $ | \n\n 765,323 | \n\n
| \n\n
| \n\n $ | \n\n 660,928 | \n\n
| \n
\n
The components of Company-owned consumer loan portfolio receivables at December 31, 2014 and 2013 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, 2014 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Current loans | \n\n
| \n\n $ | \n\n 35,688 | \n\n
| \n\n
| \n\n $ | \n\n 110,519 | \n\n
| \n\n
| \n\n $ | \n\n 194,496 | \n\n
| \n\n
| \n\n $ | \n\n 340,703 | \n\n
| \n
| \n Delinquent loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Delinquent payment amounts(1) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 3,733 | \n\n
| \n\n
| \n\n
| \n\n 1,469 | \n\n
| \n\n
| \n\n
| \n\n 5,202 | \n\n
| \n
| \n Loans on non-accrual status | \n\n
| \n\n
| \n\n 20,610 | \n\n
| \n\n
| \n\n
| \n\n 4,428 | \n\n
| \n\n
| \n\n
| \n\n 17,616 | \n\n
| \n\n
| \n\n
| \n\n 42,654 | \n\n
| \n
| \n Total delinquent loans | \n\n
| \n\n
| \n\n 20,610 | \n\n
| \n\n
| \n\n
| \n\n 8,161 | \n\n
| \n\n
| \n\n
| \n\n 19,085 | \n\n
| \n\n
| \n\n
| \n\n 47,856 | \n\n
| \n
| \n Total consumer loans, gross | \n\n
| \n\n
| \n\n 56,298 | \n\n
| \n\n
| \n\n
| \n\n 118,680 | \n\n
| \n\n
| \n\n
| \n\n 213,581 | \n\n
| \n\n
| \n\n
| \n\n 388,559 | \n\n
| \n
| \n Less: Allowance for losses | \n\n
| \n\n
| \n\n (14,324 | \n\n ) | \n\n
| \n\n
| \n\n (19,749 | \n\n ) | \n\n
| \n\n
| \n\n (30,875 | \n\n ) | \n\n
| \n\n
| \n\n (64,948 | \n\n ) | \n
| \n Consumer loans, net | \n\n
| \n\n $ | \n\n 41,974 | \n\n
| \n\n
| \n\n $ | \n\n 98,931 | \n\n
| \n\n
| \n\n $ | \n\n 182,706 | \n\n
| \n\n
| \n\n $ | \n\n 323,611 | \n\n
| \n
\n
| \n
| \n\n
| \n\n As of December 31, 2013 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Current loans | \n\n
| \n\n $ | \n\n 57,368 | \n\n
| \n\n
| \n\n $ | \n\n 112,969 | \n\n
| \n\n
| \n\n $ | \n\n 160,585 | \n\n
| \n\n
| \n\n $ | \n\n 330,922 | \n\n
| \n
| \n Delinquent loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Delinquent payment amounts(1) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 4,146 | \n\n
| \n\n
| \n\n
| \n\n 1,724 | \n\n
| \n\n
| \n\n
| \n\n 5,870 | \n\n
| \n
| \n Loans on non-accrual status | \n\n
| \n\n
| \n\n 23,385 | \n\n
| \n\n
| \n\n
| \n\n 8,687 | \n\n
| \n\n
| \n\n
| \n\n 16,921 | \n\n
| \n\n
| \n\n
| \n\n 48,993 | \n\n
| \n
| \n Total delinquent loans | \n\n
| \n\n
| \n\n 23,385 | \n\n
| \n\n
| \n\n
| \n\n 12,833 | \n\n
| \n\n
| \n\n
| \n\n 18,645 | \n\n
| \n\n
| \n\n
| \n\n 54,863 | \n\n
| \n
| \n Total consumer loans, gross | \n\n
| \n\n
| \n\n 80,753 | \n\n
| \n\n
| \n\n
| \n\n 125,802 | \n\n
| \n\n
| \n\n
| \n\n 179,230 | \n\n
| \n\n
| \n\n
| \n\n 385,785 | \n\n
| \n
| \n Less: Allowance for losses | \n\n
| \n\n
| \n\n (20,466 | \n\n ) | \n\n
| \n\n
| \n\n (29,244 | \n\n ) | \n\n
| \n\n
| \n\n (32,608 | \n\n ) | \n\n
| \n\n
| \n\n (82,318 | \n\n ) | \n
| \n Consumer loans, net | \n\n
| \n\n $ | \n\n 60,287 | \n\n
| \n\n
| \n\n $ | \n\n 96,558 | \n\n
| \n\n
| \n\n $ | \n\n 146,622 | \n\n
| \n\n
| \n\n $ | \n\n 303,467 | \n\n
| \n
\n
| \n (1) | \n\n Represents the delinquent portion of installment loans and line of credit account balances for customers that have only missed one payment. See Note 3 “Significant Accounting Policies-Current and Delinquent Consumer Loans” for additional information. |
Changes in the allowance for losses for the Company-owned loans and the liability for estimated losses on the Company’s guarantees of third-party lender-owned loans through the CSO programs for the years ended December 31, 2014, 2013 and 2012 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, 2014 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Allowance for losses for Company-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 20,466 | \n\n
| \n\n
| \n\n $ | \n\n 29,244 | \n\n
| \n\n
| \n\n $ | \n\n 32,608 | \n\n
| \n\n
| \n\n $ | \n\n 82,318 | \n\n
| \n
| \n Cost of revenue | \n\n
| \n\n
| \n\n 70,382 | \n\n
| \n\n
| \n\n
| \n\n 92,461 | \n\n
| \n\n
| \n\n
| \n\n 104,415 | \n\n
| \n\n
| \n\n
| \n\n 267,258 | \n\n
| \n
| \n Charge-offs | \n\n
| \n\n
| \n\n (105,129 | \n\n ) | \n\n
| \n\n
| \n\n (119,428 | \n\n ) | \n\n
| \n\n
| \n\n (129,466 | \n\n ) | \n\n
| \n\n
| \n\n (354,023 | \n\n ) | \n
| \n Recoveries | \n\n
| \n\n
| \n\n 28,785 | \n\n
| \n\n
| \n\n
| \n\n 17,943 | \n\n
| \n\n
| \n\n
| \n\n 23,619 | \n\n
| \n\n
| \n\n
| \n\n 70,347 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n (180 | \n\n ) | \n\n
| \n\n
| \n\n (471 | \n\n ) | \n\n
| \n\n
| \n\n (301 | \n\n ) | \n\n
| \n\n
| \n\n (952 | \n\n ) | \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 14,324 | \n\n
| \n\n
| \n\n $ | \n\n 19,749 | \n\n
| \n\n
| \n\n $ | \n\n 30,875 | \n\n
| \n\n
| \n\n $ | \n\n 64,948 | \n\n
| \n
| \n Liability for third-party lender-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n
| \n (Decrease) increase in liability | \n\n
| \n\n
| \n\n (472 | \n\n ) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 1 | \n\n
| \n\n
| \n\n
| \n\n (471 | \n\n ) | \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 1,575 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 1 | \n\n
| \n\n
| \n\n $ | \n\n 1,576 | \n\n
| \n
\n
| \n
| \n\n
| \n\n Year Ended December 31, 2013 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Allowance for losses for Company-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 41,942 | \n\n
| \n\n
| \n\n $ | \n\n 12,565 | \n\n
| \n\n
| \n\n $ | \n\n 27,845 | \n\n
| \n\n
| \n\n $ | \n\n 82,352 | \n\n
| \n
| \n Cost of revenue | \n\n
| \n\n
| \n\n 136,534 | \n\n
| \n\n
| \n\n
| \n\n 72,308 | \n\n
| \n\n
| \n\n
| \n\n 106,787 | \n\n
| \n\n
| \n\n
| \n\n 315,629 | \n\n
| \n
| \n Charge-offs | \n\n
| \n\n
| \n\n (192,504 | \n\n ) | \n\n
| \n\n
| \n\n (63,001 | \n\n ) | \n\n
| \n\n
| \n\n (116,853 | \n\n ) | \n\n
| \n\n
| \n\n (372,358 | \n\n ) | \n
| \n Recoveries | \n\n
| \n\n
| \n\n 34,796 | \n\n
| \n\n
| \n\n
| \n\n 6,714 | \n\n
| \n\n
| \n\n
| \n\n 14,544 | \n\n
| \n\n
| \n\n
| \n\n 56,054 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n (302 | \n\n ) | \n\n
| \n\n
| \n\n 658 | \n\n
| \n\n
| \n\n
| \n\n 285 | \n\n
| \n\n
| \n\n
| \n\n 641 | \n\n
| \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 20,466 | \n\n
| \n\n
| \n\n $ | \n\n 29,244 | \n\n
| \n\n
| \n\n $ | \n\n 32,608 | \n\n
| \n\n
| \n\n $ | \n\n 82,318 | \n\n
| \n
| \n Liability for third-party lender-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 2,624 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,624 | \n\n
| \n
| \n Decrease in liability | \n\n
| \n\n
| \n\n (577 | \n\n ) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (577 | \n\n ) | \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n
\n
| \n
| \n\n
| \n\n Year Ended December 31, 2012 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Allowance for losses for Company-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 42,880 | \n\n
| \n\n
| \n\n $ | \n\n 3,723 | \n\n
| \n\n
| \n\n $ | \n\n 12,451 | \n\n
| \n\n
| \n\n $ | \n\n 59,054 | \n\n
| \n
| \n Cost of revenue | \n\n
| \n\n
| \n\n 176,701 | \n\n
| \n\n
| \n\n
| \n\n 36,251 | \n\n
| \n\n
| \n\n
| \n\n 75,182 | \n\n
| \n\n
| \n\n
| \n\n 288,134 | \n\n
| \n
| \n Charge-offs | \n\n
| \n\n
| \n\n (210,557 | \n\n ) | \n\n
| \n\n
| \n\n (31,399 | \n\n ) | \n\n
| \n\n
| \n\n (65,493 | \n\n ) | \n\n
| \n\n
| \n\n (307,449 | \n\n ) | \n
| \n Recoveries | \n\n
| \n\n
| \n\n 31,675 | \n\n
| \n\n
| \n\n
| \n\n 3,990 | \n\n
| \n\n
| \n\n
| \n\n 5,174 | \n\n
| \n\n
| \n\n
| \n\n 40,839 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n 1,243 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 531 | \n\n
| \n\n
| \n\n
| \n\n 1,774 | \n\n
| \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 41,942 | \n\n
| \n\n
| \n\n $ | \n\n 12,565 | \n\n
| \n\n
| \n\n $ | \n\n 27,845 | \n\n
| \n\n
| \n\n $ | \n\n 82,352 | \n\n
| \n
| \n Liability for third-party lender-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 2,284 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,284 | \n\n
| \n
| \n Increase in liability | \n\n
| \n\n
| \n\n 340 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 340 | \n\n
| \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 2,624 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,624 | \n\n
| \n
\n
In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term and installment loans and is required to purchase any defaulted loans it has guaranteed. The guarantee represents an obligation to purchase specific loans that go into default. As of December 31, 2014 and 2013, the amount of consumer loans guaranteed by the Company was $36.3 million and $41.4 million, respectively, representing amounts due under consumer loans originated by third-party lenders under the CSO programs. The estimated fair value of the liability for estimated losses on consumer loans guaranteed by the Company of $1.6 million and $2.0 million as of December 31, 2014 and 2013, respectively, is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
5. Property and Equipment
\nAs an online financial services provider, a significant amount of capital is invested in developing computer software and systems infrastructure.
\nMajor classifications of property and equipment at December 31, 2014 and 2013 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, 2014 | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n Cost | \n\n
| \n\n
| \n\n Accumulated Depreciation | \n\n
| \n\n
| \n\n Net | \n\n
| \n|||
| \n Computer Software | \n\n
| \n\n $ | \n\n 54,966 | \n\n
| \n\n
| \n\n $ | \n\n (32,117 | \n\n ) | \n\n
| \n\n $ | \n\n 22,849 | \n\n
| \n
| \n Furniture, fixtures and equipment | \n\n
| \n\n
| \n\n 26,690 | \n\n
| \n\n
| \n\n
| \n\n (19,245 | \n\n ) | \n\n
| \n\n
| \n\n 7,445 | \n\n
| \n
| \n Leasehold improvements | \n\n
| \n\n
| \n\n 14,587 | \n\n
| \n\n
| \n\n
| \n\n (10,896 | \n\n ) | \n\n
| \n\n
| \n\n 3,691 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 96,243 | \n\n
| \n\n
| \n\n $ | \n\n (62,258 | \n\n ) | \n\n
| \n\n $ | \n\n 33,985 | \n\n
| \n
\n
| \n
| \n\n
| \n\n As of December 31, 2013 | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n Cost | \n\n
| \n\n
| \n\n Accumulated Depreciation | \n\n
| \n\n
| \n\n Net | \n\n
| \n|||
| \n Computer Software | \n\n
| \n\n $ | \n\n 56,511 | \n\n
| \n\n
| \n\n $ | \n\n (35,014 | \n\n ) | \n\n
| \n\n $ | \n\n 21,497 | \n\n
| \n
| \n Furniture, fixtures and equipment | \n\n
| \n\n
| \n\n 25,077 | \n\n
| \n\n
| \n\n
| \n\n (14,034 | \n\n ) | \n\n
| \n\n
| \n\n 11,043 | \n\n
| \n
| \n Leasehold improvements | \n\n
| \n\n
| \n\n 14,287 | \n\n
| \n\n
| \n\n
| \n\n (7,422 | \n\n ) | \n\n
| \n\n
| \n\n 6,865 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 95,875 | \n\n
| \n\n
| \n\n $ | \n\n (56,470 | \n\n ) | \n\n
| \n\n $ | \n\n 39,405 | \n\n
| \n
\n
The Company capitalized internal software development costs of $8.6 million, $6.6 million and $8.1 million during 2014, 2013 and 2012, respectively.
\nThe Company recognized depreciation expense of $18.7 million, $17.0 million and $13.0 million during 2014, 2013 and 2012, respectively.
6. Goodwill and Other Intangible Assets
\nGoodwill is tested for impairment at least annually. See Note 3 for further discussion.
\nGoodwill
\nChanges in the carrying value of goodwill for the years ended December 31, 2014 and 2013 were as follows (dollars in thousands):
\n\n
| \n Balance as of January 1, 2013 | \n\n
| \n\n $ | \n\n 255,875 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n (6 | \n\n ) | \n
| \n Balance as of December 31, 2013 | \n\n
| \n\n $ | \n\n 255,869 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n (7 | \n\n ) | \n
| \n Balance as of December 31, 2014 | \n\n
| \n\n $ | \n\n 255,862 | \n\n
| \n
\n
Acquired Intangible Assets
\nAcquired intangible assets that are subject to amortization as of December 31, 2014 and 2013, were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, 2014 | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n Cost | \n\n
| \n\n
| \n\n Accumulated Amortization | \n\n
| \n\n
| \n\n Net | \n\n
| \n|||
| \n Customer Relationships | \n\n
| \n\n $ | \n\n 2,739 | \n\n
| \n\n
| \n\n $ | \n\n (2,739 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Lead provider relationships | \n\n
| \n\n
| \n\n 2,489 | \n\n
| \n\n
| \n\n
| \n\n (2,489 | \n\n ) | \n\n
| \n\n — | \n\n
| \n|
| \n Trademarks | \n\n
| \n\n
| \n\n 406 | \n\n
| \n\n
| \n\n
| \n\n (367 | \n\n ) | \n\n
| \n\n
| \n\n 39 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 5,634 | \n\n
| \n\n
| \n\n $ | \n\n (5,595 | \n\n ) | \n\n
| \n\n $ | \n\n 39 | \n\n
| \n
\n
\n
| \n
| \n\n
| \n\n As of December 31, 2013 | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n Cost | \n\n
| \n\n
| \n\n Accumulated Amortization | \n\n
| \n\n
| \n\n Net | \n\n
| \n|||
| \n Customer Relationships | \n\n
| \n\n $ | \n\n 2,743 | \n\n
| \n\n
| \n\n $ | \n\n (2,727 | \n\n ) | \n\n
| \n\n $ | \n\n 16 | \n\n
| \n
| \n Lead provider relationships | \n\n
| \n\n
| \n\n 2,489 | \n\n
| \n\n
| \n\n
| \n\n (2,489 | \n\n ) | \n\n
| \n\n — | \n\n
| \n|
| \n Trademarks | \n\n
| \n\n
| \n\n 372 | \n\n
| \n\n
| \n\n
| \n\n (343 | \n\n ) | \n\n
| \n\n
| \n\n 29 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 5,604 | \n\n
| \n\n
| \n\n $ | \n\n (5,559 | \n\n ) | \n\n
| \n\n $ | \n\n 45 | \n\n
| \n
\n
Non-competition agreements are amortized over the applicable terms of the contract. Customer and lead provider relationships are generally amortized over three to five years based on the pattern of economic benefits provided. Trademarks are generally amortized over three years on a straight-line basis.
\nAmortization
\nAmortization expense for acquired intangible assets was $45 thousand, $0.1 million and $0.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.
