Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
12 Months Ended
Dec. 31, 2013
Income Taxes
20. INCOME TAXES

Income before income taxes consisted of the following:

 

     Year Ended December 31,  
     2011      2012      2013  

Income before income taxes:

        

U.S.

   $ 114,692       $ 183,207       $ 162,687   

Foreign

     90,940         113,611         101,177   
  

 

 

    

 

 

    

 

 

 

Total

   $ 205,632       $ 296,818       $ 263,864   
  

 

 

    

 

 

    

 

 

 

 

Current and deferred income taxes were as follows:

 

     Year Ended December 31,  
     2011     2012     2013  

Current:

      

Federal

   $ 17,070      $ 55,399      $ 97,467   

Foreign

     26,830        53,964        42,690   

State

     7,099        8,494        10,951   
  

 

 

   

 

 

   

 

 

 

Total current expense

     50,999        117,857        151,108   
  

 

 

   

 

 

   

 

 

 

Deferred:

      

Federal

     22,100        12,096        (30,833

Foreign

     (2,332     (6,007     2,653   

State

     2,283        1,452        (9,612
  

 

 

   

 

 

   

 

 

 

Total deferred taxes

     22,051        7,541        (37,792
  

 

 

   

 

 

   

 

 

 

Income taxes

   $ 73,050      $ 125,398      $ 113,316   
  

 

 

   

 

 

   

 

 

 

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,  
     2011     2012     2013  

Computed normal tax expense

   $ 71,972      $ 103,886      $ 92,353   

Foreign inflation adjustments

     (1,587     (33     67   

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

     7,310        7,456        789   

Foreign losses not benefited and other changes in valuation allowance

     (676     (711     (2,052

Foreign tax rate differential

     (3,321     (1,545     (336

Foreign dividends

     4,173        10,576        3,294   

Sale of Mexican subsidiaries

                   21,406   

Changes in uncertain tax positions

     396        13,729        (2,024

Other — net

     (5,217     (7,960     (181
  

 

 

   

 

 

   

 

 

 

Income taxes

   $ 73,050      $ 125,398      $ 113,316   
  

 

 

   

 

 

   

 

 

 

The Company reinvests the undistributed earnings of its foreign subsidiaries, with the exception of its subsidiaries in Ecuador and Mexico. Accordingly, deferred U.S. federal and state income taxes are provided only on the undistributed earnings of the Company’s subsidiaries in Ecuador and Mexico. As of December 31, 2013, the cumulative amount of undistributed earnings of the foreign subsidiaries on which the Company has not recognized income taxes was approximately $299,000. 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, 2012 and 2013 consisted of the following:

 

     December 31,  
     2012      2013  

Deferred liabilities:

     

Theatre properties and equipment

   $ 96,733       $ 126,794   

Deferred intercompany sales

     14,551         12,398   

Intangible asset — other

     23,944         25,761   

Intangible asset — tradenames

     115,939         122,129   

Investment in partnerships

     113,199         113,038   
  

 

 

    

 

 

 

Total deferred liabilities

     364,366         400,120   
  

 

 

    

 

 

 

Deferred assets:

     

Deferred lease expenses

     27,255         27,811   

Theatre properties and equipment

     5,884         —     

Deferred revenue—NCM and Fandango

     90,972         124,408   

Capital lease obligations

     54,551         79,064   

Interest rate swap agreements

     3,825         3,183   

Tax loss carryforwards

     7,700         7,653   

Alternative minimum tax and other credit carryforwards

     6,405         20,725   

Other expenses, not currently deductible for tax purposes

     30,724         33,307   
  

 

 

    

 

 

 

Total deferred assets

     227,316         296,151   
  

 

 

    

 

 

 

Net deferred income tax liability before valuation allowance

     137,050         103,969   

Valuation allowance against deferred assets

     13,326         25,711   
  

 

 

    

 

 

 

Net deferred income tax liability

   $ 150,376       $ 129,680   
  

 

 

    

 

 

 

Net deferred tax liability — Foreign

   $ 2,488       $ 21,729   

Net deferred tax liability — U.S.

     147,888         107,951   
  

 

 

    

 

 

 

Total

   $ 150,376       $ 129,680   
  

 

 

    

 

 

 

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, 2011, 2012 and 2013:

 

     Year Ended December 31,  
     2011     2012     2013  

Balance at January 1,

   $ 15,197      $ 18,660      $ 33,222   

Gross increases — tax positions in prior periods

     3,153        14,462        413   

Gross decreases — tax positions in prior periods

     —          (3,321     —     

Gross increases — current period tax positions

     3,729        3,672        1,476   

Gross decreases — current period tax positions

     (633     —          —     

Settlements

     (2,467     —          (15,444

Foreign currency translation adjustments

     (319     (251     (887
  

 

 

   

 

 

   

 

 

 

Balance at December 31,

   $ 18,660      $ 33,222      $ 18,780   
  

 

 

   

 

 

   

 

 

 

The Company had $34,475 and $20,130 of unrecognized tax benefits, including interest and penalties, as of December 31, 2012 and 2013, respectively. Of these amounts, $30,085 and $17,909 represent the amount of unrecognized tax benefits that if recognized would impact the effective income tax rate for the years ended December 31, 2012 and 2013, respectively. The Company had $4,576 and $4,671 accrued for interest and penalties as of December 31, 2012 and 2013, 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 2010. The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2009. 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 audit in the non-U.S. tax jurisdictions of Brazil and Chile. It is not expected that these audits will close in the next 12 months.