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INCOME TAXES | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
INCOME TAXES | 14. INCOME TAXES The components of pretax (loss) income from continuing operations for the years ended December 31, 2013, 2012 and 2011 are as follows (dollars in thousands):
|  | For the Year Ended December 31, |
|  | 2013 |  |  | 2012 |  |  | 2011 |
U.S |  | $ | (221,862 | ) |  | $ | (192,229 | ) |  | $ | 16,612 |
Foreign |  |  | 522 |  |  |  | (3,876 | ) |  |  | (2,866 | )
Total |  | $ | (221,340 | ) |  | $ | (196,105 | ) |  | $ | 13,746 |
The (benefit from) provision for income taxes from continuing operations for the years ended December 31, 2013, 2012 and 2011 consists of the following (dollars in thousands):
|  | For the Year Ended December 31, |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Current (benefit) provision |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (57,641 | ) |  | $ | (4,268 | ) |  | $ | 9,637 |
State and local |  |  | (2,509 | ) |  |  | 1,080 |  |  |  | 1,742 |
Foreign |  |  | 289 |  |  |  | (3,075 | ) |  |  | (1,225 | )
Total current (benefit) provision |  |  | (59,861 | ) |  |  | (6,263 | ) |  |  | 10,154 |
Deferred (benefit) provision |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 39,312 |  |  |  | (39,242 | ) |  |  | 26,904 |
State and local |  |  | 1,137 |  |  |  | (1,856 | ) |  |  | 5,346 |
Foreign |  |  | (260 | ) |  |  | 211 |  |  |  | 53 |
Total deferred (benefit) provision |  |  | 40,189 |  |  |  | (40,887 | ) |  |  | 32,303 |
Total (benefit from) provision for income taxes |  | $ | (19,672 | ) |  | $ | (47,150 | ) |  | $ | 42,457 |
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, 2013, 2012 and 2011 is as follows (dollars in thousands):
|  | For the Year Ended December 31, |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Statutory U.S. federal income tax rate |  |  | (35.0 | )% |  |  | (35.0 | )% |  |  | 35.0 | %
State and local income taxes |  |  | (3.4 | ) |  |  | (3.3 | ) |  |  | 2.7 |
Nondeductible goodwill |  |  | — |  |  |  | 14.4 |  |  |  | 351.2 |
Valuation allowance |  |  | 32.6 |  |  |  | 2.4 |  |  |  | 2.0 |
Foreign taxes |  |  | (0.5 | ) |  |  | — |  |  |  | — |
Tax credits |  |  | (0.8 | ) |  |  | — |  |  |  | (24.6 | )
Worthless stock |  |  | — |  |  |  | — |  |  |  | (11.2 | )
Other |  |  | (1.8 | ) |  |  | (2.5 | ) |  |  | (46.2 | )
Effective income tax rate |  |  | (8.9 | )% |  |  | (24.0 | )% |  |  | 308.9 | %
The effective tax rate for the year ended December 31, 2013 decreased by 32.6% due to a $72.2 million valuation allowance being recorded in the current year. The 2013 effective tax rate benefited from the settlement of various state income tax audits and reversal of one of our foreign operations as a disregarded entity which increased the effective tax rate by 3.9%. The effective income tax rate for the year ended December 31, 2012 included a $73.6 million non-deductible goodwill and asset impairment charge which decreased our negative effective tax rate by approximately 14.4%. 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 2.5%. The effective tax rate for the year ended December 31, 2011 increased by approximately 351.2% 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 46.1%. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits as of December 31, 2013, 2012 and 2011 is as follows (dollars in thousands):
|  | 2013 |  |  | 2012 |  |  | 2011 |
Gross unrecognized tax benefits, beginning of the year |  | $ | 24,479 |  |  | $ | 29,892 |  |  | $ | 28,316 |
Additions for tax positions of prior years |  |  | 3,582 |  |  |  | — |  |  |  | 1,894 |
Reductions for tax positions of prior years |  |  | — |  |  |  | (3,548 | ) |  |  | (1,748 | )
Additions for tax positions related to the current year |  |  | 813 |  |  |  | 958 |  |  |  | 2,764 |
Reductions due to settlements |  |  | (13,707 | ) |  |  | (2,531 | ) |  |  | (690 | )
Reductions due to lapse of applicable statute of limitations |  |  | (1,267 | ) |  |  | (292 | ) |  |  | (644 | )
Subtotal |  |  | 13,900 |  |  |  | 24,479 |  |  |  | 29,892 |
Interest and penalties |  |  | 3,107 |  |  |  | 3,794 |  |  |  | 4,532 |
Total gross unrecognized tax benefits, end of the year |  | $ | 17,007 |  |  | $ | 28,273 |  |  | $ | 34,424 |
