Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.3.1.900
INCOME TAXES
12 Months Ended
Dec. 31, 2015
INCOME TAXES
18. INCOME TAXES

Income before income taxes consisted of the following:

 

     Year Ended December 31,  
     2013      2014      2015  

Income before income taxes:

        

U.S.

   $ 162,687       $ 205,521       $ 259,652   

Foreign

     101,177         84,542         88,015   
  

 

 

    

 

 

    

 

 

 

Total

   $ 263,864       $ 290,063       $ 347,667   
  

 

 

    

 

 

    

 

 

 

 

Current and deferred income taxes were as follows:

 

     Year Ended December 31,  
     2013      2014      2015  

Current:

        

Federal

   $ 97,467       $ 61,732       $ 71,288   

Foreign

     42,690         27,681         35,874   

State

     10,951         6,125         10,682   
  

 

 

    

 

 

    

 

 

 

Total current expense

   $ 151,108       $ 95,538       $ 117,844   
  

 

 

    

 

 

    

 

 

 

Deferred:

        

Federal

   $ (30,833    $ 6,322       $ 10,420   

Foreign

     2,653         (6,437      (3,339

State

     (9,612      641         4,014   
  

 

 

    

 

 

    

 

 

 

Total deferred taxes

     (37,792      526         11,095   
  

 

 

    

 

 

    

 

 

 

Income taxes

   $ 113,316       $ 96,064       $ 128,939   
  

 

 

    

 

 

    

 

 

 

A reconciliation between income tax expense and taxes computed by applying the applicable statutory federal income tax rate to income before income taxes follows:

 

     Year Ended December 31,  
     2013     2014     2015  

Computed statutory tax expense

   $ 92,353      $ 101,522      $ 121,683   

Foreign inflation adjustments

     67        641        (1,295

State and local income taxes, net of federal income tax impact

     789        4,549        9,559   

Foreign losses not benefited and other changes in valuation allowance

     (2,052     (275     (2,408

Foreign tax rate differential

     (336     (2,125     (2,660

Foreign dividends

     3,294        1,083        —     

Sale of Mexican subsidiaries and related changes in intangible assets

     21,406        (10,065     —     

Changes in uncertain tax positions

     (2,024     (1,540     3,717   

Other — net

     (181     2,274        343   
  

 

 

   

 

 

   

 

 

 

Income taxes

   $ 113,316      $ 96,064      $ 128,939   
  

 

 

   

 

 

   

 

 

 

The Company reinvests the undistributed earnings of its non-U.S. subsidiaries with the exception of its subsidiary in Ecuador. Accordingly, deferred U.S. federal and state income taxes are provided only on the undistributed earnings of the Company’s subsidiary in Ecuador. As of December 31, 2015, the Company has not provided deferred taxes on approximately $316,000 of undistributed earnings of non-U.S. subsidiaries, as it is the Company’s policy to indefinitely reinvest these earnings in non-U.S. operations. However, the Company may periodically repatriate a portion of these earnings to the extent that it does not incur an additional U.S. tax liability. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings is not practicable.

 

Deferred Income Taxes

The tax effects of significant temporary differences and tax loss and tax credit carryforwards comprising the net long-term deferred income tax liabilities as of December 31, 2014 and 2015 consisted of the following:

 

     December 31,  
     2014      2015  

Deferred liabilities:

     

Theatre properties and equipment

   $ 127,010       $ 141,155   

Tax impact of items in accumulated other comprehensive income (loss)

     55         158   

Intangible asset — other

     29,342         28,889   

Intangible asset — tradenames

     111,726         112,413   

Investment in partnerships

     111,328         108,733   
  

 

 

    

 

 

 

Total deferred liabilities

     379,461         391,348   
  

 

 

    

 

 

 

Deferred assets:

     

Deferred lease expenses

     27,341         26,966   

Exchange loss

     —           3,736   

Deferred revenue — NCM

     124,366         128,642   

Capital lease obligations

     73,306         75,966   

Tax loss carryforwards

     7,764         7,379   

Alternative minimum tax and other credit carryforwards

     43,384         41,300   

Other expenses, not currently deductible for tax purposes

     25,807         20,204   
  

 

 

    

 

 

 

Total deferred assets

     301,968         304,193   
  

 

 

    

 

 

 

Net deferred income tax liability before valuation allowance

     77,493         87,155   

Valuation allowance against deferred assets — current

     2,384         —     

Valuation allowance against deferred assets — non-current

     50,489         50,636   
  

 

 

    

 

 

 

Net deferred income tax liability

   $ 130,366       $ 137,791   
  

 

 

    

 

 

 

Net deferred tax liability — Foreign

   $ 12,213       $ 4,212   

Net deferred tax liability — U.S.

     118,153         133,579   
  

 

 

    

 

 

 

Total

   $ 130,366       $ 137,791   
  

 

 

    

 

 

 

The Company’s foreign tax credit carryforwards began to expire 2015. Some foreign net operating losses will expire in the next reporting period; however, some losses may be carried forward indefinitely. State net operating losses may be carried forward for periods of between five and twenty years with the last expiring year being 2035.

During November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax assets and liabilities be classified as long-term on the balance sheet. The Company elected to early adopt ASU 2015-17 effective December 31, 2015, on a prospective basis. Adoption of ASU 2015-17 resulted in a reclassification of the Company’s net current deferred tax asset to the net long-term deferred tax asset on the Company’s consolidated balance sheet as of December 31, 2015. Balances as of December 31, 2014 have not been recast.

 

Uncertain Tax Positions

The following is a reconciliation of the total amounts of unrecognized tax benefits excluding interest and penalties, for the years ended December 31, 2013, 2014 and 2015:

 

     Year Ended December 31,  
     2013      2014      2015  

Balance at January 1,

   $ 33,222       $ 18,780       $ 16,515   

Gross increases — tax positions in prior periods

     413         10         40   

Gross decreases — tax positions in prior periods

     —           (2,379      —     

Gross increases — current period tax positions

     1,476         1,324         2,112   

Gross decreases — current period tax positions

     —           —           —     

Settlements

     (15,444      (963      (871

Foreign currency translation adjustments

     (887      (257      (663
  

 

 

    

 

 

    

 

 

 

Balance at December 31,

   $ 18,780       $ 16,515       $ 17,133   
  

 

 

    

 

 

    

 

 

 

The Company had $15,693 and $17,008 of unrecognized tax benefits, including interest and penalties, as of December 31, 2014 and 2015, respectively. Of these amounts, $15,693 and $17,008 represent the amount of unrecognized tax benefits that if recognized would impact the effective income tax rate for the years ended December 31, 2014 and 2015, respectively. The Company had $2,500 and $3,198 accrued for interest and penalties as of December 31, 2014 and 2015, respectively.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and in certain state and foreign jurisdictions and are routinely under audit by many different tax authorities. The Company believes that its accrual for tax liabilities is adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. The Company is no longer subject to income tax audits from the Internal Revenue Service for years before 2012. The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2011. Certain state returns were amended as a result of the Internal Revenue Service examination closures for 2007 through 2009, and the statutes remain open for those amendments. The Company is no longer subject to non-U.S. income tax examinations by tax authorities in its major non-U.S. tax jurisdictions for years before 2004.

The Company is currently under audit in the non-U.S. tax jurisdictions of Brazil and Chile. The Company believes that it is reasonably possible that the Chile audit will be completed within the next twelve months.