\nEstimated future amortization expense for the years ended December 31, is as follows (dollars in thousands):
\n\n
| \n YEAR | \n\n
| \n\n AMOUNT | \n\n
| \n|
| \n 2015 | \n\n
| \n\n $ | \n\n 16 | \n\n
| \n
| \n 2016 | \n\n
| \n\n
| \n\n 13 | \n\n
| \n
| \n 2017 | \n\n
| \n\n
| \n\n 10 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 39 | \n\n
| \n
7. Accounts Payable and Accrued Expenses
\nAccounts payable and accrued expenses at December 31, 2014 and 2013, were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n||
| \n Trade accounts payable | \n\n
| \n\n $ | \n\n 25,512 | \n\n
| \n\n
| \n\n $ | \n\n 18,660 | \n\n
| \n
| \n Accrued payroll and fringe benefits | \n\n
| \n\n
| \n\n 17,709 | \n\n
| \n\n
| \n\n
| \n\n 17,874 | \n\n
| \n
| \n Accrued interest payable | \n\n
| \n\n
| \n\n 4,063 | \n\n
| \n\n
| \n\n — | \n\n
| \n|
| \n Accrual for consumer loan payments rejected for non-sufficient funds | \n\n
| \n\n
| \n\n 3,650 | \n\n
| \n\n
| \n\n
| \n\n 4,971 | \n\n
| \n
| \n Deferred fees on third-party consumer loans | \n\n
| \n\n
| \n\n 3,630 | \n\n
| \n\n
| \n\n
| \n\n 4,573 | \n\n
| \n
| \n Liability for losses on third-party lender owned consumer loans | \n\n
| \n\n
| \n\n 1,576 | \n\n
| \n\n
| \n\n
| \n\n 2,047 | \n\n
| \n
| \n Other accrued liabilities | \n\n
| \n\n
| \n\n 1,137 | \n\n
| \n\n
| \n\n
| \n\n 1,451 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 57,277 | \n\n
| \n\n
| \n\n $ | \n\n 49,576 | \n\n
| \n
\n
8. Marketing Expenses
\nMarketing expenses for the years ended December 31, 2014, 2013 and 2012 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Advertising | \n\n
| \n\n $ | \n\n 74,999 | \n\n
| \n\n
| \n\n $ | \n\n 74,294 | \n\n
| \n\n
| \n\n $ | \n\n 50,776 | \n\n
| \n
| \n Customer procurement expense including lead purchase costs | \n\n
| \n\n
| \n\n 42,843 | \n\n
| \n\n
| \n\n
| \n\n 52,418 | \n\n
| \n\n
| \n\n
| \n\n 49,381 | \n\n
| \n
| \n Customer referral and revenue sharing expense | \n\n
| \n\n
| \n\n 10,020 | \n\n
| \n\n
| \n\n
| \n\n 8,624 | \n\n
| \n\n
| \n\n
| \n\n 8,653 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 127,862 | \n\n
| \n\n
| \n\n $ | \n\n 135,336 | \n\n
| \n\n
| \n\n $ | \n\n 108,810 | \n\n
| \n
\n
See Note 3 for further discussion.
\n
9. Long-term debt
\n$75.0 Million Revolving Credit Facility
\nOn May 14, 2014, the Company and its domestic subsidiaries as guarantors, entered into a credit agreement among the Company, the guarantors, Jefferies Finance, LLC as administrative agent and Jefferies Group, LLC as lender (the “Credit Agreement”). The Credit Agreement provides for an unsecured revolving credit facility of up to $75.0 million, including a multi-currency sub-facility that gives the Company the ability to borrow up to $25.0 million that may be specified in foreign currencies subject to the terms and conditions of the Credit Agreement. Interest on the amounts borrowed will be charged, at the Company’s option, at either the London Interbank Offered Rate (“LIBOR”) for one week or one-, two-, three- or six-month periods, as selected by the Company, plus a margin varying from 2.50% to 3.75% or at the agent’s base rate plus a margin varying from 1.50% to 2.75%. The margin for the borrowings under the Credit Agreement is dependent on the Company’s cash flow leverage ratios. The Company is also required to pay a fee on the unused portion of the line of credit ranging from 0.25% to 0.50% (0.375% as of December 31, 2014) based on the Company’s cash flow leverage ratios. The Credit Agreement will mature on June 30, 2017. There were no outstanding borrowings under the Credit Agreement as of December 31, 2014.
\nThe Credit Agreement also includes a sub-limit of up to $20.0 million for standby or commercial letters of credit that is guaranteed by the Company’s domestic subsidiaries. In the event that an amount is paid by the issuing bank under a letter of credit, it will be due and payable by the Company on demand. Pursuant to the terms of the Credit Agreement, the Company agrees to pay fees equal to the LIBOR margin per annum on the undrawn amount of each outstanding standby letter of credit plus a one-time commercial letter of credit fee of 0.20% of the face amount of each commercial letter of credit plus 0.25% per annum on the average daily amount of the total letter of credit exposure. No loans were outstanding under the Credit Agreement and the Company had outstanding letters of credit of $6.6 million thereunder as of December 31, 2014.
\nIn connection with the issuance of the Credit Agreement, the Company incurred debt issuance costs of approximately $1.6 million in 2014, which primarily consisted of underwriting fees and legal expenses. The unamortized balance of these costs as of December 31, 2014 is included in “Other assets” in the consolidated balance sheets. These costs are being amortized to interest expense over a period of 37 months, the term of the Credit Agreement.
\n$500.0 Million 9.75% Senior Unsecured Notes
\nOn May 30, 2014, the Company issued and sold $500.0 million in aggregate principal amount of 9.75% Senior Notes due 2021 (the “Senior Notes”). The Senior Notes bear interest at a rate of 9.75% annually on the principal amount payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2014. The Senior Notes were sold at a discount of the principal amount to yield 10.0% to maturity. The Senior Notes will mature on June 1, 2021. The Senior Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended, or the Securities Act, and outside the United States pursuant to Regulation S under the Securities Act.
\nThe Senior Notes are unsecured debt obligations of the Company, and are unconditionally guaranteed by all of the Company’s domestic subsidiaries, on a joint and several basis. Enova International, Inc., on a stand-alone unconsolidated basis, has no independent assets or operations. The assets and operations of the Company’s non-guarantor subsidiaries, individually and in the aggregate, are minor. There are no significant restrictions on the ability of the Company to receive funds from its subsidiaries through dividends, loans and advances otherwise.
\nThe Senior Notes are governed by an indenture (the “Senior Notes Indenture”), dated May 30, 2014, between the Company, the Company’s domestic subsidiaries, as guarantors, and the trustee. The Senior Notes Indenture contains certain covenants that, among other things, limit the Company’s, and certain of its subsidiaries, ability to incur additional debt, acquire or create new subsidiaries, create liens, engage in certain transactions with affiliates and consolidate or merge with or into other companies. The Senior Notes Indenture provides for customary events of default, including nonpayment and failure to comply with covenants or other agreements in the Senior Notes Indenture.
\nThe Senior Notes are redeemable at the Company’s option, in whole or in part, (i) at any time prior to June 1, 2017 at 100% of the aggregate principal amount of Senior Notes redeemed plus the applicable “make whole” redemption price specified in the Senior Notes Indenture, plus accrued and unpaid interest, if any, to the redemption date and (ii) at any time on or after June 1, 2017 at a premium specified in the Senior Notes Indenture that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. In addition, prior to June 1, 2017, at its option, the Company may redeem up to 35% of the aggregate principal amount of the Senior Notes at a redemption price equal to 109.75% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, with the proceeds of certain equity offerings as described in the Senior Notes Indenture. If a change of control occurs, as that term is defined in the Senior Notes Indenture, the holders of the Senior Notes will have the right, subject to certain conditions, to require the Company to repurchase their Senior Notes at a purchase price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, as of the date of repurchase. The Spin-off did not constitute a change of control under the Senior Notes Indenture. See Note 1 for additional information on the Spin-off.
\nAdditionally, on May 30, 2014, the Company entered into a registration rights agreement with Jefferies, LLC as the initial purchaser (the “Registration Rights Agreement”) of the Senior Notes, pursuant to which the Company agreed to use commercially reasonable efforts to cause a registration statement to be declared effective on or prior to the 360th day following the closing date relating to an exchange offer of the Senior Notes for identical new notes registered under the Securities Act. In certain circumstances, the Company may be required to file a shelf registration to cover resales of the Senior Notes. If the Company does not comply with certain covenants set forth in the Registration Rights Agreement, it must pay liquidated damages to holders of the Senior Notes. If the Company fails to satisfy any of its registration obligations, it may be required to pay the holders of the Senior Notes additional interest ranging from 0.25% to 0.50% per annum until the Company satisfies its registration obligations.
\nThe Company used all of the net proceeds of the Senior Notes offering, or $479.0 million, to repay all of its intercompany indebtedness due to Cash America, which was $361.4 million as of May 30, 2014, and the remaining net proceeds were used to pay a significant portion of $122.4 million in cash dividends paid to Cash America, of which $120.7 million was paid on May 30, 2014 and $1.7 million was paid on June 30, 2014.
\nAs of December 31, 2014, the carrying amount of the Senior Notes was $494.2 million, which included an unamortized discount of $5.8 million. The discount is being amortized to interest expense over a period of seven years, through the maturity date of June 1, 2021. The total interest expense recognized was $28.9 million for 2014, of which $0.4 million represented the non-cash amortization of the discount. In connection with the issuance of the Senior Notes, the Company incurred approximately $14.7 million for issuance costs, which primarily consisted of underwriting fees, legal and other professional expenses. These costs are being amortized to interest expense over seven years and are included in “Other assets” in the consolidated balance sheets.
\nPrior to issuing the Senior Notes, the Company depended on Cash America’s support for a significant portion of its financing requirements and had in place a $450 million affiliate revolving credit agreement related to amounts outstanding with Cash America (the “Affiliate Line of Credit”). Borrowings under the Affiliate Line of Credit bore interest at a fluctuating interest rate equal to the prevailing LIBOR rate per annum (based upon a one month interest period) plus 4.5%, or in certain circumstances equal to the prevailing alternate base rate per annum plus 2.0%. The alternate base rate was equal to the greater of (a) the U.S. prime rate, (b) the federal funds effective rate plus 0.5%, and (c) the sum of the one-month LIBOR plus 1.0%. Interest accruing on borrowings made under the revolving line of credit were payable to Cash America and were settled through an adjustment to its affiliate line of credit with Cash America on a monthly basis. At December 31, 2013, the Company had outstanding unsecured amounts payable under the Affiliate Line of Credit of $424.1 million.
\nWeighted-average interest rates on long-term debt were 8.11% and 4.72% during 2014 and 2013, respectively.
\nAs of December 31, 2014 and 2013, the Company was in compliance with all covenants and other requirements set forth in the prevailing long-term debt agreement(s).
\nAs of December 31, 2014, required principal payments under the terms of the long-term debt for each of the five years after December 31, 2014 are as follows (dollars in thousands):
\n\n
| \n YEAR | \n\n
| \n\n Amount | \n\n
| \n|
| \n 2015 | \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n 2016 | \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n 2017 | \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n 2018 | \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n 2019 | \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Thereafter | \n\n
| \n\n
| \n\n 500,000 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 500,000 | \n\n
| \n
10. Income Taxes
\nThe components of the Company’s deferred tax assets and liabilities as of December 31, 2014 and 2013 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n||
| \n Deferred tax assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Consumer loans, net | \n\n
| \n\n $ | \n\n 25,281 | \n\n
| \n\n
| \n\n $ | \n\n 31,649 | \n\n
| \n
| \n Compensation and benefits | \n\n
| \n\n
| \n\n 507 | \n\n
| \n\n
| \n\n
| \n\n 2,535 | \n\n
| \n
| \n Translation adjustments | \n\n
| \n\n
| \n\n 3,956 | \n\n
| \n\n
| \n\n
| \n\n 759 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 868 | \n\n
| \n\n
| \n\n
| \n\n 837 | \n\n
| \n
| \n Total deferred tax assets | \n\n
| \n\n $ | \n\n 30,612 | \n\n
| \n\n
| \n\n $ | \n\n 35,780 | \n\n
| \n
| \n Deferred tax liabilities: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Amortizable intangible assets | \n\n
| \n\n $ | \n\n 46,010 | \n\n
| \n\n
| \n\n $ | \n\n 39,334 | \n\n
| \n
| \n Property and equipment | \n\n
| \n\n
| \n\n 6,794 | \n\n
| \n\n
| \n\n
| \n\n 9,085 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 334 | \n\n
| \n\n
| \n\n
| \n\n 1,753 | \n\n
| \n
| \n Total deferred tax liabilities | \n\n
| \n\n $ | \n\n 53,138 | \n\n
| \n\n
| \n\n $ | \n\n 50,172 | \n\n
| \n
| \n Net deferred tax liabilities before valuation allowance | \n\n
| \n\n $ | \n\n (22,526 | \n\n ) | \n\n
| \n\n $ | \n\n (14,392 | \n\n ) | \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Net deferred tax liabilities | \n\n
| \n\n $ | \n\n (22,526 | \n\n ) | \n\n
| \n\n $ | \n\n (14,392 | \n\n ) | \n
| \n Balance sheet classification: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Current deferred tax assets | \n\n
| \n\n $ | \n\n 25,427 | \n\n
| \n\n
| \n\n $ | \n\n 30,914 | \n\n
| \n
| \n Non-current deferred tax liabilities | \n\n
| \n\n
| \n\n (47,953 | \n\n ) | \n\n
| \n\n
| \n\n (45,306 | \n\n ) | \n
| \n Net deferred tax liabilities | \n\n
| \n\n $ | \n\n (22,526 | \n\n ) | \n\n
| \n\n $ | \n\n (14,392 | \n\n ) | \n
\n
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 are shown below (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Income (loss) before income taxes: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 176,494 | \n\n
| \n\n
| \n\n $ | \n\n 119,974 | \n\n
| \n\n
| \n\n $ | \n\n 94,349 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 5 | \n\n
| \n\n
| \n\n
| \n\n 1,658 | \n\n
| \n\n
| \n\n
| \n\n (1,510 | \n\n ) | \n
| \n Income before income taxes | \n\n
| \n\n $ | \n\n 176,499 | \n\n
| \n\n
| \n\n $ | \n\n 121,632 | \n\n
| \n\n
| \n\n $ | \n\n 92,839 | \n\n
| \n
| \n Current provision: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Federal | \n\n
| \n\n $ | \n\n 51,144 | \n\n
| \n\n
| \n\n $ | \n\n 37,639 | \n\n
| \n\n
| \n\n $ | \n\n 35,327 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 46 | \n\n
| \n\n
| \n\n
| \n\n 56 | \n\n
| \n\n
| \n\n
| \n\n 17 | \n\n
| \n
| \n State and local | \n\n
| \n\n
| \n\n 1,753 | \n\n
| \n\n
| \n\n
| \n\n 682 | \n\n
| \n\n
| \n\n
| \n\n 1,049 | \n\n
| \n
| \n Total current provision for income taxes | \n\n
| \n\n $ | \n\n 52,943 | \n\n
| \n\n
| \n\n $ | \n\n 38,377 | \n\n
| \n\n
| \n\n $ | \n\n 36,393 | \n\n
| \n
| \n Deferred provision (benefit): | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Federal | \n\n
| \n\n $ | \n\n 11,363 | \n\n
| \n\n
| \n\n $ | \n\n 5,122 | \n\n
| \n\n
| \n\n $ | \n\n (2,399 | \n\n ) | \n
| \n International | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n State and local | \n\n
| \n\n
| \n\n 522 | \n\n
| \n\n
| \n\n
| \n\n 95 | \n\n
| \n\n
| \n\n
| \n\n (27 | \n\n ) | \n
| \n Total deferred provision (benefit) for income taxes | \n\n
| \n\n $ | \n\n 11,885 | \n\n
| \n\n
| \n\n $ | \n\n 5,217 | \n\n
| \n\n
| \n\n $ | \n\n (2,426 | \n\n ) | \n
| \n Total provision for income taxes | \n\n
| \n\n $ | \n\n 64,828 | \n\n
| \n\n
| \n\n $ | \n\n 43,594 | \n\n
| \n\n
| \n\n $ | \n\n 33,967 | \n\n
| \n
\n
The Company has no uncertain income tax positions as defined by ASC 740 for the years ended December 31, 2014, 2013 or 2012.
\nThe effective tax rate on income differs from the federal statutory rate of 35% for the following reasons (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Tax provision computed at the federal statutory income tax rate | \n\n
| \n\n $ | \n\n 61,781 | \n\n
| \n\n
| \n\n $ | \n\n 42,571 | \n\n
| \n\n
| \n\n $ | \n\n 32,494 | \n\n
| \n
| \n State and local income taxes, net of federal tax benefits | \n\n
| \n\n
| \n\n 1,329 | \n\n
| \n\n
| \n\n
| \n\n 505 | \n\n
| \n\n
| \n\n
| \n\n 664 | \n\n
| \n
| \n Tax effect of Regulatory Penalty (1) | \n\n
| \n\n
| \n\n 12 | \n\n
| \n\n
| \n\n
| \n\n 871 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (457 | \n\n ) | \n\n
| \n\n
| \n\n 470 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 1,706 | \n\n
| \n\n
| \n\n
| \n\n 104 | \n\n
| \n\n
| \n\n
| \n\n 339 | \n\n
| \n
| \n Total provision | \n\n
| \n\n $ | \n\n 64,828 | \n\n
| \n\n
| \n\n $ | \n\n 43,594 | \n\n
| \n\n
| \n\n $ | \n\n 33,967 | \n\n
| \n
| \n Effective tax rate | \n\n
| \n\n
| \n\n 36.7 | \n\n % | \n\n
| \n\n
| \n\n 35.8 | \n\n % | \n\n
| \n\n
| \n\n 36.6 | \n\n % | \n
\n
| \n (1) | \n\n Represents the tax effect of the $2.5 million CFPB penalty paid in 2013, which is nondeductible for tax purposes, in connection with the Regulatory Penalty. See Note 11 for further information. |
As of December 31, 2012, a valuation allowance was established against deferred tax assets for net operating losses, totaling $0.5 million, related to its Mexico subsidiary which the Company did not expect to realize. In 2013, the $0.5 million valuation allowance was decreased due to the recognition of taxable income by the Mexico subsidiary, causing full utilization of the net operating losses.
\nAs of December 31, 2014, the Company’s 2011 through 2013 tax years were open to examination by the Internal Revenue Service and major state taxing jurisdictions, and the 2012 through 2013 tax years of the Company’s Mexican subsidiary were open to examination by the Mexican taxing authorities.
11. Commitments and Contingencies
\nLeases
\nThe Company leases its headquarters in Chicago, Illinois and a call center facility in Gurnee, Illinois under operating leases with remaining terms ranging from two to five years with certain rights to extend for additional periods. On July 25, 2014, the Company entered into a new office lease agreement for approximately 160,000 square feet of office space for its headquarters with the intention of relocating in 2015. The lease term is 12 years, with options to renew for two five-year terms. Under the terms of the lease, the Company was provided $9.8 million in tenant improvement allowances and $8.5 million in rent abatements. For the new office lease agreement, the Company is responsible for paying its proportionate share of the increase in actual operating expenses and real estate taxes over the defined lease year. The operating expenses and real estate taxes are not included in the table below. Future minimum rentals due under non-cancelable leases as of December 31, 2014 are as follows for each of the years ending December 31 (dollars in thousands):
\n\n
| \n YEAR | \n\n
| \n\n AMOUNT | \n\n
| \n|
| \n 2015 | \n\n
| \n\n $ | \n\n 3,500 | \n\n
| \n
| \n 2016 | \n\n
| \n\n
| \n\n 3,336 | \n\n
| \n
| \n 2017 | \n\n
| \n\n
| \n\n 5,864 | \n\n
| \n
| \n 2018 | \n\n
| \n\n
| \n\n 5,023 | \n\n
| \n
| \n 2019 | \n\n
| \n\n
| \n\n 5,885 | \n\n
| \n
| \n Thereafter | \n\n
| \n\n
| \n\n 41,998 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 65,606 | \n\n
| \n
\n
Rent expense was $3.7 million, $2.7 million and $2.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.
