XML 126 R20.htm IDEA: XBRL DOCUMENT
v2.4.0.6

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2012
INCOME TAXES | 14. INCOME TAXES The components of pretax income for the years ended December 31, 2012, 2011 and 2010 are as follows:
|  | For the Year Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | (Dollars in thousands) |
U.S |  | $ | (198,893 | ) |  | $ | 23,409 |  |  | $ | 223,124 |
Foreign |  |  | 17,181 |  |  |  | 20,070 |  |  |  | 19,494 |
Total |  | $ | (181,712 | ) |  | $ | 43,479 |  |  | $ | 242,618 |
The provision for income taxes from continuing operations for the years ended December 31, 2012, 2011 and 2010 consists of the following:
|  | For the Year Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | (Dollars in thousands) |
Current (benefit) provision |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (5,918 | ) |  | $ | 11,787 |  |  | $ | 85,405 |
State and local |  |  | 283 |  |  |  | 759 |  |  |  | 11,121 |
Foreign |  |  | 200 |  |  |  | 2,182 |  |  |  | 3,565 |
Total current (benefit) provision |  |  | (5,435 | ) |  |  | 14,728 |  |  |  | 100,091 |
Deferred (benefit) provision |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (39,650 | ) |  |  | 26,499 |  |  |  | (20,699 | )
State and local |  |  | (1,908 | ) |  |  | 5,319 |  |  |  | (516 | )
Foreign |  |  | 187 |  |  |  | 194 |  |  |  | 72 |
Total deferred (benefit) provision |  |  | (41,371 | ) |  |  | 32,012 |  |  |  | (21,143 | )
Total (benefit) provision for income taxes |  | $ | (46,806 | ) |  | $ | 46,740 |  |  | $ | 78,948 |
A reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate for continuing operations for the years ended December 31, 2012, 2011 and 2010 is as follows:
|  | For the Year Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Statutory U.S. federal income tax rate |  |  | (35.0 | )% |  |  | 35.0 | % |  |  | 35.0 | %
State and local income taxes |  |  | (3.8 | ) |  |  | 2.7 |  |  |  | 2.8 |
Nondeductible goodwill |  |  | 15.0 |  |  |  | 103.5 |  |  |  | — |
Valuation allowance |  |  | 2.7 |  |  |  | 0.1 |  |  |  | (0.3 | )
Foreign taxes |  |  | (2.3 | ) |  |  | (15.6 | ) |  |  | (1.3 | )
Tax credits |  |  | — |  |  |  | (10.5 | ) |  |  | (2.8 | )
Worthless stock |  |  | — |  |  |  | (3.0 | ) |  |  | — |
Other |  |  | (2.4 | ) |  |  | (4.7 | ) |  |  | (0.9 | )
Effective income tax rate |  |  | (25.8 | )% |  |  | 107.5 | % |  |  | 32.5 | %
The effective income tax rate for the year ended December 31, 2012 includes a $73.6 million non-deductible goodwill and asset impairment charge which decreased our negative effective tax rate by approximately 15.0%. The 2012 effective tax rate benefited from favorable tax adjustments related to the resolution of various state tax exposures and the expiration of the statute of limitations on other federal and state tax exposures which increased our negative effective tax rate by 2.6%. The effective tax rate for the year ended December 31, 2011 increased by approximately 103.5% due to $121.7 million of non-deductible goodwill and asset impairment charges. The 2011 effective tax rate benefited from both the conversion of a foreign operation to a disregarded entity for U.S. tax purposes and favorable tax credit adjustments which decreased the effective tax rate by 16.7%. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits as of December 31, 2012, 2011 and 2010 is as follows:
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | (Dollars in thousands) |
Gross unrecognized tax benefits, beginning of the year |  | $ | 29,892 |  |  | $ | 28,316 |  |  | $ | 29,357 |
Additions for tax positions of prior years |  |  | — |  |  |  | 1,894 |  |  |  | 1,518 |
Reductions for tax positions of prior years |  |  | (3,548 | ) |  |  | (1,748 | ) |  |  | (3,765 | )
Additions for tax positions related to the current year |  |  | 958 |  |  |  | 2,764 |  |  |  | 2,231 |
Reductions due to settlements |  |  | (2,531 | ) |  |  | (690 | ) |  |  | (810 | )
Reductions due to lapse of applicable statute of limitations |  |  | (292 | ) |  |  | (644 | ) |  |  | (215 | )
Subtotal |  |  | 24,479 |  |  |  | 29,892 |  |  |  | 28,316 |
Interest and penalties |  |  | 3,794 |  |  |  | 4,532 |  |  |  | 3,892 |
Total gross unrecognized tax benefits, end of the year |  | $ | 28,273 |  |  | $ | 34,424 |  |  | $ | 32,208 |
