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  
Income Taxes

(13)  Income Taxes

 

The Company’s income tax expense consists of the following (amounts in thousands):

 

 

 

Year Ended December 31,

 

 

 

2013

 

2012

 

2011

 

Current:

 

 

 

 

 

 

 

Federal

 

$

 

 

 

State

 

2,827

 

2,198

 

2,201

 

 

 

2,827

 

2,198

 

2,201

 

Deferred:

 

 

 

 

 

 

 

Federal

 

(2,407

)

406

 

353

 

State

 

3,597

 

15

 

10

 

 

 

1,190

 

421

 

363

 

Total income tax expense

 

$

4,017

 

2,619

 

2,564

 

 

Income tax expense differs from the amounts computed by applying the United States federal income tax rate of 35% as a result of the following (amounts in thousands):

 

 

 

Year Ended December 31,

 

 

 

2013

 

2012

 

2011

 

 

 

 

 

 

 

 

 

Computed expected tax benefit

 

$

(4,762

)

(4,955

)

(1,468

)

State and local income taxes, net of federal income taxes

 

4,176

 

1,438

 

1,437

 

Change in valuation allowance affecting tax expense

 

2,696

 

5,538

 

2,462

 

Non-deductible expenses

 

426

 

191

 

208

 

Amortization of indefinite-lived assets

 

1,481

 

431

 

155

 

Other, net

 

 

(24

)

(230

)

Income tax expense

 

$

4,017

 

2,619

 

2,564

 

 

Components of deferred tax assets and liabilities as of December 31 are as follows (amounts in thousands):

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Allowance for doubtful accounts

 

$

1,072

 

$

505

 

Accrued liabilities

 

8,921

 

6,160

 

Other

 

 

29

 

Total current deferred tax assets

 

9,993

 

6,694

 

Valuation allowance

 

(1,463

)

(1,567

)

Current deferred tax assets, net

 

8,530

 

5,127

 

 

 

 

 

 

 

Noncurrent assets:

 

 

 

 

 

Net operating loss carryforwards

 

108,504

 

75,181

 

Derivative financial instruments

 

 

4,308

 

Business credits

 

1,495

 

1,524

 

Other

 

2,464

 

1,014

 

Total noncurrent deferred tax assets

 

112,463

 

82,027

 

Valuation allowance

 

(16,161

)

(17,107

)

Noncurrent deferred tax asset, net

 

96,302

 

64,920

 

Total deferred tax assets, net

 

104,832

 

70,047

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

Intangible assets

 

(110,164

)

(70,634

)

Property, plant and equipment

 

(3,692

)

(3,135

)

Other

 

(25

)

 

Total deferred tax liabilities

 

(113,881

)

(73,769

)

Net deferred tax liabilities

 

$

(9,049

)

$

(3,722

)

 

The Company’s deferred tax assets and liabilities are reported in the accompanying consolidated balance sheets as follows (amounts in thousands):

 

 

 

December 31,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Current deferred tax assets, net

 

$

8,530

 

$

5,127

 

Long-term deferred tax liabilities, net

 

(17,579

)

(8,849

)

Net deferred tax assets (liabilities)

 

$

(9,049

)

$

(3,722

)

 

For the year ended December 31, 2013, the valuation allowance decreased by $1,050,000.  The change in the valuation allowance is attributable to an increase of $2,696,000 related to income tax expense, which includes the impact of a reduction of the Company’s valuation allowance of $3,887,000 in connection with the acquisition of Security Networks, offset by a decrease of $4,334,000 related to changes in the derivative fair values recorded in other comprehensive income and a decrease in other deferred tax liabilities of $588,000.

 

As of December 31, 2013, the Company had $305,551,000 of federal net operating loss carryforwards, which begin to expire, if unused, in 2024. Approximately $130,367,000 of the Company’s federal net operating losses are subject to IRC Section 382 limitations.  In addition, the Company had available for federal income tax purposes an alternative minimum tax credit carryforward of $426,000, which is available for an indefinite period. As of December 31, 2013, the Company had available for state income tax purposes net operating loss carryforwards of $98,581,000 and state tax credits of $1,070,000, the latter of which will expire in 2026.

 

As of December 31, 2013, the Company’s federal income tax returns for the 2010 through 2012 tax years remain subject to examination by the IRS and state authorities.  The Company’s state income tax returns subsequent to 2008 are subject to examination by state tax authorities.

 

A reconciliation of the beginning and ending amount of uncertain tax positions, which is recorded in other long term liabilities, is as follows (amounts in thousands):

 

 

 

Year Ended December 31,

 

 

 

2013

 

2012

 

2011

 

As of the beginning of the year

 

$

247

 

247

 

207

 

Increases for tax positions of current years

 

 

 

40

 

As of the end of the year

 

$

247

 

247

 

247

 

 

When the tax law requires interest to be paid on an underpayment of income taxes, the Company recognizes interest expense from the first period the interest would begin accruing according to the relevant tax law. Any accrual of interest and penalties related to underpayment of income taxes on uncertain tax positions is included in Income tax expense from continuing operations in the accompanying consolidated statements of operations. As of December 31, 2013 accrued interest and penalties related to uncertain tax positions were approximately $55,000.  The Company does not expect a significant change in uncertain tax positions in the next twelve months.