\nGuarantees of Consumer Loans
\nIn connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term and installment loans the Company arranges for consumers on the third-party lenders’ behalf and is required to purchase any defaulted loans it has guaranteed. The guarantee represents an obligation to purchase specific loans that go into default, which generally occurs after one payment is missed. As of December 31, 2014 and 2013, the amount of consumer loans guaranteed by the Company was $36.3 million and $41.4 million, respectively, representing amounts due under consumer loans originated by third-party lenders under the CSO programs. The liability for estimated losses on consumer loans guaranteed by the Company of $1.6 million and $2.0 million, as of December 31, 2014 and 2013, respectively, is included in “Accounts payable and accrued expenses” in the accompanying consolidated balance sheets.
\nLitigation
\nOn March 8, 2013, Flemming Kristensen, on behalf of himself and others similarly situated, filed a purported class action lawsuit in the U.S. District Court of Nevada against the Company and other unaffiliated lenders and lead providers. The lawsuit alleges that the lead provider defendants sent unauthorized text messages to consumers on behalf of the Company and the other lender defendants in violation of the Telephone Consumer Protection Act. The complaint seeks class certification, statutory damages, an injunction against “wireless spam activities,” and attorneys’ fees and costs. The Company filed an answer to the complaint denying all liability. On March 26, 2014, the Court granted class certification. On October 24, 2014, the Company filed a motion for summary judgment, and the court has not yet ruled on this motion. On January 27, 2015, the plaintiff filed a motion for summary judgment against all of the defendants, and the court has not yet ruled on this motion. Neither the likelihood of an unfavorable ruling nor the ultimate liability, if any, with respect to this matter can be determined at this time, and the Company is currently unable to estimate a range of reasonably possible losses, as defined by ASC 450-20-20, Contingencies–Loss Contingencies–Glossary , for this litigation. The Company believes that the plaintiff’s claims in the complaint are without merit and intends to vigorously defend this lawsuit.
\nThe Company is also a defendant in certain routine litigation matters encountered in the ordinary course of its business. Certain of these matters may be covered to an extent by insurance. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.
\nConsumer Financial Protection Bureau (“CFPB”)
\nOn November 20, 2013, Cash America consented to the issuance of a Consent Order by the CFPB pursuant to which it agreed, without admitting or denying any of the facts or conclusions made by the CFPB from its 2012 review of Cash America and the Company, to pay a civil money penalty of $5.0 million, which is non-deductible for tax purposes. The Company and Cash America agreed to allocate $2.5 million of this penalty to the Company (the “Regulatory Penalty”).
\n
12. Employee Benefit Plans
\nPrior to July 1, 2012, substantially all employees of the Company were eligible to participate in the Cash America International, Inc. 401(k) Savings Plan. Effective on July 1, 2012, the Company established the Enova International, Inc. 401(k) Savings Plan (the “401(k) Plan”), which is open to substantially all employees of the Company and its subsidiaries. New employees are automatically enrolled in this plan unless they elect not to participate. Prior to July 1, 2012, the Cash America International, Inc. Nonqualified Savings Plan was available to certain members of Company management. The Enova International, Inc. Nonqualified Savings Plan (the “NQSP”) was established effective July 1, 2012 and is available in lieu of the Cash America International, Inc. Nonqualified Savings Plan to certain members of Company management. Participants may contribute up to 75% of their earnings to the 401(k) Plan subject to regulatory and other plan restrictions. NQSP participants may contribute up to 80% of their annual bonus and up to 50% of their other eligible compensation to the NQSP. The Company makes matching cash contributions of 50% of each participant’s contributions, based on participant contributions of up to 5% of compensation. Company contributions vest at the rate of 20% each year after one year of service; thus a participant is 100% vested after five years of service. The Company’s consolidated contributions to the 401(k) Plan and the NQSP were $1.0 million, $1.1 million and $1.0 million for the years ended December 31, 2014, 2013 and 2012, respectively.
\nEffective on January 1, 2012, the Company established the Enova International, Inc. Supplemental Executive Retirement Plan (“SERP”) in which certain officers and certain other employees of the Company participate. Under this defined contribution plan, the Company makes an annual supplemental cash contribution to the SERP based on the objectives of the plan as approved by the Company’s (or, previously, Cash America’s) Management Development and Compensation Committee of the Board of Directors. The Company recorded compensation expense of $0.2 million for SERP contributions for each of the years ended December 31, 2014, 2013 and 2012.
\nThe NQSP and the SERP are non-qualified deferred compensation plans. Benefits under the NQSP and the SERP are unfunded. As of December 31, 2014, 2013 and 2012, the Company held securities in rabbi trusts to pay benefits under these plans. These securities are classified as trading securities, and the unrealized gains and losses on these securities are netted with the costs of the plans in “General and administrative expenses” in the consolidated statements of income.
\nAmounts included in the consolidated balance sheets relating to the Nonqualified Savings Plan and the SERP were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n||
| \n Prepaid expenses and other assets | \n\n
| \n\n $ | \n\n 755 | \n\n
| \n\n
| \n\n $ | \n\n 559 | \n\n
| \n
| \n Accounts payable and accrued expenses | \n\n
| \n\n $ | \n\n 1,004 | \n\n
| \n\n
| \n\n $ | \n\n 723 | \n\n
| \n
\n
In 2014, 2013 and 2012, Cash America’s Board of Directors approved grants of Performance Units under the Cash America International, Inc. First Amended and Restated 2004 Long-Term Incentive Plan, as Amended (“Cash America LTIP”) that, upon vesting, were paid solely in cash to the Company’s officers and certain of its other employees. Generally, each grant of Performance Units vested over a three-year period, subject to continued employment with Cash America and the satisfaction of certain conditions related to an increase in the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) over the periods specified at the time of grant. The unit value of each award was based on a percentage of the increase in EBITDA over the prior year EBITDA. Payments for all Performance Units that vested were made within a reasonable period of time each year following certification of the applicable performance results by the Management Development and Compensation Committee of the Cash America Board of Directors. In addition, the Performance Unit award agreements are subject to a “clawback” provision that allows Cash America to recoup all or some of the payments made under certain circumstances if there is a material restatement of Cash America’s financial results. The agreements provided for immediate vesting and payment of awards that were outstanding and scheduled to vest within 12 calendar months following the date of a change in control of Cash America. Outstanding units granted in 2014, 2013, and 2012 were immediately vested with the Spin-off on November 13, 2014 and payments were made in December 2014. No awards were outstanding under this plan as of December 31, 2014.
\nThe Company recorded compensation expense of $10.3 million, $6.2 million and $6.4 million related to all Performance Unit awards for the years ended December 31, 2014, 2013 and 2012, respectively.
\n
13. Stock-Based Compensation
\nEnova Awards
\nOn October 16, 2014, the Management Development and Compensation Committee of the Company approved long-term incentive awards to be made under the Enova International, Inc. 2014 Long-Term Incentive Plan (the “Enova LTIP”) to its executive officers and certain other employees. The awards granted in connection with the distribution included (a) restricted stock units and (b) stock options to purchase Company stock, and these awards were granted on December 13, 2014, the 30th day following the Spin-off and will vest over a period of four years and three years, respectively. On October 16, 2014, the Company’s Management Development and Compensation Committee also approved an award of restricted stock units under the Enova LTIP with a value of $100,000 for each award to be made to each of the Company’s non-employee directors. These awards were granted on December 13, 2014, the 30th day following the distribution date, and will vest twelve months from the date of grant.
\nRestricted Stock Units
\nIn accordance with ASC 718, the grant date fair value of Restricted Stock Units (“RSUs”) is based on the Company’s closing stock price on the day before the grant date and is amortized to expense over the vesting periods. The agreements relating to awards provide that the vesting and payment of awards would be accelerated if there is a change in control of the Company.
\nThe following table summarizes the Enova restricted stock unit activity during 2014:
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n|||||
| \n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Fair Value at Date of Grant | \n\n
| \n||
| \n Outstanding at beginning of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Units granted | \n\n
| \n\n
| \n\n 549,707 | \n\n
| \n\n
| \n\n
| \n\n 23.04 | \n\n
| \n
| \n Shares issued | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Units forfeited | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Outstanding at end of year | \n\n
| \n\n
| \n\n 549,707 | \n\n
| \n\n
| \n\n $ | \n\n 23.04 | \n\n
| \n
| \n Units vested at end of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
Compensation expense related to these RSUs totaling $0.1 million ($89 thousand net of related taxes) was recognized for the year ended December 31, 2014. Total unrecognized compensation cost related to these RSUs at December 31, 2014 was $8.5 million, which will be recognized over a weighted average period of approximately 3.8 years. The outstanding RSUs had an aggregate intrinsic value of $12.2 million at December 31, 2014.
\nStock Options
\nStock options granted under the Enova LTIP become exercisable in equal increments on the first, second and third anniversaries of their date of grant, and expire on the 7th anniversary of their date of grant. Exercise prices of these stock options are equal to the closing stock price on the grant date. In accordance with ASC 718, compensation expense on stock options is based on the fair value of the stock options on the day before the grant date and is amortized to expense over the vesting periods. The Company estimated the fair value of the stock option grants using the Black-Scholes option-pricing model based on the following assumptions: risk-free interest rate of 1.4%, expected term (life) of options of 4.5 years, expected volatility of 40.2% and no expected dividends.
\nDetermining the fair value of stock-based awards at their respective grant dates requires considerable judgment, including estimating expected volatility and expected term (life). The Company based its expected volatility on the historical volatility of comparable public companies over the option’s expected term. The Company calculated its expected term based on the simplified method, which is the mid-point between the weighted-average graded-vesting term and the contractual term. The simplified method was chosen as a means to determine expected term as we have limited historical option exercise experience as a public company. The Company derived the risk-free rate from a weighted-average yield for the three-and five-year zero-coupon U.S. Treasury Strips. The Company estimates forfeitures at the grant date based on its historical forfeiture rate, which is based on activity of cash-based long-term incentive units granted and outstanding prior to the Spin-off, and will revise the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
\nThere were no stock options outstanding as of December 31, 2013 and 2012. A summary of the Company’s stock option activity for the year ended December 31, 2014 is as follows:
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n|||||
| \n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Exercise Price | \n\n
| \n||
| \n Outstanding at beginning of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Options granted | \n\n
| \n\n
| \n\n 1,425,196 | \n\n
| \n\n
| \n\n
| \n\n 23.04 | \n\n
| \n
| \n Shares issued | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Options forfeited | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Outstanding at end of year | \n\n
| \n\n
| \n\n 1,425,196 | \n\n
| \n\n
| \n\n $ | \n\n 23.04 | \n\n
| \n
| \n Options vested at end of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
The weighted average fair value of options granted in 2014 was $8.11. Compensation expense related to stock options totaling $0.2 million ($0.1 million net of related taxes) was recognized for the year ended December 31, 2014. Total unrecognized compensation cost related to RSUs at December 31, 2014 was $8.4 million, which will be recognized over a period of approximately 3.0 years. The outstanding stock options had no intrinsic value at December 31, 2014.
\nCash America Awards
\nIn 2013, Cash America’s Board of Directors approved a grant of RSUs that vested over a two year period to the Company’s Chief Executive Officer under the Cash America LTIP. In conjunction with the Spin-off on November 13, 2014, the vesting of this grant was accelerated, and each vested RSU entitled the holder to receive a share of common stock of Cash America as well as 0.915 shares of the Company’s common stock.
\nIn accordance with ASC 718, the grant date fair value of RSUs was based on Cash America’s closing stock price on the day before the grant date and was amortized to expense over the vesting periods.
\nThe following table summarizes the Cash America RSU activity during 2014, 2013 and 2012:
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||||||||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||||||||||||||
| \n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Fair Value at Date of Grant | \n\n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Fair Value at Date of Grant | \n\n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Fair Value at Date of Grant | \n\n
| \n||||||
| \n Outstanding at beginning of year | \n\n
| \n\n
| \n\n 14,260 | \n\n
| \n\n
| \n\n $ | \n\n 48.19 | \n\n
| \n\n
| \n\n
| \n\n 13,215 | \n\n
| \n\n
| \n\n $ | \n\n 39.66 | \n\n
| \n\n
| \n\n
| \n\n 16,667 | \n\n
| \n\n
| \n\n $ | \n\n 38.97 | \n\n
| \n
| \n Units granted | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 14,260 | \n\n
| \n\n
| \n\n
| \n\n 48.19 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Shares issued | \n\n
| \n\n
| \n\n (14,260 | \n\n ) | \n\n (1) | \n\n
| \n\n 48.19 | \n\n
| \n\n
| \n\n
| \n\n (2,333 | \n\n ) | \n\n
| \n\n
| \n\n 39.66 | \n\n
| \n\n
| \n\n
| \n\n (3,452 | \n\n ) | \n\n
| \n\n
| \n\n 36.34 | \n\n
| \n
| \n Units forfeited | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (10,882 | \n\n ) | \n\n
| \n\n
| \n\n 39.66 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Outstanding at end of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n
| \n\n 14,260 | \n\n
| \n\n
| \n\n $ | \n\n 48.19 | \n\n
| \n\n
| \n\n
| \n\n 13,215 | \n\n
| \n\n
| \n\n $ | \n\n 39.66 | \n\n
| \n
| \n Units vested at end of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
\n
| \n (1) | \n\n Amount does not include 13,048 shares of common stock of the Company that were delivered by Cash America to the Company’s Chief Executive Officer in connection with his RSUs that vested on November 13, 2014. In connection with the Spin-off, such RSU awards were payable by Cash America in both shares of Cash America common stock and Enova common stock. |
\n
Compensation expense related to Cash America RSUs totaling $0.4 million ($0.2 million net of related taxes), $0.2 million ($0.2 million net of related taxes) and $0.1 million ($92 thousand net of related taxes) was recognized for the years ended December 31, 2014, 2013 and 2012, respectively.
14. Derivative Instruments
\nThe Company periodically uses derivative instruments to manage risk from changes in market conditions that may affect the Company’s financial performance. The Company primarily uses derivative instruments to manage its primary market risks, which are interest rate risk and foreign currency exchange rate risk.
\nThe Company uses forward currency exchange contracts to minimize the effects of foreign currency risk in the United Kingdom and Australia. The forward currency exchange contracts are non-designated derivatives. Any gain or loss resulting from these contracts is recorded as income or loss and is included in “Foreign currency transaction loss” in the Company’s consolidated statements of income. The Company currently does not manage its exposure to risk from foreign currency exchange rate fluctuations through the use of forward currency exchange contracts in Canada or Brazil.
\nThe Company’s derivative instruments are presented in its financial statements on a net basis. The following table presents information related to the Company’s derivative instruments as of December 31, 2014 (dollars in thousands):
\nNon-designated derivatives:
\n\n
| \n
| \n\n
| \n\n As of December 31, 2014 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n Gross Amounts | \n\n
| \n\n
| \n\n Gross Amounts | \n\n
| \n\n
| \n\n Net Amounts of Assets | \n\n
| \n|||
| \n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n of Recognized | \n\n
| \n\n
| \n\n Offset in the | \n\n
| \n\n
| \n\n Presented in the | \n\n
| \n|||
| \n
| \n\n
| \n\n Notional | \n\n
| \n\n
| \n\n Financial | \n\n
| \n\n
| \n\n Consolidated | \n\n
| \n\n
| \n\n Consolidated Balance | \n\n
| \n||||
| \n Forward currency exchange contracts | \n\n
| \n\n Amount | \n\n
| \n\n
| \n\n Instruments | \n\n
| \n\n
| \n\n Balance Sheets(1) | \n\n
| \n\n
| \n\n Sheets(2) | \n\n
| \n||||
| \n Assets | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Liabilities | \n\n
| \n\n $ | \n\n 112,593 | \n\n
| \n\n
| \n\n $ | \n\n 213 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 213 | \n\n
| \n
\n
| \n (1) | \n\n As of December 31, 2014, the Company had no gross amounts of recognized derivative instruments that the Company makes an accounting policy election not to offset. In addition, there is no financial collateral related to the Company’s derivatives. The Company has no liabilities that are subject to an enforceable master netting agreement or similar arrangement. |
| \n (2) | \n\n Represents the fair value of forward currency contracts, which is recorded in “Prepaid expenses and other assets” in the consolidated balance sheets. |
Prior to June 2014, the Company participated in Cash America’s derivative and hedging programs, which are coordinated through a centralized treasury function; therefore, the assets and liabilities related to derivative instruments were not recorded in the Company’s financial statements, however, the gains and losses associated with Cash America’s foreign currency forward contracts that relate to the Company’s business were included as “Foreign currency transaction loss” in the consolidated statements of income. The notional amount recorded by Cash America as of December 31, 2013 was $81.5 million.
\nThe following table presents information on the effect of derivative instruments on the consolidated results of operations and AOCI for years ended December 31, 2014, 2013 and 2012 (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n Gains (Losses) | \n\n
| \n||||||||||||||
| \n
| \n\n
| \n\n Gains (Losses) | \n\n
| \n\n
| \n\n Gains (Losses) | \n\n
| \n\n
| \n\n Reclassified From | \n\n
| \n|||||||||||||||||||||||||||
| \n
| \n\n
| \n\n Recognized in Income | \n\n
| \n\n
| \n\n Recognized in AOCI | \n\n
| \n\n
| \n\n AOCI into Income | \n\n
| \n|||||||||||||||||||||||||||
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||||||||||||||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||||||||
| \n Non-designated derivatives: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Forward currency exchange contracts(1) | \n\n
| \n\n $ | \n\n 287 | \n\n
| \n\n
| \n\n $ | \n\n (1,813 | \n\n ) | \n\n
| \n\n $ | \n\n (4,794 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 287 | \n\n
| \n\n
| \n\n $ | \n\n (1,813 | \n\n ) | \n\n
| \n\n $ | \n\n (4,794 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
\n
| \n (1) | \n\n The gains (losses) on these derivatives substantially offset the (losses) gains on the hedged portion of the foreign intercompany balances. |
15. Related Party Transactions
\nPrior to the Spin-off, Cash America provided certain corporate service functions, such as executive oversight, insurance and risk management, government relations, internal audit, treasury, licensing, and to a limited extent finance, accounting, tax, legal, human resources, compensation and benefits, compliance and support for certain information systems related to financial reporting. The costs of such services were allocated to the Company based on the Company’s share of Cash America’s corporate services expenses incurred for the consolidated entity. Actual corporate services costs that may have been incurred if the Company had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. The Company believes that the expenses in these financial statements were reported on a basis that fairly represents the utilization of the services provided. These financial statements do not necessarily reflect the financial position or results of operations that would have existed if the Company had been operated as a stand-alone entity during the periods covered and may not be indicative of future results of operations and financial position. General and administrative expenses include allocations by Cash America of $9.1 million, $10.0 million and $10.6 million for the years ended December 31, 2014, 2013 and 2012, respectively.
\nThe Company also paid $46.0 million, $34.8 million and $33.6 million for the years ended December 31, 2014, 2013 and 2012, respectively, to Cash America for its share of income taxes as though the Company had been taxed separately from Cash America and had prepared separate tax returns.
\nIn conjunction with the Spin-off, the Company entered into a transition services agreement with Cash America. Under the agreement, Cash America provides support for certain information systems related to financial reporting and payment processing to us for a period of time following the Spin-off for a fee of $18 thousand per month. In addition, the Company will reimburse Cash America for all out-of-pocket costs and expenses it pays or incurs in connection with providing such services. The expiration date of the agreement varies by service provided but is generally no longer than 12 months from the separation date. Prior to the Spin-off, the Company paid Cash America compensation for loans made to or arranged for customers who were referred from Cash America. The Company paid $1.2 million for each of the years ended December 31, 2014, 2013 and 2012, pursuant to this arrangement. In addition, prior to the Spin-off, the Company administered the consumer loan underwriting model utilized by Cash America’s Retail Services Division in exchange for the reimbursement of the Company’s direct third-party costs incurred in providing the service. The Company received $0.6 million, $0.9 million and $1.5 million for the years ended December 31, 2014, 2013 and 2012, respectively, pursuant to this arrangement.
\nPrior to the issuance of the Senior Notes on May 30, 2014, all payments the Company owed Cash America, offset by any credits or fees Cash America owed the Company in connection with the transactions above, were made through the Affiliate Line of Credit agreement. See Note 9 for further discussion of this agreement. Since May 30, 2014, amounts due to Cash America have been settled a month in arrears. The balance due to Cash America of $0.4 million as of December 31, 2014 is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
\nThe Company and its subsidiaries participated jointly and severally with all subsidiaries of Cash America and guaranteed long-term debt of Cash America of $638.2 million at December 31, 2013. Under the provisions of Cash America’s debt agreements, the Company had liability in the event Cash America defaulted in its payment obligations or failed to comply with the covenants under the various debt agreements or upon the occurrence of specified events contained in the various debt agreements, including the event of bankruptcy, insolvency or reorganization of Cash America. The Company was released from liability under such guarantees in connection with the Spin-off. See Note 1 for additional information on the Spin-off.
16. Supplemental Disclosures of Cash Flow Information
\nThe following table sets forth certain cash and non-cash activities for the years ended December 31 (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Cash paid during the year for: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Interest | \n\n
| \n\n $ | \n\n 24,807 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Income taxes paid | \n\n
| \n\n
| \n\n 46,353 | \n\n
| \n\n
| \n\n
| \n\n 34,829 | \n\n
| \n\n
| \n\n
| \n\n 33,619 | \n\n
| \n
| \n Non-cash investing and financing activities: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Consumer loans renewed | \n\n
| \n\n $ | \n\n 290,956 | \n\n
| \n\n
| \n\n $ | \n\n 599,227 | \n\n
| \n\n
| \n\n $ | \n\n 620,097 | \n\n
| \n
| \n Affiliate interest expense | \n\n
| \n\n
| \n\n 7,629 | \n\n
| \n\n
| \n\n
| \n\n 19,788 | \n\n
| \n\n
| \n\n
| \n\n 20,996 | \n\n
| \n
17. Operating Segment Information
\nThe Company provides online financial services to alternative credit consumers in the United States, United Kingdom, Australia Canada, Brazil and China and has one reportable segment, which is composed of the Company’s domestic and international operations. The Company has aggregated all components of its business into a single reportable segment based on the similarities of the economic characteristics, the nature of the products and services, the nature of the production and distribution methods, the type of customer and the nature of the regulatory environment.
\nThe Company allocates certain corporate expenses (primarily general and administrative expenses and to a lesser extent, marketing and operations and technology) between the domestic and international components based on revenue. The following tables present information on the Company’s domestic and international operations as of and for the years ended December 31, 2014, 2013 and 2012 (dollars in thousands).
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Revenue | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 474,715 | \n\n
| \n\n
| \n\n $ | \n\n 395,549 | \n\n
| \n\n
| \n\n $ | \n\n 334,066 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 335,122 | \n\n
| \n\n
| \n\n
| \n\n 369,774 | \n\n
| \n\n
| \n\n
| \n\n 326,862 | \n\n
| \n
| \n Total revenue | \n\n
| \n\n $ | \n\n 809,837 | \n\n
| \n\n
| \n\n $ | \n\n 765,323 | \n\n
| \n\n
| \n\n $ | \n\n 660,928 | \n\n
| \n
| \n Income from operations | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 111,869 | \n\n
| \n\n
| \n\n $ | \n\n 73,858 | \n\n
| \n\n
| \n\n $ | \n\n 55,011 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 103,139 | \n\n
| \n\n
| \n\n
| \n\n 68,738 | \n\n
| \n\n
| \n\n
| \n\n 59,166 | \n\n
| \n
| \n Total income from operations | \n\n
| \n\n $ | \n\n 215,008 | \n\n
| \n\n
| \n\n $ | \n\n 142,596 | \n\n
| \n\n
| \n\n $ | \n\n 114,177 | \n\n
| \n
| \n Depreciation and amortization | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 16,284 | \n\n
| \n\n
| \n\n $ | \n\n 14,536 | \n\n
| \n\n
| \n\n $ | \n\n 11,988 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 2,448 | \n\n
| \n\n
| \n\n
| \n\n 2,607 | \n\n
| \n\n
| \n\n
| \n\n 1,284 | \n\n
| \n
| \n Total depreciation and amortization | \n\n
| \n\n $ | \n\n 18,732 | \n\n
| \n\n
| \n\n $ | \n\n 17,143 | \n\n
| \n\n
| \n\n $ | \n\n 13,272 | \n\n
| \n
| \n Expenditures for property and equipment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 12,414 | \n\n
| \n\n
| \n\n $ | \n\n 12,527 | \n\n
| \n\n
| \n\n $ | \n\n 15,628 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 870 | \n\n
| \n\n
| \n\n
| \n\n 2,345 | \n\n
| \n\n
| \n\n
| \n\n 2,244 | \n\n
| \n
| \n Total expenditures for property and equipment | \n\n
| \n\n $ | \n\n 13,284 | \n\n
| \n\n
| \n\n $ | \n\n 14,872 | \n\n
| \n\n
| \n\n $ | \n\n 17,872 | \n\n
| \n
\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n||
| \n Property and equipment, net | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 29,274 | \n\n
| \n\n
| \n\n $ | \n\n 34,091 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 4,711 | \n\n
| \n\n
| \n\n
| \n\n 5,314 | \n\n
| \n
| \n Total property and equipment, net | \n\n
| \n\n $ | \n\n 33,985 | \n\n
| \n\n
| \n\n $ | \n\n 39,405 | \n\n
| \n
| \n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Assets | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 595,180 | \n\n
| \n\n
| \n\n $ | \n\n 475,050 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 165,017 | \n\n
| \n\n
| \n\n
| \n\n 217,102 | \n\n
| \n
| \n Total assets | \n\n
| \n\n $ | \n\n 760,197 | \n\n
| \n\n
| \n\n $ | \n\n 692,152 | \n\n
| \n
\n
Geographic Information
\nThe following table presents the Company’s revenue by geographic region for the years ended December 31, 2014, 2013 and 2012 (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Revenue | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n United States | \n\n
| \n\n $ | \n\n 474,715 | \n\n
| \n\n
| \n\n $ | \n\n 395,549 | \n\n
| \n\n
| \n\n $ | \n\n 334,066 | \n\n
| \n
| \n United Kingdom | \n\n
| \n\n
| \n\n 325,014 | \n\n
| \n\n
| \n\n
| \n\n 360,186 | \n\n
| \n\n
| \n\n
| \n\n 308,415 | \n\n
| \n
| \n Other international countries | \n\n
| \n\n
| \n\n 10,108 | \n\n
| \n\n
| \n\n
| \n\n 9,588 | \n\n
| \n\n
| \n\n
| \n\n 18,447 | \n\n
| \n
| \n Total revenue | \n\n
| \n\n $ | \n\n 809,837 | \n\n
| \n\n
| \n\n $ | \n\n 765,323 | \n\n
| \n\n
| \n\n $ | \n\n 660,928 | \n\n
| \n
\n
The Company’s long-lived assets, which consist of the Company’s property and equipment, were $34.0 million and $39.4 million at December 31, 2014 and 2013, respectively. The operations for the Company’s domestic and international businesses are primarily located within the United States, and the value of any long-lived assets located outside of the United States is immaterial.
18. Fair Value Measurements
\nRecurring Fair Value Measurements
\nIn accordance with ASC 820, certain of the Company’s assets and liabilities, which are carried at fair value, are classified in one of the following three categories:
\nLevel 1: Quoted market prices in active markets for identical assets or liabilities.
\nLevel 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
\nLevel 3: Unobservable inputs that are not corroborated by market data.
\nThe Company’s financial assets that are measured at fair value on a recurring basis as of December 31, 2014 and 2013 are as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n\n
| \n\n Fair Value Measurements Using | \n\n
| \n||||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n Level 1 | \n\n
| \n\n
| \n\n Level 2 | \n\n
| \n\n
| \n\n Level 3 | \n\n
| \n||||
| \n Financial assets (liabilities) | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Forward currency exchange contracts | \n\n
| \n\n $ | \n\n (213 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n (213 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Nonqualified savings plan assets(1) | \n\n
| \n\n
| \n\n 755 | \n\n
| \n\n
| \n\n
| \n\n 755 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 542 | \n\n
| \n\n
| \n\n $ | \n\n 755 | \n\n
| \n\n
| \n\n $ | \n\n (213 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n
\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n\n
| \n\n Fair Value Measurements Using | \n\n
| \n||||||||||
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n Level 1 | \n\n
| \n\n
| \n\n Level 2 | \n\n
| \n\n
| \n\n Level 3 | \n\n
| \n||||
| \n Financial assets (liabilities) | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Nonqualified savings plan assets(1) | \n\n
| \n\n $ | \n\n 559 | \n\n
| \n\n
| \n\n $ | \n\n 559 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 559 | \n\n
| \n\n
| \n\n $ | \n\n 559 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
\n
| \n (1) | \n\n The non-qualified savings plan assets have an offsetting liability of equal amount, which is included in “Accounts payable and accrued expenses” in the Company’s consolidated balance sheets. |
The Company measures the fair value of its forward currency exchange contracts under Level 2 inputs as defined by ASC 820. For these forward currency exchange contracts, current market rates are used to determine fair value. The significant inputs used in these models are derived from observable market rates. The fair value of the nonqualified savings plan assets is measured under a Level 1 input. These assets are publicly traded equity securities for which market prices are readily observable. During the years ended December 31, 2014 and 2013, there were no transfers of assets in or out of Level 1 fair value measurements. Prior to June 2014 the Company participated in Cash America’s derivative and hedging programs, which are coordinated through a centralized treasury function; therefore, the assets and liabilities related to derivative instruments were not recorded in the Company’s financial statements; however, the gains and losses associated with Cash America’s foreign currency forward contracts that relate to the Company’s business are included as “Foreign currency transaction loss” in the consolidated statements of income.
\nFair Value Measurements on a Non-Recurring Basis
\nThe Company measures non-financial assets and liabilities such as property and equipment and intangible assets at fair value on a nonrecurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired. At December 31, 2014 and 2013, there were no assets or liabilities recorded at fair value on a nonrecurring basis.
\nFinancial Assets and Liabilities Not Measured at Fair Value
\nThe Company’s financial assets and liabilities as of December 31, 2014 and 2013 that are not measured at fair value in the consolidated balance sheets are as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n\n
| \n\n Fair Value Measurements Using | \n\n
| \n||||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n Level 1 | \n\n
| \n\n
| \n\n Level 2 | \n\n
| \n\n
| \n\n Level 3 | \n\n
| \n||||
| \n Financial assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Cash and cash equivalents | \n\n
| \n\n $ | \n\n 75,106 | \n\n
| \n\n
| \n\n $ | \n\n 75,106 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Short-term loans and line of credit accounts, net (1) | \n\n
| \n\n
| \n\n 140,905 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 140,905 | \n\n
| \n
| \n Installment loans, net (1) | \n\n
| \n\n
| \n\n 182,706 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 182,706 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 398,717 | \n\n
| \n\n
| \n\n $ | \n\n 75,106 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 323,611 | \n\n
| \n
| \n Financial liabilities: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Liability for estimated losses on consumer loans guaranteed by the Company | \n\n
| \n\n $ | \n\n 1,576 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 1,576 | \n\n
| \n
| \n Senior Notes | \n\n
| \n\n
| \n\n 494,181 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 491,250 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 495,757 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 491,250 | \n\n
| \n\n
| \n\n $ | \n\n 1,576 | \n\n
| \n
\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n\n
| \n\n Fair Value Measurements Using | \n\n
| \n||||||||||
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n Level 1 | \n\n
| \n\n
| \n\n Level 2 | \n\n
| \n\n
| \n\n Level 3 | \n\n
| \n||||
| \n Financial assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Cash and cash equivalents | \n\n
| \n\n $ | \n\n 47,480 | \n\n
| \n\n
| \n\n $ | \n\n 47,480 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Short-term loans and line of credit accounts, net (1) | \n\n
| \n\n
| \n\n 156,845 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 156,845 | \n\n
| \n
| \n Installment loans, net (1) | \n\n
| \n\n
| \n\n 146,622 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 146,622 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 350,947 | \n\n
| \n\n
| \n\n $ | \n\n 47,480 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 303,467 | \n\n
| \n
| \n Financial liabilities: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Liability for estimated losses on consumer loans guaranteed by the Company | \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n
| \n Affiliate Line of Credit | \n\n
| \n\n
| \n\n 424,133 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 429,978 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 426,180 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 429,978 | \n\n
| \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n
\n
| \n (1) | \n\n Short-term loans, line of credit accounts and installment loans are included in “Consumer loans, net” in the consolidated balance sheets. |
Cash and cash equivalents bear interest at market rates and have maturities of less than 90 days.
\nShort-term loans, line of credit accounts and installment loans are carried in the consolidated balance sheet net of the allowance for estimated loan losses, which is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value approximates the fair value. Short-term loans and line of credit accounts have relatively short maturity periods that are generally 12 months or less. The fair value of installment loans is estimated using a discounted cash flow analysis, which considers interest rates offered for loans with similar terms to borrowers of similar credit quality. The carrying values of the Company’s installment loans approximate the fair value of these loans. Unsecured installment loans typically have terms between two and 12 months, but may have available terms up to 60 months.
\nIn connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term consumer and installment loans and is required to purchase any defaulted loans it has guaranteed. The estimated fair value of the liability for estimated losses on consumer loans guaranteed by the Company was $1.6 million and $2.0 million as of December 31, 2014 and 2013, respectively. The Company measures the fair value of its liability for third-party lender-owned consumer loans under Level 3 inputs. The fair value of these liabilities is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value of these liabilities approximates the fair value.
\nThe Company measures the fair value of its long-term debt using Level 2 inputs. The fair value of the Company’s Senior Notes is estimated based on quoted prices in markets that are not active. As of December 31, 2014, the Company’s Senior Notes had a lower fair value than the carrying value based on the price of the last trade of the Senior Notes. As of December 31, 2013 the Company’s Affiliate Line of Credit had a higher fair market value than the carrying value due to the difference in yield when compared to similar types of credit.
19. Quarterly Financial Data (Unaudited)
\nThe Company’s operations are subject to seasonal fluctuations. Demand has historically been highest in the third and fourth quarters of each year, corresponding to the holiday season, and lowest in the first quarter of each year, corresponding to customers’ receipt of income tax refunds in the United States. Typically, the Company’s cost of revenue, which represents its loan loss provision, is lowest as a percentage of revenue in the first quarter of each year. This trend was not evident in 2014 as a result of regulatory changes in the United Kingdom that led to a decline in lending in that market. The following is a summary of the quarterly results of operations for the years ended December 31, 2014 and 2013 (in thousands, except per share data):
\n\n
| \n
| \n\n
| \n\n First | \n\n
| \n\n
| \n\n Second | \n\n
| \n\n
| \n\n Third | \n\n
| \n\n
| \n\n Fourth | \n\n
| \n||||
| \n
| \n\n
| \n\n Quarter | \n\n
| \n\n
| \n\n Quarter | \n\n
| \n\n
| \n\n Quarter | \n\n
| \n\n
| \n\n Quarter | \n\n
| \n||||
| \n 2014 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Total Revenue | \n\n
| \n\n $ | \n\n 208,465 | \n\n
| \n\n
| \n\n $ | \n\n 201,482 | \n\n
| \n\n
| \n\n $ | \n\n 205,168 | \n\n
| \n\n
| \n\n $ | \n\n 194,722 | \n\n
| \n
| \n Cost of Revenue | \n\n
| \n\n
| \n\n 66,436 | \n\n
| \n\n
| \n\n
| \n\n 66,840 | \n\n
| \n\n
| \n\n
| \n\n 72,919 | \n\n
| \n\n
| \n\n
| \n\n 60,592 | \n\n
| \n
| \n Gross Profit | \n\n
| \n\n $ | \n\n 142,029 | \n\n
| \n\n
| \n\n $ | \n\n 134,642 | \n\n
| \n\n
| \n\n $ | \n\n 132,249 | \n\n
| \n\n
| \n\n $ | \n\n 134,130 | \n\n
| \n
| \n Net Income | \n\n
| \n\n $ | \n\n 40,055 | \n\n
| \n\n
| \n\n $ | \n\n 30,629 | \n\n
| \n\n
| \n\n $ | \n\n 18,485 | \n\n
| \n\n
| \n\n $ | \n\n 22,502 | \n\n
| \n
| \n Diluted earnings per share (1) | \n\n
| \n\n $ | \n\n 1.21 | \n\n
| \n\n
| \n\n $ | \n\n 0.93 | \n\n
| \n\n
| \n\n $ | \n\n 0.56 | \n\n
| \n\n
| \n\n $ | \n\n 0.68 | \n\n
| \n
| \n Diluted weighted average common shares (2) | \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,031 | \n\n
| \n
| \n 2013 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Total Revenue | \n\n
| \n\n $ | \n\n 182,312 | \n\n
| \n\n
| \n\n $ | \n\n 176,143 | \n\n
| \n\n
| \n\n $ | \n\n 198,098 | \n\n
| \n\n
| \n\n $ | \n\n 208,770 | \n\n
| \n
| \n Cost of Revenue | \n\n
| \n\n
| \n\n 67,998 | \n\n
| \n\n
| \n\n
| \n\n 70,160 | \n\n
| \n\n
| \n\n
| \n\n 90,389 | \n\n
| \n\n
| \n\n
| \n\n 86,505 | \n\n
| \n
| \n Gross Profit | \n\n
| \n\n $ | \n\n 114,314 | \n\n
| \n\n
| \n\n $ | \n\n 105,983 | \n\n
| \n\n
| \n\n $ | \n\n 107,709 | \n\n
| \n\n
| \n\n $ | \n\n 122,265 | \n\n
| \n
| \n Net Income | \n\n
| \n\n $ | \n\n 22,808 | \n\n
| \n\n
| \n\n $ | \n\n 18,428 | \n\n
| \n\n
| \n\n $ | \n\n 17,088 | \n\n
| \n\n
| \n\n $ | \n\n 19,714 | \n\n
| \n
| \n Diluted earnings per share (1) | \n\n
| \n\n $ | \n\n 0.69 | \n\n
| \n\n
| \n\n $ | \n\n 0.56 | \n\n
| \n\n
| \n\n $ | \n\n 0.52 | \n\n
| \n\n
| \n\n $ | \n\n 0.60 | \n\n
| \n
| \n Diluted weighted average common shares (2) | \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n
\n
| \n (1) | \n\n The sum of the quarterly earnings per share amounts may not total to each full year amount presented in the Company’s financial statements because these computations are made independently for each quarter and for the full year and take into account the weighted average number of common shares outstanding for each period. |
| \n (2) | \n\n See Note 3 for Basis of Presentation. |
20. Subsequent Events
\nSubsequent events have been reviewed through the date these financial statements were available to be issued.
SCHEDULE II
\nENOVA INTERNATIONAL, INC. AND SUBSIDIARIES
\nVALUATION AND QUALIFYING ACCOUNTS
\nFor the Three Years Ended December 31, 2014
\n(dollars in thousands)
\n\n
| \n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n Additions | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||||
| \n Description | \n\n
| \n\n Balance at Beginning of Period | \n\n
| \n\n
| \n\n Charged to Expense | \n\n
| \n\n
| \n\n Charged to Other | \n\n
| \n\n
| \n\n Deductions | \n\n
| \n\n
| \n\n Balance at End of Period | \n\n
| \n|||||
| \n Tax valuation allowance | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Year Ended | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n December 31, 2014 | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n December 31, 2013 | \n\n
| \n\n $ | \n\n 457 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n (457 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n December 31, 2012 | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 470 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n (13 | \n\n ) | \n\n
| \n\n $ | \n\n 457 | \n\n
| \n
Basis of Presentation
\nOn September 7, 2011, Cash America formed a new company, Enova International, Inc. On September 13, 2011, Cash America contributed to the Company all of the stock of its wholly-owned subsidiary, Enova Online Services, Inc., in exchange for 33 million shares of the Company’s common stock.
\nThe consolidated financial statements of the Company reflect the historical results of operations and cash flows of the Company during each respective period. The financial statements include goodwill and intangible assets arising from businesses previously acquired. Prior to the Spin-off, the financial statements also included the allocation of certain assets and liabilities that were historically held at the Cash America corporate level but which were specifically identifiable or allocable to the Company. Certain transactions with Cash America, such as stock-based compensation and foreign currency transactions, were considered to be effectively settled as net equity transactions with parent in “Retained earnings” in the consolidated balance sheets at the time the transaction was recorded. Prior to May 30, 2014, all intercompany transactions between the Company and Cash America were considered to be effectively settled in the financial statements at the time the transaction is recorded. The net effect of the settlement of these transactions was primarily reflected as a change in “Long-term debt” in the consolidated balance sheets. In addition, the historical financial statements include allocations of costs relating to certain functions historically provided by Cash America, including corporate services such as executive oversight, insurance and risk management, government relations, internal audit, treasury, licensing, and to a limited extent finance, accounting, tax, legal, human resources, compensation and benefits, compliance and support for certain information systems related to financial reporting. The expense allocations have been determined on a basis that Cash America and the Company consider to be reasonable reflections of the utilization of services provided by Cash America. Also see Note 15 for additional information on the Company’s relationship with Cash America. The financial information included herein may not be indicative of the consolidated financial position, operating results, changes in stockholders’ equity and cash flows of the Company in the future, or if the Company had been a separate company during the periods presented.
Use of Estimates
\nThe preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for losses on consumer loans, goodwill, long-lived and intangible assets, income taxes, contingencies and litigation. Management bases its estimates on historical experience, empirical data and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.
Foreign Currency Translations
\nThe functional currencies for the Company’s subsidiaries that serve residents of the United Kingdom, Australia, Canada and Brazil are the British pound, the Australian dollar, the Canadian dollar and the Brazilian real, respectively. The assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rates in effect at each balance sheet date, and the resulting adjustments are recorded in “Accumulated other comprehensive income (loss)” (“AOCI”) as a separate component of stockholders’ equity. Revenue and expenses are translated at the monthly average exchange rates occurring during each period.
Cash and Cash Equivalents
\nThe Company considers deposits in banks and short-term investments with original maturities of 90 days or less as cash and cash equivalents.
\nIn 2014 the Company deposited $7.9 million in a deposit account with a third-party service provider as a security deposit. For an extended period of time the Company is restricted from drawing on these funds. This deposit has been included in “Other assets” in the consolidated balance sheets and reflected as “Restricted cash deposit” in the consolidated statement of cash flows.
Revenue Recognition
\nThe Company recognizes consumer loan fees as revenue for each of the loan products it offers. “Revenue” in the consolidated statements of income include: interest income, finance charges, fees for services provided through the CSO programs (“CSO fees”), service charges, draw fees, minimum fees, late fees, nonsufficient funds fees and any other fees or charges permitted by applicable laws and pursuant to the agreement with the borrower. For short-term loans that the Company offers, interest and finance charges are recognized on an effective yield basis over the term of the loan, and fees are recognized when assessed to the customer. CSO fees are recognized on an effective yield basis over the term of the loan. For line of credit accounts, interest is recognized during the period based upon the balance outstanding and the contractual interest rate, and fees are recognized when assessed to the customer. For installment loans, revenue is recognized on an effective yield basis over the term of the loan and fees are recognized when assessed to the customer. Unpaid and accrued interest and fees are included in “Consumer loans, net” in the consolidated balance sheets.
Current and Delinquent Consumer Loans
\nThe Company classifies its consumer loans as either current or delinquent. Short-term loans are considered delinquent when payment of an amount due is not made as of the due date. If a line of credit account or installment loan customer misses one payment, that payment is considered delinquent and the balance of the loan is considered current. The Company does not accrue interest on the delinquent payment portion of the loan but does continue to accrue interest on the remaining portion of the loan. If a line of credit account or installment loan customer does not make two consecutive payments, the entire account or loan is classified as delinquent. The Company allows for normal payment processing time before considering a loan delinquent but does not provide for any additional grace period.
\nThe Company generally does not accrue interest on delinquent consumer loans and does not resume accrual of interest on a delinquent loan unless it is returned to current status. In addition, delinquent consumer loans generally may not be renewed, and if, during its attempt to collect on a delinquent consumer loan, the Company allows additional time for payment through a payment plan or a promise to pay, it is still considered delinquent. All payments received are first applied against accrued but unpaid interest and fees and then against the principal balance of the loan.
Allowance and Liability for Estimated Losses on Consumer Loans
\nThe Company monitors the performance of its consumer loan portfolio and maintains either an allowance or liability for estimated losses on consumer loans (including fees and interest) at a level estimated to be adequate to absorb credit losses inherent in the portfolio. The allowance for losses on the Company’s owned consumer loans reduces the outstanding loan balance in the consolidated balance sheets. The liability for estimated losses related to loans guaranteed under the CSO programs is initially recorded at fair value and is included in “Accounts payable and accrued expenses” in the consolidated balance sheets.
\nIn determining the allowance or liability for estimated losses on consumer loans, the Company applies a documented systematic methodology. In calculating the allowance or liability for loan losses, outstanding loans are divided into discrete groups of short-term loans, line of credit accounts and installment loans and are analyzed as current or delinquent. Increases in either the allowance or the liability, net of charge-offs and recoveries, are recorded as a “Cost of revenue” in the consolidated statements of income.
\nThe allowance or liability for short-term loans classified as current is based on historical loss rates adjusted for recent default trends for current loans. For delinquent short-term loans, the allowance or liability is based on a six-month rolling average of loss rates by stage of collection. For line of credit accounts and installment loan portfolios, the Company generally uses a migration analysis to estimate losses inherent in the portfolio. The allowance or liability calculation under the migration analysis is based on historical charge-off experience and the loss emergence period, which represents the average amount of time between the first occurrence of a loss event to the charge-off of a loan. The factors the Company considers to assess the adequacy of the allowance or liability include past due performance, historical behavior of monthly vintages, underwriting changes and recent trends in delinquency in the migration analysis.
\nThe Company fully reserves and generally charges off consumer loans, including accrued interest and/or fees, once the loan or a portion of the loan has been classified as delinquent for 60 consecutive days. If a loan is deemed uncollectible before it is fully reserved, it is charged off at that point. Consumer loans classified as delinquent generally have an age of one to 59 days from the date any portion of the loan became delinquent, as defined above. Recoveries on loans previously charged to the allowance are credited to the allowance when collected.
Property and Equipment
\nProperty and equipment is recorded at cost. The cost of property retired or sold and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the consolidated statements of income. Costs associated with repair and maintenance activities are expensed as incurred. Depreciation expense is generally provided on a straight-line basis, using the following estimated useful lives:
\n\n
| \n Computer hardware and software | \n\n
| \n\n 2 to 5 years | \n
| \n Furniture, fixtures and equipment | \n\n
| \n\n 3 to 7 years | \n
| \n Leasehold improvements (1) | \n\n
| \n\n 2 to 10 years | \n
\n
| \n (1) | \n\n Leasehold improvements are depreciated over the lesser of the estimated useful life, remaining lease term, or 10 years. |
Software Development Costs
\nThe Company applies Accounting Standards Codification (“ASC”) 350-40, Internal Use Software (“ASC 350-40”), to its software purchase and development activities. Under ASC 350-40, eligible internal and external costs incurred for the development of computer applications, as well as for upgrades and enhancements that result in additional functionality of the applications, are capitalized to “Property and equipment” on the consolidated balance sheets. Internal and external training and maintenance costs are charged to expense as incurred or over the related service period. When a software application is placed in service, the Company begins amortizing the related capitalized software costs using the straight-line method based on its estimated useful life, which currently ranges from two to five years.
Goodwill
\nGoodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. In accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), 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.
\nThe Company uses the income approach to complete its annual goodwill assessment. The income approach uses future cash flows and estimated terminal values for the Company that are discounted using a market participant perspective to determine the fair value, which is then compared to the carrying value to determine if there is impairment. The income approach includes assumptions about revenue growth rates, operating margins and terminal growth rates discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and economic standpoint. The Company completed its annual assessment of goodwill as of June 30, 2014 and determined that the fair value of its goodwill exceeded carrying value, and, as a result, no impairment existed at that date. Following the separation from Cash America, the Company completed an interim assessment of goodwill, including market capitalization and other qualitative factors, as of December 31, 2014. Consistent with the assessment completed as of June 30, 2014, no impairment existed as of December 31, 2014.
\nAs of December 31, 2014, the Company had $255.9 million of goodwill, all of which is expected to be deductible for tax purposes.
Long-Lived Assets Other Than Goodwill
\nAn evaluation of the recoverability of property and equipment and intangible assets subject to amortization is performed whenever the facts and circumstances indicate that the carrying value may be impaired. An impairment loss is recognized if the future undiscounted cash flows associated with the asset and the estimated fair value of the asset are less than the asset’s corresponding carrying value. The amount of the impairment loss, if any, is the excess of the asset’s carrying value over its estimated fair value.
\nThe Company amortizes intangible assets subject to amortization on the basis of their expected periods of benefit, generally three to five years. The costs of start-up activities and organization costs are charged to expense as incurred.
Hedging and Derivatives Activity
\nThe Company periodically uses foreign currency forward contracts, which are considered derivative instruments, to minimize the effects of foreign currency risk in the United Kingdom and Australia related to the operations of the Company. The forward contracts are not designated as hedges as defined by ASC 815, Derivatives and Hedging; therefore, any changes in the fair value of the forward contracts are recognized in “Foreign currency transaction loss” in the consolidated statements of income. See Note 14.
Non-Marketable Equity Securities
\nThe Company accounts for its non-marketable equity securities in accordance with ASC 325, Investments—Other. Non-marketable equity securities are recorded on a cost basis. The Company evaluates non-marketable equity securities for impairment on a quarterly basis. If an impairment of an equity security is determined to be other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary-impairment is identified. Non-marketable equity securities are held in “Other assets” on the consolidated balance sheets.
\nAs of December 31, 2014, the Company owned a $6.7 million investment in the preferred stock of a privately-held developing consumer financial services entity. The entity is not currently profitable and has historically funded its operations through a series of capital contributions from investors. The Company’s impairment evaluation of this investment as of December 31, 2014 determined that an impairment loss was not probable as of that date. The Company will continue to evaluate the impairment risk of this entity by monitoring and assessing the entity’s ability to raise capital or generate profits to fund its future operations.
Marketing Expenses
\nMarketing expenses consist of online marketing costs such as sponsored search and advertising on social networking sites, and offline marketing costs such as television, radio and direct mail advertising. In addition, marketing expenses include lead purchase costs paid to marketers in exchange for providing information or applications from potential customers interested in using the Company’s services. Online marketing and lead purchase costs are expensed as incurred. The production costs associated with offline marketing are expensed as incurred. Other marketing costs are expensed as incurred.
\nThe Company also has an agreement with an independent third party pursuant to which the Company pays a portion of the net revenue received from the customers referred to the Company by such third party. Prior to the Spin-off, the Company had an arrangement with Cash America pursuant to which the Company paid either a lead purchase fee or a portion of the net revenue received from the customers referred to the Company by Cash America. These referral fees were included in “Marketing” in the consolidated statements of income.
Operations and Technology Expenses
\nOperations and technology expenses include all expenses related to the direct operations and technology infrastructure related to loan underwriting and processing. This includes call center and operations personnel costs, software maintenance expense, underwriting data from third-party vendors, and telephony costs.
General and Administrative Expenses
\nGeneral and Administrative expenses primarily include the Company’s corporate personnel costs, as well as legal, occupancy, and other related costs. In addition, general and administrative expenses include expense allocations for certain corporate service functions historically provided by Cash America, such as executive oversight, insurance and risk management, government relations, internal audit, treasury, licensing, and to a limited extent finance, accounting, tax, legal, human resources, compensation and benefits, compliance and support for certain information systems related to financial reporting. Cash America allocated these expenses to the Company based on the Company’s share of Cash America’s corporate services expenses incurred for the consolidated entity. Actual corporate services costs that may have been incurred if the Company had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. The Company believes that the expenses in these financial statements are reported on a basis that fairly represents the utilization of the services provided. These financial statements do not necessarily reflect the financial position or results of operations that would have existed if the Company had been operated as a stand-alone entity during the periods covered and may not be indicative of future results of operations and financial position. See Note 15 for additional information.
Stock-Based Compensation
\nThe Company accounts for its stock-based employee compensation plans in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”). In accordance with ASC 718, the Company recognizes compensation expense over the remaining vesting periods for stock-based awards. During the periods prior to the Spin-off, certain employees received stock-based compensation in the form of restricted stock units from Cash America. These awards are reflected in stock-based compensation or as a net equity transaction with Cash America in the Company’s statement of stockholders’ equity. During the year ended December 31, 2012, certain employees received performance-based stock awards. For these awards, compensation expense was originally based on the number of shares that would have vested if the Company achieved the level of performance that management estimated was the most probable outcome at the grant date. Throughout the requisite service period, management monitored the probability of achievement of the performance condition and adjusted stock-based compensation expense if necessary. See Note 13.
Income Taxes
\nThe provision for income taxes is based on income before income taxes as reported for financial statement purposes. Deferred income taxes are provided for in accordance with the assets and liability method of accounting for income taxes in order to recognize the tax effects of temporary differences between financial statement and income tax accounting.
\nIn the Company’s financial statements, income tax expense and deferred tax balances have been calculated on a separate tax return basis although prior to the Spin-off the Company’s operations were included as part of consolidated and unitary tax returns with Cash America and its affiliated companies. With the exception of certain entities outside of the United States, prior to the Spin-off, the Company settled its current tax balances with Cash America on a quarterly basis through an adjustment to its affiliate line of credit with Cash America.
\nThe Company accounts for uncertainty in income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 requires that a more-likely-than-not threshold be met before the benefit of a tax position may be recognized in the consolidated financial statements and prescribes how such benefit should be measured. It also provides guidance on recognition adjustment, classification, accrual of interest and penalties, accounting in interim periods, disclosure and transition.
\nThe Company performs an evaluation of the recoverability of its deferred tax assets on a quarterly basis. The Company establishes a valuation allowance if it is more likely than not (greater than 50 percent) that all or some portion of the deferred tax asset will not be realized. The Company analyzes several factors, including the nature and frequency of operating losses, the Company’s carryforward period for any losses, the reversal of future taxable temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning strategies to protect against the loss of deferred tax assets. See Note 10 for further discussion.
\nIt is the Company’s policy to classify interest and penalties on income tax liabilities as interest expense and general and administrative expense, respectively.
Earnings Per Share
\nBasic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted earnings per share is calculated by giving effect to the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares during the year. Restricted stock units issued under the Company’s stock-based employee compensation plans are included in diluted shares upon the granting of the awards even though the vesting of shares will occur over time.
\nThe following table sets forth the reconciliation of numerators and denominators of basic and diluted earnings per share computations for the years ended December 31, 2014, 2013 and 2012 (in thousands, except per share amounts):
\n| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Numerator: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Net income | \n\n
| \n\n $ | \n\n 111,671 | \n\n
| \n\n
| \n\n $ | \n\n 78,038 | \n\n
| \n\n
| \n\n $ | \n\n 58,872 | \n\n
| \n
| \n Denominator: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Total weighted average basic shares | \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n
| \n Shares applicable to stock-based compensation | \n\n
| \n\n
| \n\n 8 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Total weighted average diluted shares | \n\n
| \n\n
| \n\n 33,008 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n
| \n Net income – basic and diluted | \n\n
| \n\n $ | \n\n 3.38 | \n\n
| \n\n
| \n\n $ | \n\n 2.36 | \n\n
| \n\n
| \n\n $ | \n\n 1.78 | \n\n
| \n
\n
Stock options to purchase 1,425,196 shares were outstanding as of December 31, 2014, but were not included in the computation of diluted earnings per share because the options’ exercise price during the respective periods was greater than the average market price of the common shares and, therefore, the effect would have been antidilutive. There were no stock options outstanding as of December 31, 2013 and 2012.
Adopted Accounting Standards
\nIn November 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-17, Business Combinations (Topic 805) – Pushdown Accounting (“ASU 2014-17”). The primary purpose of ASU 2014-17 is to provide guidance on whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. The amendments should reduce diversity in the timing and content of footnote disclosure. ASU 2014-17 is effective after November 18, 2014. The Company adopted ASU 2014-17 on November 18, 2014, and the adoption did not have a material effect on its financial position or results of operations.
\nIn April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). The amendments in ASU 2014-08 change the criteria for reporting discontinued operations and enhance disclosures in this area. The new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income or loss attributable to a disposal of an individually significant component of an organization that does not qualify for discontinued operations presentation in the financial statements. The Company is required to adopt ASU 2014-08 prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014 and interim periods within those years. Early adoption is permitted. The Company adopted ASU 2014-08 on June 30, 2014, and the adoption did not have a material effect on its financial position or results of operations.
\nIn July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”), which provides guidance on the presentation of unrecognized tax benefits when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this update are effective for fiscal years (and interim periods within those years) beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company prospectively adopted ASU 2013-11 on January 1, 2014, and the adoption did not have a material effect on its financial condition or results of operations.
\nIn March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-05”), which applies to the release of the cumulative translation adjustment into net income when a parent either sells all or a part of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. ASU 2013-05 is effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The Company adopted ASU 2013-05 on January 1, 2014, and the adoption did not have a material effect on its financial condition or results of operations.
\nIn February 2013, the FASB issued ASU No. 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). ASU 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the amount the reporting entity agreed to pay plus additional amounts the reporting entity expects to pay on behalf of its co-obligors. The guidance further provides for disclosure of the nature and amount of the obligation. ASU 2013-04 is effective for interim and annual reporting periods beginning after December 15, 2013. The Company adopted ASU 2013-04 on January 1, 2014, and the adoption did not have a material effect on its financial condition or results of operations.
Accounting Standards to be Adopted in Future Periods
\nIn February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis (“ASU 2015-02”) which provides guidance for reporting entities that are required to evaluate whether they should consolidate certain legal entities. In accordance with ASU 2015-02, all legal entities are subject to reevaluation under the revised consolidation model. ASU 2015-02 is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. The Company is still assessing the potential impact of ASU 2015-02 on its financial position and results of operations.
\nIn August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which requires management to evaluate, in connection with financial statement preparation for each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued, and to provide related disclosures. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company does not expect adoption of this guidance will have a material effect on its consolidated financial statements.
\nIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is not permitted. The Company is still assessing the potential impact of ASU 2014-09 on its financial position and results of operations.
The Company uses forward currency exchange contracts to minimize the effects of foreign currency risk in the United Kingdom and Australia. The forward currency exchange contracts are non-designated derivatives. Any gain or loss resulting from these contracts is recorded as income or loss and is included in “Foreign currency transaction loss” in the Company’s consolidated statements of income. The Company currently does not manage its exposure to risk from foreign currency exchange rate fluctuations through the use of forward currency exchange contracts in Canada or Brazil.
Depreciation expense is generally provided on a straight-line basis, using the following estimated useful lives:
| \n Computer hardware and software | \n\n
| \n\n 2 to 5 years | \n
| \n Furniture, fixtures and equipment | \n\n
| \n\n 3 to 7 years | \n
| \n Leasehold improvements (1) | \n\n
| \n\n 2 to 10 years | \n
\n
| \n (1) | \n\n Leasehold improvements are depreciated over the lesser of the estimated useful life, remaining lease term, or 10 years. |
The following table sets forth the reconciliation of numerators and denominators of basic and diluted earnings per share computations for the years ended December 31, 2014, 2013 and 2012 (in thousands, except per share amounts):
\n| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Numerator: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Net income | \n\n
| \n\n $ | \n\n 111,671 | \n\n
| \n\n
| \n\n $ | \n\n 78,038 | \n\n
| \n\n
| \n\n $ | \n\n 58,872 | \n\n
| \n
| \n Denominator: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Total weighted average basic shares | \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n
| \n Shares applicable to stock-based compensation | \n\n
| \n\n
| \n\n 8 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Total weighted average diluted shares | \n\n
| \n\n
| \n\n 33,008 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n
| \n Net income – basic and diluted | \n\n
| \n\n $ | \n\n 3.38 | \n\n
| \n\n
| \n\n $ | \n\n 2.36 | \n\n
| \n\n
| \n\n $ | \n\n 1.78 | \n\n
| \n
Consumer loan fee revenue generated from the Company’s consumer loans for the years ended December 31, 2014, 2013 and 2012 was as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Interest and fees on short-term loans | \n\n
| \n\n $ | \n\n 257,169 | \n\n
| \n\n
| \n\n $ | \n\n 389,706 | \n\n
| \n\n
| \n\n $ | \n\n 459,835 | \n\n
| \n
| \n Interest and fees on line of credit accounts | \n\n
| \n\n
| \n\n 305,118 | \n\n
| \n\n
| \n\n
| \n\n 170,496 | \n\n
| \n\n
| \n\n
| \n\n 73,532 | \n\n
| \n
| \n Interest and fees on installment loans | \n\n
| \n\n
| \n\n 246,700 | \n\n
| \n\n
| \n\n
| \n\n 203,924 | \n\n
| \n\n
| \n\n
| \n\n 126,202 | \n\n
| \n
| \n Total consumer loan revenue | \n\n
| \n\n
| \n\n 808,987 | \n\n
| \n\n
| \n\n
| \n\n 764,126 | \n\n
| \n\n
| \n\n
| \n\n 659,569 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 850 | \n\n
| \n\n
| \n\n
| \n\n 1,197 | \n\n
| \n\n
| \n\n
| \n\n 1,359 | \n\n
| \n
| \n Total Revenue | \n\n
| \n\n $ | \n\n 809,837 | \n\n
| \n\n
| \n\n $ | \n\n 765,323 | \n\n
| \n\n
| \n\n $ | \n\n 660,928 | \n\n
| \n
The components of Company-owned consumer loan portfolio receivables at December 31, 2014 and 2013 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, 2014 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Current loans | \n\n
| \n\n $ | \n\n 35,688 | \n\n
| \n\n
| \n\n $ | \n\n 110,519 | \n\n
| \n\n
| \n\n $ | \n\n 194,496 | \n\n
| \n\n
| \n\n $ | \n\n 340,703 | \n\n
| \n
| \n Delinquent loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Delinquent payment amounts(1) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 3,733 | \n\n
| \n\n
| \n\n
| \n\n 1,469 | \n\n
| \n\n
| \n\n
| \n\n 5,202 | \n\n
| \n
| \n Loans on non-accrual status | \n\n
| \n\n
| \n\n 20,610 | \n\n
| \n\n
| \n\n
| \n\n 4,428 | \n\n
| \n\n
| \n\n
| \n\n 17,616 | \n\n
| \n\n
| \n\n
| \n\n 42,654 | \n\n
| \n
| \n Total delinquent loans | \n\n
| \n\n
| \n\n 20,610 | \n\n
| \n\n
| \n\n
| \n\n 8,161 | \n\n
| \n\n
| \n\n
| \n\n 19,085 | \n\n
| \n\n
| \n\n
| \n\n 47,856 | \n\n
| \n
| \n Total consumer loans, gross | \n\n
| \n\n
| \n\n 56,298 | \n\n
| \n\n
| \n\n
| \n\n 118,680 | \n\n
| \n\n
| \n\n
| \n\n 213,581 | \n\n
| \n\n
| \n\n
| \n\n 388,559 | \n\n
| \n
| \n Less: Allowance for losses | \n\n
| \n\n
| \n\n (14,324 | \n\n ) | \n\n
| \n\n
| \n\n (19,749 | \n\n ) | \n\n
| \n\n
| \n\n (30,875 | \n\n ) | \n\n
| \n\n
| \n\n (64,948 | \n\n ) | \n
| \n Consumer loans, net | \n\n
| \n\n $ | \n\n 41,974 | \n\n
| \n\n
| \n\n $ | \n\n 98,931 | \n\n
| \n\n
| \n\n $ | \n\n 182,706 | \n\n
| \n\n
| \n\n $ | \n\n 323,611 | \n\n
| \n
\n
| \n
| \n\n
| \n\n As of December 31, 2013 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Current loans | \n\n
| \n\n $ | \n\n 57,368 | \n\n
| \n\n
| \n\n $ | \n\n 112,969 | \n\n
| \n\n
| \n\n $ | \n\n 160,585 | \n\n
| \n\n
| \n\n $ | \n\n 330,922 | \n\n
| \n
| \n Delinquent loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Delinquent payment amounts(1) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 4,146 | \n\n
| \n\n
| \n\n
| \n\n 1,724 | \n\n
| \n\n
| \n\n
| \n\n 5,870 | \n\n
| \n
| \n Loans on non-accrual status | \n\n
| \n\n
| \n\n 23,385 | \n\n
| \n\n
| \n\n
| \n\n 8,687 | \n\n
| \n\n
| \n\n
| \n\n 16,921 | \n\n
| \n\n
| \n\n
| \n\n 48,993 | \n\n
| \n
| \n Total delinquent loans | \n\n
| \n\n
| \n\n 23,385 | \n\n
| \n\n
| \n\n
| \n\n 12,833 | \n\n
| \n\n
| \n\n
| \n\n 18,645 | \n\n
| \n\n
| \n\n
| \n\n 54,863 | \n\n
| \n
| \n Total consumer loans, gross | \n\n
| \n\n
| \n\n 80,753 | \n\n
| \n\n
| \n\n
| \n\n 125,802 | \n\n
| \n\n
| \n\n
| \n\n 179,230 | \n\n
| \n\n
| \n\n
| \n\n 385,785 | \n\n
| \n
| \n Less: Allowance for losses | \n\n
| \n\n
| \n\n (20,466 | \n\n ) | \n\n
| \n\n
| \n\n (29,244 | \n\n ) | \n\n
| \n\n
| \n\n (32,608 | \n\n ) | \n\n
| \n\n
| \n\n (82,318 | \n\n ) | \n
| \n Consumer loans, net | \n\n
| \n\n $ | \n\n 60,287 | \n\n
| \n\n
| \n\n $ | \n\n 96,558 | \n\n
| \n\n
| \n\n $ | \n\n 146,622 | \n\n
| \n\n
| \n\n $ | \n\n 303,467 | \n\n
| \n
\n
| \n (1) | \n\n Represents the delinquent portion of installment loans and line of credit account balances for customers that have only missed one payment. See Note 3 “Significant Accounting Policies-Current and Delinquent Consumer Loans” for additional information. |
Changes in the allowance for losses for the Company-owned loans and the liability for estimated losses on the Company’s guarantees of third-party lender-owned loans through the CSO programs for the years ended December 31, 2014, 2013 and 2012 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, 2014 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Allowance for losses for Company-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 20,466 | \n\n
| \n\n
| \n\n $ | \n\n 29,244 | \n\n
| \n\n
| \n\n $ | \n\n 32,608 | \n\n
| \n\n
| \n\n $ | \n\n 82,318 | \n\n
| \n
| \n Cost of revenue | \n\n
| \n\n
| \n\n 70,382 | \n\n
| \n\n
| \n\n
| \n\n 92,461 | \n\n
| \n\n
| \n\n
| \n\n 104,415 | \n\n
| \n\n
| \n\n
| \n\n 267,258 | \n\n
| \n
| \n Charge-offs | \n\n
| \n\n
| \n\n (105,129 | \n\n ) | \n\n
| \n\n
| \n\n (119,428 | \n\n ) | \n\n
| \n\n
| \n\n (129,466 | \n\n ) | \n\n
| \n\n
| \n\n (354,023 | \n\n ) | \n
| \n Recoveries | \n\n
| \n\n
| \n\n 28,785 | \n\n
| \n\n
| \n\n
| \n\n 17,943 | \n\n
| \n\n
| \n\n
| \n\n 23,619 | \n\n
| \n\n
| \n\n
| \n\n 70,347 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n (180 | \n\n ) | \n\n
| \n\n
| \n\n (471 | \n\n ) | \n\n
| \n\n
| \n\n (301 | \n\n ) | \n\n
| \n\n
| \n\n (952 | \n\n ) | \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 14,324 | \n\n
| \n\n
| \n\n $ | \n\n 19,749 | \n\n
| \n\n
| \n\n $ | \n\n 30,875 | \n\n
| \n\n
| \n\n $ | \n\n 64,948 | \n\n
| \n
| \n Liability for third-party lender-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n
| \n (Decrease) increase in liability | \n\n
| \n\n
| \n\n (472 | \n\n ) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 1 | \n\n
| \n\n
| \n\n
| \n\n (471 | \n\n ) | \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 1,575 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 1 | \n\n
| \n\n
| \n\n $ | \n\n 1,576 | \n\n
| \n
\n
| \n
| \n\n
| \n\n Year Ended December 31, 2013 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Allowance for losses for Company-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 41,942 | \n\n
| \n\n
| \n\n $ | \n\n 12,565 | \n\n
| \n\n
| \n\n $ | \n\n 27,845 | \n\n
| \n\n
| \n\n $ | \n\n 82,352 | \n\n
| \n
| \n Cost of revenue | \n\n
| \n\n
| \n\n 136,534 | \n\n
| \n\n
| \n\n
| \n\n 72,308 | \n\n
| \n\n
| \n\n
| \n\n 106,787 | \n\n
| \n\n
| \n\n
| \n\n 315,629 | \n\n
| \n
| \n Charge-offs | \n\n
| \n\n
| \n\n (192,504 | \n\n ) | \n\n
| \n\n
| \n\n (63,001 | \n\n ) | \n\n
| \n\n
| \n\n (116,853 | \n\n ) | \n\n
| \n\n
| \n\n (372,358 | \n\n ) | \n
| \n Recoveries | \n\n
| \n\n
| \n\n 34,796 | \n\n
| \n\n
| \n\n
| \n\n 6,714 | \n\n
| \n\n
| \n\n
| \n\n 14,544 | \n\n
| \n\n
| \n\n
| \n\n 56,054 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n (302 | \n\n ) | \n\n
| \n\n
| \n\n 658 | \n\n
| \n\n
| \n\n
| \n\n 285 | \n\n
| \n\n
| \n\n
| \n\n 641 | \n\n
| \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 20,466 | \n\n
| \n\n
| \n\n $ | \n\n 29,244 | \n\n
| \n\n
| \n\n $ | \n\n 32,608 | \n\n
| \n\n
| \n\n $ | \n\n 82,318 | \n\n
| \n
| \n Liability for third-party lender-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 2,624 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,624 | \n\n
| \n
| \n Decrease in liability | \n\n
| \n\n
| \n\n (577 | \n\n ) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (577 | \n\n ) | \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n
\n
| \n
| \n\n
| \n\n Year Ended December 31, 2012 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n Short-term | \n\n
| \n\n
| \n\n Line of Credit | \n\n
| \n\n
| \n\n Installment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n|||
| \n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Accounts | \n\n
| \n\n
| \n\n Loans | \n\n
| \n\n
| \n\n Total | \n\n
| \n||||
| \n Allowance for losses for Company-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 42,880 | \n\n
| \n\n
| \n\n $ | \n\n 3,723 | \n\n
| \n\n
| \n\n $ | \n\n 12,451 | \n\n
| \n\n
| \n\n $ | \n\n 59,054 | \n\n
| \n
| \n Cost of revenue | \n\n
| \n\n
| \n\n 176,701 | \n\n
| \n\n
| \n\n
| \n\n 36,251 | \n\n
| \n\n
| \n\n
| \n\n 75,182 | \n\n
| \n\n
| \n\n
| \n\n 288,134 | \n\n
| \n
| \n Charge-offs | \n\n
| \n\n
| \n\n (210,557 | \n\n ) | \n\n
| \n\n
| \n\n (31,399 | \n\n ) | \n\n
| \n\n
| \n\n (65,493 | \n\n ) | \n\n
| \n\n
| \n\n (307,449 | \n\n ) | \n
| \n Recoveries | \n\n
| \n\n
| \n\n 31,675 | \n\n
| \n\n
| \n\n
| \n\n 3,990 | \n\n
| \n\n
| \n\n
| \n\n 5,174 | \n\n
| \n\n
| \n\n
| \n\n 40,839 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n 1,243 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 531 | \n\n
| \n\n
| \n\n
| \n\n 1,774 | \n\n
| \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 41,942 | \n\n
| \n\n
| \n\n $ | \n\n 12,565 | \n\n
| \n\n
| \n\n $ | \n\n 27,845 | \n\n
| \n\n
| \n\n $ | \n\n 82,352 | \n\n
| \n
| \n Liability for third-party lender-owned consumer loans: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance at beginning of period | \n\n
| \n\n $ | \n\n 2,284 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,284 | \n\n
| \n
| \n Increase in liability | \n\n
| \n\n
| \n\n 340 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 340 | \n\n
| \n
| \n Balance at end of period | \n\n
| \n\n $ | \n\n 2,624 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,624 | \n\n
| \n
Major classifications of property and equipment at December 31, 2014 and 2013 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, 2014 | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n Cost | \n\n
| \n\n
| \n\n Accumulated Depreciation | \n\n
| \n\n
| \n\n Net | \n\n
| \n|||
| \n Computer Software | \n\n
| \n\n $ | \n\n 54,966 | \n\n
| \n\n
| \n\n $ | \n\n (32,117 | \n\n ) | \n\n
| \n\n $ | \n\n 22,849 | \n\n
| \n
| \n Furniture, fixtures and equipment | \n\n
| \n\n
| \n\n 26,690 | \n\n
| \n\n
| \n\n
| \n\n (19,245 | \n\n ) | \n\n
| \n\n
| \n\n 7,445 | \n\n
| \n
| \n Leasehold improvements | \n\n
| \n\n
| \n\n 14,587 | \n\n
| \n\n
| \n\n
| \n\n (10,896 | \n\n ) | \n\n
| \n\n
| \n\n 3,691 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 96,243 | \n\n
| \n\n
| \n\n $ | \n\n (62,258 | \n\n ) | \n\n
| \n\n $ | \n\n 33,985 | \n\n
| \n
\n
| \n
| \n\n
| \n\n As of December 31, 2013 | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n Cost | \n\n
| \n\n
| \n\n Accumulated Depreciation | \n\n
| \n\n
| \n\n Net | \n\n
| \n|||
| \n Computer Software | \n\n
| \n\n $ | \n\n 56,511 | \n\n
| \n\n
| \n\n $ | \n\n (35,014 | \n\n ) | \n\n
| \n\n $ | \n\n 21,497 | \n\n
| \n
| \n Furniture, fixtures and equipment | \n\n
| \n\n
| \n\n 25,077 | \n\n
| \n\n
| \n\n
| \n\n (14,034 | \n\n ) | \n\n
| \n\n
| \n\n 11,043 | \n\n
| \n
| \n Leasehold improvements | \n\n
| \n\n
| \n\n 14,287 | \n\n
| \n\n
| \n\n
| \n\n (7,422 | \n\n ) | \n\n
| \n\n
| \n\n 6,865 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 95,875 | \n\n
| \n\n
| \n\n $ | \n\n (56,470 | \n\n ) | \n\n
| \n\n $ | \n\n 39,405 | \n\n
| \n
Changes in the carrying value of goodwill for the years ended December 31, 2014 and 2013 were as follows (dollars in thousands):
\n\n
| \n Balance as of January 1, 2013 | \n\n
| \n\n $ | \n\n 255,875 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n (6 | \n\n ) | \n
| \n Balance as of December 31, 2013 | \n\n
| \n\n $ | \n\n 255,869 | \n\n
| \n
| \n Effect of foreign currency translation | \n\n
| \n\n
| \n\n (7 | \n\n ) | \n
| \n Balance as of December 31, 2014 | \n\n
| \n\n $ | \n\n 255,862 | \n\n
| \n
Acquired intangible assets that are subject to amortization as of December 31, 2014 and 2013, were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, 2014 | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n Cost | \n\n
| \n\n
| \n\n Accumulated Amortization | \n\n
| \n\n
| \n\n Net | \n\n
| \n|||
| \n Customer Relationships | \n\n
| \n\n $ | \n\n 2,739 | \n\n
| \n\n
| \n\n $ | \n\n (2,739 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Lead provider relationships | \n\n
| \n\n
| \n\n 2,489 | \n\n
| \n\n
| \n\n
| \n\n (2,489 | \n\n ) | \n\n
| \n\n — | \n\n
| \n|
| \n Trademarks | \n\n
| \n\n
| \n\n 406 | \n\n
| \n\n
| \n\n
| \n\n (367 | \n\n ) | \n\n
| \n\n
| \n\n 39 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 5,634 | \n\n
| \n\n
| \n\n $ | \n\n (5,595 | \n\n ) | \n\n
| \n\n $ | \n\n 39 | \n\n
| \n
\n
| \n
| \n\n
| \n\n As of December 31, 2013 | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n Cost | \n\n
| \n\n
| \n\n Accumulated Amortization | \n\n
| \n\n
| \n\n Net | \n\n
| \n|||
| \n Customer Relationships | \n\n
| \n\n $ | \n\n 2,743 | \n\n
| \n\n
| \n\n $ | \n\n (2,727 | \n\n ) | \n\n
| \n\n $ | \n\n 16 | \n\n
| \n
| \n Lead provider relationships | \n\n
| \n\n
| \n\n 2,489 | \n\n
| \n\n
| \n\n
| \n\n (2,489 | \n\n ) | \n\n
| \n\n — | \n\n
| \n|
| \n Trademarks | \n\n
| \n\n
| \n\n 372 | \n\n
| \n\n
| \n\n
| \n\n (343 | \n\n ) | \n\n
| \n\n
| \n\n 29 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 5,604 | \n\n
| \n\n
| \n\n $ | \n\n (5,559 | \n\n ) | \n\n
| \n\n $ | \n\n 45 | \n\n
| \n
Estimated future amortization expense for the years ended December 31, is as follows (dollars in thousands):
\n\n
| \n YEAR | \n\n
| \n\n AMOUNT | \n\n
| \n|
| \n 2015 | \n\n
| \n\n $ | \n\n 16 | \n\n
| \n
| \n 2016 | \n\n
| \n\n
| \n\n 13 | \n\n
| \n
| \n 2017 | \n\n
| \n\n
| \n\n 10 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 39 | \n\n
| \n
Accounts payable and accrued expenses at December 31, 2014 and 2013, were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n||
| \n Trade accounts payable | \n\n
| \n\n $ | \n\n 25,512 | \n\n
| \n\n
| \n\n $ | \n\n 18,660 | \n\n
| \n
| \n Accrued payroll and fringe benefits | \n\n
| \n\n
| \n\n 17,709 | \n\n
| \n\n
| \n\n
| \n\n 17,874 | \n\n
| \n
| \n Accrued interest payable | \n\n
| \n\n
| \n\n 4,063 | \n\n
| \n\n
| \n\n — | \n\n
| \n|
| \n Accrual for consumer loan payments rejected for non-sufficient funds | \n\n
| \n\n
| \n\n 3,650 | \n\n
| \n\n
| \n\n
| \n\n 4,971 | \n\n
| \n
| \n Deferred fees on third-party consumer loans | \n\n
| \n\n
| \n\n 3,630 | \n\n
| \n\n
| \n\n
| \n\n 4,573 | \n\n
| \n
| \n Liability for losses on third-party lender owned consumer loans | \n\n
| \n\n
| \n\n 1,576 | \n\n
| \n\n
| \n\n
| \n\n 2,047 | \n\n
| \n
| \n Other accrued liabilities | \n\n
| \n\n
| \n\n 1,137 | \n\n
| \n\n
| \n\n
| \n\n 1,451 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 57,277 | \n\n
| \n\n
| \n\n $ | \n\n 49,576 | \n\n
| \n
Marketing expenses for the years ended December 31, 2014, 2013 and 2012 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Advertising | \n\n
| \n\n $ | \n\n 74,999 | \n\n
| \n\n
| \n\n $ | \n\n 74,294 | \n\n
| \n\n
| \n\n $ | \n\n 50,776 | \n\n
| \n
| \n Customer procurement expense including lead purchase costs | \n\n
| \n\n
| \n\n 42,843 | \n\n
| \n\n
| \n\n
| \n\n 52,418 | \n\n
| \n\n
| \n\n
| \n\n 49,381 | \n\n
| \n
| \n Customer referral and revenue sharing expense | \n\n
| \n\n
| \n\n 10,020 | \n\n
| \n\n
| \n\n
| \n\n 8,624 | \n\n
| \n\n
| \n\n
| \n\n 8,653 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 127,862 | \n\n
| \n\n
| \n\n $ | \n\n 135,336 | \n\n
| \n\n
| \n\n $ | \n\n 108,810 | \n\n
| \n
As of December 31, 2014, required principal payments under the terms of the long-term debt for each of the five years after December 31, 2014 are as follows (dollars in thousands):
\n\n
| \n YEAR | \n\n
| \n\n Amount | \n\n
| \n|
| \n 2015 | \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n 2016 | \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n 2017 | \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n 2018 | \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n 2019 | \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Thereafter | \n\n
| \n\n
| \n\n 500,000 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 500,000 | \n\n
| \n
The components of the Company’s deferred tax assets and liabilities as of December 31, 2014 and 2013 were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n||
| \n Deferred tax assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Consumer loans, net | \n\n
| \n\n $ | \n\n 25,281 | \n\n
| \n\n
| \n\n $ | \n\n 31,649 | \n\n
| \n
| \n Compensation and benefits | \n\n
| \n\n
| \n\n 507 | \n\n
| \n\n
| \n\n
| \n\n 2,535 | \n\n
| \n
| \n Translation adjustments | \n\n
| \n\n
| \n\n 3,956 | \n\n
| \n\n
| \n\n
| \n\n 759 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 868 | \n\n
| \n\n
| \n\n
| \n\n 837 | \n\n
| \n
| \n Total deferred tax assets | \n\n
| \n\n $ | \n\n 30,612 | \n\n
| \n\n
| \n\n $ | \n\n 35,780 | \n\n
| \n
| \n Deferred tax liabilities: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Amortizable intangible assets | \n\n
| \n\n $ | \n\n 46,010 | \n\n
| \n\n
| \n\n $ | \n\n 39,334 | \n\n
| \n
| \n Property and equipment | \n\n
| \n\n
| \n\n 6,794 | \n\n
| \n\n
| \n\n
| \n\n 9,085 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 334 | \n\n
| \n\n
| \n\n
| \n\n 1,753 | \n\n
| \n
| \n Total deferred tax liabilities | \n\n
| \n\n $ | \n\n 53,138 | \n\n
| \n\n
| \n\n $ | \n\n 50,172 | \n\n
| \n
| \n Net deferred tax liabilities before valuation allowance | \n\n
| \n\n $ | \n\n (22,526 | \n\n ) | \n\n
| \n\n $ | \n\n (14,392 | \n\n ) | \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Net deferred tax liabilities | \n\n
| \n\n $ | \n\n (22,526 | \n\n ) | \n\n
| \n\n $ | \n\n (14,392 | \n\n ) | \n
| \n Balance sheet classification: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Current deferred tax assets | \n\n
| \n\n $ | \n\n 25,427 | \n\n
| \n\n
| \n\n $ | \n\n 30,914 | \n\n
| \n
| \n Non-current deferred tax liabilities | \n\n
| \n\n
| \n\n (47,953 | \n\n ) | \n\n
| \n\n
| \n\n (45,306 | \n\n ) | \n
| \n Net deferred tax liabilities | \n\n
| \n\n $ | \n\n (22,526 | \n\n ) | \n\n
| \n\n $ | \n\n (14,392 | \n\n ) | \n
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 are shown below (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Income (loss) before income taxes: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 176,494 | \n\n
| \n\n
| \n\n $ | \n\n 119,974 | \n\n
| \n\n
| \n\n $ | \n\n 94,349 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 5 | \n\n
| \n\n
| \n\n
| \n\n 1,658 | \n\n
| \n\n
| \n\n
| \n\n (1,510 | \n\n ) | \n
| \n Income before income taxes | \n\n
| \n\n $ | \n\n 176,499 | \n\n
| \n\n
| \n\n $ | \n\n 121,632 | \n\n
| \n\n
| \n\n $ | \n\n 92,839 | \n\n
| \n
| \n Current provision: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Federal | \n\n
| \n\n $ | \n\n 51,144 | \n\n
| \n\n
| \n\n $ | \n\n 37,639 | \n\n
| \n\n
| \n\n $ | \n\n 35,327 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 46 | \n\n
| \n\n
| \n\n
| \n\n 56 | \n\n
| \n\n
| \n\n
| \n\n 17 | \n\n
| \n
| \n State and local | \n\n
| \n\n
| \n\n 1,753 | \n\n
| \n\n
| \n\n
| \n\n 682 | \n\n
| \n\n
| \n\n
| \n\n 1,049 | \n\n
| \n
| \n Total current provision for income taxes | \n\n
| \n\n $ | \n\n 52,943 | \n\n
| \n\n
| \n\n $ | \n\n 38,377 | \n\n
| \n\n
| \n\n $ | \n\n 36,393 | \n\n
| \n
| \n Deferred provision (benefit): | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Federal | \n\n
| \n\n $ | \n\n 11,363 | \n\n
| \n\n
| \n\n $ | \n\n 5,122 | \n\n
| \n\n
| \n\n $ | \n\n (2,399 | \n\n ) | \n
| \n International | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n State and local | \n\n
| \n\n
| \n\n 522 | \n\n
| \n\n
| \n\n
| \n\n 95 | \n\n
| \n\n
| \n\n
| \n\n (27 | \n\n ) | \n
| \n Total deferred provision (benefit) for income taxes | \n\n
| \n\n $ | \n\n 11,885 | \n\n
| \n\n
| \n\n $ | \n\n 5,217 | \n\n
| \n\n
| \n\n $ | \n\n (2,426 | \n\n ) | \n
| \n Total provision for income taxes | \n\n
| \n\n $ | \n\n 64,828 | \n\n
| \n\n
| \n\n $ | \n\n 43,594 | \n\n
| \n\n
| \n\n $ | \n\n 33,967 | \n\n
| \n
The effective tax rate on income differs from the federal statutory rate of 35% for the following reasons (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Tax provision computed at the federal statutory income tax rate | \n\n
| \n\n $ | \n\n 61,781 | \n\n
| \n\n
| \n\n $ | \n\n 42,571 | \n\n
| \n\n
| \n\n $ | \n\n 32,494 | \n\n
| \n
| \n State and local income taxes, net of federal tax benefits | \n\n
| \n\n
| \n\n 1,329 | \n\n
| \n\n
| \n\n
| \n\n 505 | \n\n
| \n\n
| \n\n
| \n\n 664 | \n\n
| \n
| \n Tax effect of Regulatory Penalty (1) | \n\n
| \n\n
| \n\n 12 | \n\n
| \n\n
| \n\n
| \n\n 871 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (457 | \n\n ) | \n\n
| \n\n
| \n\n 470 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 1,706 | \n\n
| \n\n
| \n\n
| \n\n 104 | \n\n
| \n\n
| \n\n
| \n\n 339 | \n\n
| \n
| \n Total provision | \n\n
| \n\n $ | \n\n 64,828 | \n\n
| \n\n
| \n\n $ | \n\n 43,594 | \n\n
| \n\n
| \n\n $ | \n\n 33,967 | \n\n
| \n
| \n Effective tax rate | \n\n
| \n\n
| \n\n 36.7 | \n\n % | \n\n
| \n\n
| \n\n 35.8 | \n\n % | \n\n
| \n\n
| \n\n 36.6 | \n\n % | \n
\n
| \n — | \n\n Represents the tax effect of the $2.5 million CFPB penalty paid in 2013, which is nondeductible for tax purposes, in connection with the Regulatory Penalty. See Note 11 for further information. |
Future minimum rentals due under non-cancelable leases as of December 31, 2014 are as follows for each of the years ending December 31 (dollars in thousands):
\n
| \n YEAR | \n\n
| \n\n AMOUNT | \n\n
| \n|
| \n 2015 | \n\n
| \n\n $ | \n\n 3,500 | \n\n
| \n
| \n 2016 | \n\n
| \n\n
| \n\n 3,336 | \n\n
| \n
| \n 2017 | \n\n
| \n\n
| \n\n 5,864 | \n\n
| \n
| \n 2018 | \n\n
| \n\n
| \n\n 5,023 | \n\n
| \n
| \n 2019 | \n\n
| \n\n
| \n\n 5,885 | \n\n
| \n
| \n Thereafter | \n\n
| \n\n
| \n\n 41,998 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 65,606 | \n\n
| \n
Amounts included in the consolidated balance sheets relating to the Nonqualified Savings Plan and the SERP were as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n As of December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n||
| \n Prepaid expenses and other assets | \n\n
| \n\n $ | \n\n 755 | \n\n
| \n\n
| \n\n $ | \n\n 559 | \n\n
| \n
| \n Accounts payable and accrued expenses | \n\n
| \n\n $ | \n\n 1,004 | \n\n
| \n\n
| \n\n $ | \n\n 723 | \n\n
| \n
The following table summarizes the Enova restricted stock unit activity during 2014:
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n|||||
| \n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Fair Value at Date of Grant | \n\n
| \n||
| \n Outstanding at beginning of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Units granted | \n\n
| \n\n
| \n\n 549,707 | \n\n
| \n\n
| \n\n
| \n\n 23.04 | \n\n
| \n
| \n Shares issued | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Units forfeited | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Outstanding at end of year | \n\n
| \n\n
| \n\n 549,707 | \n\n
| \n\n
| \n\n $ | \n\n 23.04 | \n\n
| \n
| \n Units vested at end of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
There were no stock options outstanding as of December 31, 2013 and 2012. A summary of the Company’s stock option activity for the year ended December 31, 2014 is as follows:
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n|||||
| \n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Exercise Price | \n\n
| \n||
| \n Outstanding at beginning of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Options granted | \n\n
| \n\n
| \n\n 1,425,196 | \n\n
| \n\n
| \n\n
| \n\n 23.04 | \n\n
| \n
| \n Shares issued | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Options forfeited | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Outstanding at end of year | \n\n
| \n\n
| \n\n 1,425,196 | \n\n
| \n\n
| \n\n $ | \n\n 23.04 | \n\n
| \n
| \n Options vested at end of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
The following table summarizes the Cash America RSU activity during 2014, 2013 and 2012:
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||||||||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||||||||||||||
| \n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Fair Value at Date of Grant | \n\n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Fair Value at Date of Grant | \n\n
| \n\n
| \n\n Units | \n\n
| \n\n
| \n\n Weighted Average Fair Value at Date of Grant | \n\n
| \n||||||
| \n Outstanding at beginning of year | \n\n
| \n\n
| \n\n 14,260 | \n\n
| \n\n
| \n\n $ | \n\n 48.19 | \n\n
| \n\n
| \n\n
| \n\n 13,215 | \n\n
| \n\n
| \n\n $ | \n\n 39.66 | \n\n
| \n\n
| \n\n
| \n\n 16,667 | \n\n
| \n\n
| \n\n $ | \n\n 38.97 | \n\n
| \n
| \n Units granted | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 14,260 | \n\n
| \n\n
| \n\n
| \n\n 48.19 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Shares issued | \n\n
| \n\n
| \n\n (14,260 | \n\n ) | \n\n (1) | \n\n
| \n\n 48.19 | \n\n
| \n\n
| \n\n
| \n\n (2,333 | \n\n ) | \n\n
| \n\n
| \n\n 39.66 | \n\n
| \n\n
| \n\n
| \n\n (3,452 | \n\n ) | \n\n
| \n\n
| \n\n 36.34 | \n\n
| \n
| \n Units forfeited | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (10,882 | \n\n ) | \n\n
| \n\n
| \n\n 39.66 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Outstanding at end of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n
| \n\n 14,260 | \n\n
| \n\n
| \n\n $ | \n\n 48.19 | \n\n
| \n\n
| \n\n
| \n\n 13,215 | \n\n
| \n\n
| \n\n $ | \n\n 39.66 | \n\n
| \n
| \n Units vested at end of year | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
The following table presents information related to the Company’s derivative instruments as of December 31, 2014 (dollars in thousands):
Non-designated derivatives:
\n\n
| \n
| \n\n
| \n\n As of December 31, 2014 | \n\n
| \n|||||||||||||
| \n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n Gross Amounts | \n\n
| \n\n
| \n\n Gross Amounts | \n\n
| \n\n
| \n\n Net Amounts of Assets | \n\n
| \n|||
| \n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n of Recognized | \n\n
| \n\n
| \n\n Offset in the | \n\n
| \n\n
| \n\n Presented in the | \n\n
| \n|||
| \n
| \n\n
| \n\n Notional | \n\n
| \n\n
| \n\n Financial | \n\n
| \n\n
| \n\n Consolidated | \n\n
| \n\n
| \n\n Consolidated Balance | \n\n
| \n||||
| \n Forward currency exchange contracts | \n\n
| \n\n Amount | \n\n
| \n\n
| \n\n Instruments | \n\n
| \n\n
| \n\n Balance Sheets(1) | \n\n
| \n\n
| \n\n Sheets(2) | \n\n
| \n||||
| \n Assets | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Liabilities | \n\n
| \n\n $ | \n\n 112,593 | \n\n
| \n\n
| \n\n $ | \n\n 213 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 213 | \n\n
| \n
\n
| \n (1) | \n\n As of December 31, 2014, the Company had no gross amounts of recognized derivative instruments that the Company makes an accounting policy election not to offset. In addition, there is no financial collateral related to the Company’s derivatives. The Company has no liabilities that are subject to an enforceable master netting agreement or similar arrangement. |
| \n (2) | \n\n Represents the fair value of forward currency contracts, which is recorded in “Prepaid expenses and other assets” in the consolidated balance sheets. |
The following table presents information on the effect of derivative instruments on the consolidated results of operations and AOCI for years ended December 31, 2014, 2013 and 2012 (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n Gains (Losses) | \n\n
| \n||||||||||||||
| \n
| \n\n
| \n\n Gains (Losses) | \n\n
| \n\n
| \n\n Gains (Losses) | \n\n
| \n\n
| \n\n Reclassified From | \n\n
| \n|||||||||||||||||||||||||||
| \n
| \n\n
| \n\n Recognized in Income | \n\n
| \n\n
| \n\n Recognized in AOCI | \n\n
| \n\n
| \n\n AOCI into Income | \n\n
| \n|||||||||||||||||||||||||||
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||||||||||||||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||||||||
| \n Non-designated derivatives: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Forward currency exchange contracts(1) | \n\n
| \n\n $ | \n\n 287 | \n\n
| \n\n
| \n\n $ | \n\n (1,813 | \n\n ) | \n\n
| \n\n $ | \n\n (4,794 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 287 | \n\n
| \n\n
| \n\n $ | \n\n (1,813 | \n\n ) | \n\n
| \n\n $ | \n\n (4,794 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
\n
| \n (1) | \n\n The gains (losses) on these derivatives substantially offset the (losses) gains on the hedged portion of the foreign intercompany balances. |
The following table sets forth certain cash and non-cash activities for the years ended December 31 (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Cash paid during the year for: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Interest | \n\n
| \n\n $ | \n\n 24,807 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Income taxes paid | \n\n
| \n\n
| \n\n 46,353 | \n\n
| \n\n
| \n\n
| \n\n 34,829 | \n\n
| \n\n
| \n\n
| \n\n 33,619 | \n\n
| \n
| \n Non-cash investing and financing activities: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Consumer loans renewed | \n\n
| \n\n $ | \n\n 290,956 | \n\n
| \n\n
| \n\n $ | \n\n 599,227 | \n\n
| \n\n
| \n\n $ | \n\n 620,097 | \n\n
| \n
| \n Affiliate interest expense | \n\n
| \n\n
| \n\n 7,629 | \n\n
| \n\n
| \n\n
| \n\n 19,788 | \n\n
| \n\n
| \n\n
| \n\n 20,996 | \n\n
| \n
The following tables present information on the Company’s domestic and international operations as of and for the years ended December 31, 2014, 2013 and 2012 (dollars in thousands).