The total amount of net unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods was $18.8 million and $23.9 million for the years ended December 31, 2012 and 2011, respectively. At December 31, 2012, our short and long-term reserves, recorded within current accrued income taxes and other non-current liabilities, respectively, related to FASB’s interpretation No. 48 of ASC Topic 740-10, Accounting for Uncertainty in Income Taxes or (“FIN 48”), were $10.9 million and $13.6 million, respectively. We record interest and penalties related to unrecognized tax benefits within provision for income taxes on our consolidated statement of income and comprehensive income. The total amount of accrued interest and penalties resulting from such unrecognized tax benefits was $3.8 million and $4.5 million as of the years ended December 31, 2012 and 2011, respectively. For the year ended December 31, 2012, we recognized $0.5 million of benefit related to the reduction of interest and penalties from unrecognized tax benefits in our consolidated results of continuing operations. For the year ended December 31, 2011, we recognized expenses related to interest and penalties from unrecognized tax benefits of $0.6 million, and for the year ended December 31, 2010, our provision for income taxes included benefits of $0.7 million related to the reduction of interest and penalties from unrecognized tax benefits. CEC and its subsidiaries file income tax returns in the U.S. and in various state, local, and foreign jurisdictions. CEC and its subsidiaries are routinely examined by tax authorities in these jurisdictions. As of December 31, 2012, CEC had been examined by the Internal Revenue Service through our tax year ending December 31, 2007. In addition, a number of state and local examinations are currently ongoing. It is possible that these examinations may be resolved within twelve months. Due to the potential for resolution of federal, state and foreign examinations, and the expiration of various statutes of limitations, it is reasonably possible that CEC’s gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $11.5 million. Deferred income tax assets and liabilities result primarily from temporary differences in the recognition of various expenses for tax and financial statement purposes, and from the recognition of the tax benefits of net operating loss carry forwards. Components of deferred income tax assets and liabilities for continuing operations as of December 31, 2012 and 2011 are as follows:
|  | December 31, |
|  | 2012 |  |  | 2011 |
|  | (Dollars in thousands) |
Deferred income tax assets: |  |  |  |  |  |  |  |
Accrued occupancy |  | $ | 3,526 |  |  | $ | 1,675 |
Deferred rent obligations |  |  | 17,327 |  |  |  | 17,285 |
Foreign tax credits |  |  | 22,267 |  |  |  | — |
Valuation allowance foreign tax credits |  |  | (607 | ) |  |  | — |
Compensation and employee benefits |  |  | 13,946 |  |  |  | 17,418 |
Tax net operating loss carry forwards |  |  | 5,454 |  |  |  | 5,312 |
Valuation allowance |  |  | (5,100 | ) |  |  | (4,327 | )
Allowance for doubtful accounts |  |  | 2,150 |  |  |  | 5,151 |
Covenant not-to-compete |  |  | 117 |  |  |  | 210 |
Accrued settlements and legal |  |  | 1,887 |  |  |  | 2,767 |
Deferred compensation |  |  | 130 |  |  |  | 647 |
Accrued restructuring and severance |  |  | 2,332 |  |  |  | 1,138 |
Other |  |  | 1,988 |  |  |  | 4,332 |
Total deferred income tax assets |  |  | 65,417 |  |  |  | 51,608 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 4,974 |  |  |  | 32,189 |
Other |  |  | 5,281 |  |  |  | 5,909 |
Total deferred income tax liabilities |  |  | 10,255 |  |  |  | 38,098 |
Net deferred income tax assets |  | $ | 55,162 |  |  | $ | 13,510 |
Net deferred income tax assets for continuing operations as of December 31, 2012 and 2011 are reflected in the consolidated balance sheets as follows:
|  | December 31, |
|  | 2012 |  |  | 2011 |
|  | (Dollars in thousands) |
Current deferred income tax assets, net |  | $ | 7,092 |  |  | $ | 10,837 |
Non-current deferred income tax assets, net |  |  | 48,070 |  |  |  | 2,673 |
Net deferred income tax assets |  | $ | 55,162 |  |  | $ | 13,510 |
As of December 31, 2012, we have net operating loss carry forwards, for state income tax purposes, of approximately $125.3 million. These net operating loss carry forwards are available to offset various future state taxable income, if any, and expire between 2013 and 2032. As of December 31, 2012, foreign subsidiary earnings of approximately $128.2 million are considered permanently invested in those businesses. Accordingly, U.S. income taxes have not been provided on such foreign subsidiary earnings. A determination of the unrecognized deferred tax liability associated with permanently reinvested foreign subsidiary earnings is not practicable. In connection with our sale of the Istituto Marangoni schools in the fourth quarter of 2011, we repatriated earnings of approximately $39.0 million in the third quarter of 2012 as a result of the divesture of the asset. We do not anticipate paying any additional taxes on this repatriation. We currently have no further plans to repatriate cash and cash equivalents and short-term investments held by our foreign subsidiaries because we plan to reinvest such cash and cash equivalents and short-term investments to support our operations and continued growth plans outside the United States through funding of capital expenditures, acquisitions, operating expenses or other similar cash needs of these operations.

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration