Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
12 Months Ended
Dec. 31, 2011
Income Taxes [Abstract]  
INCOME TAXES

21.    INCOME TAXES

Income before income taxes consisted of the following:

 

                         
    Year Ended December 31,  
    2009     2010     2011  

Income before income taxes:

                       

U.S.

  $ 98,908     $ 124,335     $ 114,692  

Foreign

    46,693       83,166       90,940  
   

 

 

   

 

 

   

 

 

 

Total

  $ 145,601     $ 207,501     $ 205,632  
   

 

 

   

 

 

   

 

 

 

Current:

                       

Federal

  $ 35,303     $ 35,172     $ 17,070  

Foreign

    13,706       21,933       26,830  

State

    8,450       9,336       7,099  
   

 

 

   

 

 

   

 

 

 

Total current expense

    57,459       66,441       50,999  
   

 

 

   

 

 

   

 

 

 

Deferred:

                       

Federal

    (9,527     (143     22,100  

Foreign

    (2,405     (7,188     (2,332

State

    (682     (1,272     2,283  
   

 

 

   

 

 

   

 

 

 

Total deferred taxes

    (12,614     (8,603     22,051  
   

 

 

   

 

 

   

 

 

 

Income taxes

  $ 44,845     $ 57,838     $ 73,050  
   

 

 

   

 

 

   

 

 

 

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,  
    2009     2010     2011  

Computed normal tax expense

  $ 50,960     $ 72,625     $ 71,972  

Foreign inflation adjustments

    1,614       47       (1,587

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

    5,215       5,195       7,310  

Foreign losses not benefited and other changes in valuation allowance

    (552     (5,685     (676

Foreign tax rate differential

    (1,464     (4,798     (3,321

Foreign dividends

    2,141       3,952       4,173  

Capital loss benefit

    (12,913     —         —    

Changes in uncertain tax positions

    6,957       (8,080     396  

True up to deferred tax items

    (6,453     —         —    

Other — net

    (660     (5,418     (5,217
   

 

 

   

 

 

   

 

 

 

Income taxes

  $ 44,845     $ 57,838     $ 73,050  
   

 

 

   

 

 

   

 

 

 

The Company reinvests the undistributed earnings of its foreign 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 Ecuador subsidiary. As of December 31, 2011, the cumulative amount of undistributed earnings of the foreign subsidiaries on which the Company has not recognized income taxes was approximately $293,000. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation.

 

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, 2010 and 2011 consisted of the following:

 

                 
    December 31,  
    2010     2011  

Deferred liabilities:

               

Theatre properties and equipment

  $ 101,162     $ 92,466  

Deferred intercompany sales

    12,905       12,051  

Intangible asset — other

    23,872       24,749  

Intangible asset — tradenames

    112,720       116,333  

Investment in partnerships

    56,732       98,742  
   

 

 

   

 

 

 

Total deferred liabilities

    307,391       344,341  
   

 

 

   

 

 

 

Deferred assets:

               

Deferred lease expenses

    21,333       23,225  

Theatre properties and equipment

    14,152       5,910  

Deferred revenue — NCM and Fandango

    84,206       88,616  

Capital lease obligations

    51,294       51,211  

Interest rate swap agreements

    (606     5,882  

Tax loss carryforwards

    8,847       10,602  

Alternative minimum tax and other credit carryforwards

    9,076       7,548  

Other expenses, not currently deductible for tax purposes

    13,320       23,750  
   

 

 

   

 

 

 

Total deferred assets

    201,622       216,744  
   

 

 

   

 

 

 

Net deferred income tax liability before valuation allowance

    105,769       127,597  

Valuation allowance against deferred assets

    15,425       15,443  
   

 

 

   

 

 

 

Net deferred income tax liability

  $ 121,194     $ 143,040  
   

 

 

   

 

 

 

Net deferred tax liability — Foreign

  $ 6,807     $ 10,757  

Net deferred tax liability — U.S.

    114,387       132,283  
   

 

 

   

 

 

 

Total

  $ 121,194     $ 143,040  
   

 

 

   

 

 

 

The Company’s foreign tax credit carryforwards begin expiring in 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 2029.

 

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, 2009, 2010 and 2011:

 

                         
    Year Ended December 31,  
    2009     2010     2011  

Balance at January 1,

  $ 13,976     $ 23,857     $ 15,197  

Gross increases-tax positions in prior periods

    2,274       —         3,153  

Gross decreases-tax positions in prior periods

    —         (1,392     —    

Gross increases — current period tax positions

    7,845       3,551       3,729  

Gross decreases — current period tax positions

    (622     (613     (633

Settlements

    —         (10,383     (2,467

Foreign currency translation adjustments

    384       177       (319
   

 

 

   

 

 

   

 

 

 

Balance at December 31,

  $ 23,857     $ 15,197     $ 18,660  
   

 

 

   

 

 

   

 

 

 

The Company had $19,788 and $22,411 of gross unrecognized tax benefits, including interest and penalties, as of December 31, 2010 and December 31, 2011, respectively. Of these amounts, $14,339 and $16,274 represent the amount of unrecognized tax benefits that if recognized would impact the effective income tax rate for the years ended December 31, 2010 and 2011, respectively. The Company had $4,591 and $3,751 accrued for interest and penalties as of December 31, 2010 and 2011, respectively.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and multiple state and foreign jurisdictions, and the Company is 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 2007. The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2007. Certain state returns were amended as a result of the Internal Revenue Service examination closures for 2002 through 2006, 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 examination by the Internal Revenue Service for the 2007, 2008 and 2009 tax years. We do not believe that these audits will be completed within the next twelve months.