\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Revenue | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 474,715 | \n\n
| \n\n
| \n\n $ | \n\n 395,549 | \n\n
| \n\n
| \n\n $ | \n\n 334,066 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 335,122 | \n\n
| \n\n
| \n\n
| \n\n 369,774 | \n\n
| \n\n
| \n\n
| \n\n 326,862 | \n\n
| \n
| \n Total revenue | \n\n
| \n\n $ | \n\n 809,837 | \n\n
| \n\n
| \n\n $ | \n\n 765,323 | \n\n
| \n\n
| \n\n $ | \n\n 660,928 | \n\n
| \n
| \n Income from operations | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 111,869 | \n\n
| \n\n
| \n\n $ | \n\n 73,858 | \n\n
| \n\n
| \n\n $ | \n\n 55,011 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 103,139 | \n\n
| \n\n
| \n\n
| \n\n 68,738 | \n\n
| \n\n
| \n\n
| \n\n 59,166 | \n\n
| \n
| \n Total income from operations | \n\n
| \n\n $ | \n\n 215,008 | \n\n
| \n\n
| \n\n $ | \n\n 142,596 | \n\n
| \n\n
| \n\n $ | \n\n 114,177 | \n\n
| \n
| \n Depreciation and amortization | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 16,284 | \n\n
| \n\n
| \n\n $ | \n\n 14,536 | \n\n
| \n\n
| \n\n $ | \n\n 11,988 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 2,448 | \n\n
| \n\n
| \n\n
| \n\n 2,607 | \n\n
| \n\n
| \n\n
| \n\n 1,284 | \n\n
| \n
| \n Total depreciation and amortization | \n\n
| \n\n $ | \n\n 18,732 | \n\n
| \n\n
| \n\n $ | \n\n 17,143 | \n\n
| \n\n
| \n\n $ | \n\n 13,272 | \n\n
| \n
| \n Expenditures for property and equipment | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 12,414 | \n\n
| \n\n
| \n\n $ | \n\n 12,527 | \n\n
| \n\n
| \n\n $ | \n\n 15,628 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 870 | \n\n
| \n\n
| \n\n
| \n\n 2,345 | \n\n
| \n\n
| \n\n
| \n\n 2,244 | \n\n
| \n
| \n Total expenditures for property and equipment | \n\n
| \n\n $ | \n\n 13,284 | \n\n
| \n\n
| \n\n $ | \n\n 14,872 | \n\n
| \n\n
| \n\n $ | \n\n 17,872 | \n\n
| \n
\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n|||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n||
| \n Property and equipment, net | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 29,274 | \n\n
| \n\n
| \n\n $ | \n\n 34,091 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 4,711 | \n\n
| \n\n
| \n\n
| \n\n 5,314 | \n\n
| \n
| \n Total property and equipment, net | \n\n
| \n\n $ | \n\n 33,985 | \n\n
| \n\n
| \n\n $ | \n\n 39,405 | \n\n
| \n
| \n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Assets | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Domestic | \n\n
| \n\n $ | \n\n 595,180 | \n\n
| \n\n
| \n\n $ | \n\n 475,050 | \n\n
| \n
| \n International | \n\n
| \n\n
| \n\n 165,017 | \n\n
| \n\n
| \n\n
| \n\n 217,102 | \n\n
| \n
| \n Total assets | \n\n
| \n\n $ | \n\n 760,197 | \n\n
| \n\n
| \n\n $ | \n\n 692,152 | \n\n
| \n
The following table presents the Company’s revenue by geographic region for the years ended December 31, 2014, 2013 and 2012 (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n Year Ended December 31, | \n\n
| \n|||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2012 | \n\n
| \n|||
| \n Revenue | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n United States | \n\n
| \n\n $ | \n\n 474,715 | \n\n
| \n\n
| \n\n $ | \n\n 395,549 | \n\n
| \n\n
| \n\n $ | \n\n 334,066 | \n\n
| \n
| \n United Kingdom | \n\n
| \n\n
| \n\n 325,014 | \n\n
| \n\n
| \n\n
| \n\n 360,186 | \n\n
| \n\n
| \n\n
| \n\n 308,415 | \n\n
| \n
| \n Other international countries | \n\n
| \n\n
| \n\n 10,108 | \n\n
| \n\n
| \n\n
| \n\n 9,588 | \n\n
| \n\n
| \n\n
| \n\n 18,447 | \n\n
| \n
| \n Total revenue | \n\n
| \n\n $ | \n\n 809,837 | \n\n
| \n\n
| \n\n $ | \n\n 765,323 | \n\n
| \n\n
| \n\n $ | \n\n 660,928 | \n\n
| \n
The Company’s financial assets that are measured at fair value on a recurring basis as of December 31, 2014 and 2013 are as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n\n
| \n\n Fair Value Measurements Using | \n\n
| \n||||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n Level 1 | \n\n
| \n\n
| \n\n Level 2 | \n\n
| \n\n
| \n\n Level 3 | \n\n
| \n||||
| \n Financial assets (liabilities) | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Forward currency exchange contracts | \n\n
| \n\n $ | \n\n (213 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n (213 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Nonqualified savings plan assets(1) | \n\n
| \n\n
| \n\n 755 | \n\n
| \n\n
| \n\n
| \n\n 755 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 542 | \n\n
| \n\n
| \n\n $ | \n\n 755 | \n\n
| \n\n
| \n\n $ | \n\n (213 | \n\n ) | \n\n
| \n\n $ | \n\n — | \n\n
| \n
\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n\n
| \n\n Fair Value Measurements Using | \n\n
| \n||||||||||
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n Level 1 | \n\n
| \n\n
| \n\n Level 2 | \n\n
| \n\n
| \n\n Level 3 | \n\n
| \n||||
| \n Financial assets (liabilities) | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Nonqualified savings plan assets(1) | \n\n
| \n\n $ | \n\n 559 | \n\n
| \n\n
| \n\n $ | \n\n 559 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 559 | \n\n
| \n\n
| \n\n $ | \n\n 559 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
\n
| \n (1) | \n\n The non-qualified savings plan assets have an offsetting liability of equal amount, which is included in “Accounts payable and accrued expenses” in the Company’s consolidated balance sheets. |
The Company’s financial assets and liabilities as of December 31, 2014 and 2013 that are not measured at fair value in the consolidated balance sheets are as follows (dollars in thousands):
\n\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n\n
| \n\n Fair Value Measurements Using | \n\n
| \n||||||||||
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n Level 1 | \n\n
| \n\n
| \n\n Level 2 | \n\n
| \n\n
| \n\n Level 3 | \n\n
| \n||||
| \n Financial assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Cash and cash equivalents | \n\n
| \n\n $ | \n\n 75,106 | \n\n
| \n\n
| \n\n $ | \n\n 75,106 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Short-term loans and line of credit accounts, net (1) | \n\n
| \n\n
| \n\n 140,905 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 140,905 | \n\n
| \n
| \n Installment loans, net (1) | \n\n
| \n\n
| \n\n 182,706 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 182,706 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 398,717 | \n\n
| \n\n
| \n\n $ | \n\n 75,106 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 323,611 | \n\n
| \n
| \n Financial liabilities: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Liability for estimated losses on consumer loans guaranteed by the Company | \n\n
| \n\n $ | \n\n 1,576 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 1,576 | \n\n
| \n
| \n Senior Notes | \n\n
| \n\n
| \n\n 494,181 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 491,250 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 495,757 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 491,250 | \n\n
| \n\n
| \n\n $ | \n\n 1,576 | \n\n
| \n
\n
| \n
| \n\n
| \n\n December 31, | \n\n
| \n\n
| \n\n Fair Value Measurements Using | \n\n
| \n||||||||||
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n Level 1 | \n\n
| \n\n
| \n\n Level 2 | \n\n
| \n\n
| \n\n Level 3 | \n\n
| \n||||
| \n Financial assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Cash and cash equivalents | \n\n
| \n\n $ | \n\n 47,480 | \n\n
| \n\n
| \n\n $ | \n\n 47,480 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n
| \n Short-term loans and line of credit accounts, net (1) | \n\n
| \n\n
| \n\n 156,845 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 156,845 | \n\n
| \n
| \n Installment loans, net (1) | \n\n
| \n\n
| \n\n 146,622 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 146,622 | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 350,947 | \n\n
| \n\n
| \n\n $ | \n\n 47,480 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 303,467 | \n\n
| \n
| \n Financial liabilities: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Liability for estimated losses on consumer loans guaranteed by the Company | \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n
| \n Affiliate Line of Credit | \n\n
| \n\n
| \n\n 424,133 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 429,978 | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n
| \n Total | \n\n
| \n\n $ | \n\n 426,180 | \n\n
| \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 429,978 | \n\n
| \n\n
| \n\n $ | \n\n 2,047 | \n\n
| \n
\n
| \n (1) | \n\n Short-term loans, line of credit accounts and installment loans are included in “Consumer loans, net” in the consolidated balance sheets. |
The following is a summary of the quarterly results of operations for the years ended December 31, 2014 and 2013 (in thousands, except per share data):
\n
| \n
| \n\n
| \n\n First | \n\n
| \n\n
| \n\n Second | \n\n
| \n\n
| \n\n Third | \n\n
| \n\n
| \n\n Fourth | \n\n
| \n||||
| \n
| \n\n
| \n\n Quarter | \n\n
| \n\n
| \n\n Quarter | \n\n
| \n\n
| \n\n Quarter | \n\n
| \n\n
| \n\n Quarter | \n\n
| \n||||
| \n 2014 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Total Revenue | \n\n
| \n\n $ | \n\n 208,465 | \n\n
| \n\n
| \n\n $ | \n\n 201,482 | \n\n
| \n\n
| \n\n $ | \n\n 205,168 | \n\n
| \n\n
| \n\n $ | \n\n 194,722 | \n\n
| \n
| \n Cost of Revenue | \n\n
| \n\n
| \n\n 66,436 | \n\n
| \n\n
| \n\n
| \n\n 66,840 | \n\n
| \n\n
| \n\n
| \n\n 72,919 | \n\n
| \n\n
| \n\n
| \n\n 60,592 | \n\n
| \n
| \n Gross Profit | \n\n
| \n\n $ | \n\n 142,029 | \n\n
| \n\n
| \n\n $ | \n\n 134,642 | \n\n
| \n\n
| \n\n $ | \n\n 132,249 | \n\n
| \n\n
| \n\n $ | \n\n 134,130 | \n\n
| \n
| \n Net Income | \n\n
| \n\n $ | \n\n 40,055 | \n\n
| \n\n
| \n\n $ | \n\n 30,629 | \n\n
| \n\n
| \n\n $ | \n\n 18,485 | \n\n
| \n\n
| \n\n $ | \n\n 22,502 | \n\n
| \n
| \n Diluted earnings per share (1) | \n\n
| \n\n $ | \n\n 1.21 | \n\n
| \n\n
| \n\n $ | \n\n 0.93 | \n\n
| \n\n
| \n\n $ | \n\n 0.56 | \n\n
| \n\n
| \n\n $ | \n\n 0.68 | \n\n
| \n
| \n Diluted weighted average common shares (2) | \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,031 | \n\n
| \n
| \n 2013 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Total Revenue | \n\n
| \n\n $ | \n\n 182,312 | \n\n
| \n\n
| \n\n $ | \n\n 176,143 | \n\n
| \n\n
| \n\n $ | \n\n 198,098 | \n\n
| \n\n
| \n\n $ | \n\n 208,770 | \n\n
| \n
| \n Cost of Revenue | \n\n
| \n\n
| \n\n 67,998 | \n\n
| \n\n
| \n\n
| \n\n 70,160 | \n\n
| \n\n
| \n\n
| \n\n 90,389 | \n\n
| \n\n
| \n\n
| \n\n 86,505 | \n\n
| \n
| \n Gross Profit | \n\n
| \n\n $ | \n\n 114,314 | \n\n
| \n\n
| \n\n $ | \n\n 105,983 | \n\n
| \n\n
| \n\n $ | \n\n 107,709 | \n\n
| \n\n
| \n\n $ | \n\n 122,265 | \n\n
| \n
| \n Net Income | \n\n
| \n\n $ | \n\n 22,808 | \n\n
| \n\n
| \n\n $ | \n\n 18,428 | \n\n
| \n\n
| \n\n $ | \n\n 17,088 | \n\n
| \n\n
| \n\n $ | \n\n 19,714 | \n\n
| \n
| \n Diluted earnings per share (1) | \n\n
| \n\n $ | \n\n 0.69 | \n\n
| \n\n
| \n\n $ | \n\n 0.56 | \n\n
| \n\n
| \n\n $ | \n\n 0.52 | \n\n
| \n\n
| \n\n $ | \n\n 0.60 | \n\n
| \n
| \n Diluted weighted average common shares (2) | \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n\n
| \n\n
| \n\n 33,000 | \n\n
| \n
\n
| \n (1) | \n\n The sum of the quarterly earnings per share amounts may not total to each full year amount presented in the Company’s financial statements because these computations are made independently for each quarter and for the full year and take into account the weighted average number of common shares outstanding for each period. |
| \n (2) | \n\n See Note 3 for Basis of Presentation. |