The total amount of net unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods was $12.7 million and $18.8 million for the years ended December 31, 2013 and 2012, respectively. At December 31, 2013, 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 $0.7 million and $13.2 million, respectively. We record interest and penalties related to unrecognized tax benefits within (benefit from) provision for income taxes on our consolidated statements of (loss) income and comprehensive (loss) income. The total amount of accrued interest and penalties resulting from such unrecognized tax benefits was $3.1 million and $3.8 million as of the years ended December 31, 2013 and 2012, respectively. For the years ended December 31, 2013, 2012, and 2011, we recognized $0.7 million of benefit, $0.5 million of benefit and $0.6 million of expense, respectively, related to interest and penalties from unrecognized tax benefits in our consolidated results of continuing operations. 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, 2013, CEC had been examined by the Internal Revenue Service through our tax year ending December 31, 2007. In addition, a number of federal, 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 and state 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 $1.1 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, 2013 and 2012 are as follows (dollars in thousands):
|  | December 31, |
|  | 2013 |  |  | 2012 |
Deferred income tax assets: |  |  |  |  |  |  |  |
Accrued occupancy |  | $ | 4,001 |  |  | $ | 3,526 |
Deferred rent obligations |  |  | 16,213 |  |  |  | 17,160 |
Foreign tax credits |  |  | 12,026 |  |  |  | 22,267 |
Valuation allowance foreign tax credits |  |  | (3,116 | ) |  |  | (607 | )
Compensation and employee benefits |  |  | 18,001 |  |  |  | 13,946 |
Tax net operating loss carry forwards |  |  | 7,220 |  |  |  | 5,454 |
Valuation allowance |  |  | (7,220 | ) |  |  | (5,100 | )
Allowance for doubtful accounts |  |  | 1,668 |  |  |  | 2,141 |
Covenant not-to-compete |  |  | 80 |  |  |  | 117 |
Accrued settlements and legal |  |  | 7,713 |  |  |  | 1,887 |
Deferred compensation |  |  | 498 |  |  |  | 130 |
Accrued restructuring and severance |  |  | 2,057 |  |  |  | 2,332 |
Depreciation and amortization |  |  | 11,655 |  |  |  | — |
Other |  |  | 1,711 |  |  |  | 1,980 |
Valuation allowance deferred tax assets |  |  | (54,193 | ) |  |  | — |
Total deferred income tax assets |  |  | 18,314 |  |  |  | 65,233 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | — |  |  |  | 5,523 |
Other |  |  | 4,064 |  |  |  | 5,273 |
Total deferred income tax liabilities |  |  | 4,064 |  |  |  | 10,796 |
Net deferred income tax assets |  | $ | 14,250 |  |  | $ | 54,437 |
Net deferred income tax assets for continuing operations as of December 31, 2013 and 2012 are reflected in the consolidated balance sheets as follows (dollars in thousands):
|  | December 31, |
|  | 2013 |  |  | 2012 |
Current deferred income tax assets, net |  | $ | 3,606 |  |  | $ | 7,088 |
Non-current deferred income tax assets, net |  |  | 10,644 |  |  |  | 47,349 |
Net deferred income tax assets |  | $ | 14,250 |  |  | $ | 54,437 |
As of December 31, 2013, we have net operating loss carry forwards, for state income tax purposes, of approximately $187.7 million. These net operating loss carry forwards are available to offset various future state taxable income, if any, and expire between 2014 and 2033. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. Topic 740 provides that important factors in determining whether a deferred tax asset will be realized are whether there has been sufficient taxable income in recent years and whether sufficient taxable income is expected in future years in order to utilize the deferred tax asset. In evaluating the realizability of deferred income tax assets, we consider, among other things, historical levels of taxable income along with possible sources of future taxable income, which include: the expected timing of the reversals of existing temporary reporting differences, the existence of taxable income in prior carryback year(s), the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits and expected future taxable income. Changes in, among other things, income tax legislation, statutory income tax rates, or future taxable income levels could materially impact our valuation of income tax assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods. If, based on the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, with placing less weight on projections for future growth as projections for future growth are less objectively verifiable, we record a valuation allowance. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. A high degree of judgment is required to determine if, and the extent to which, valuation allowances should be recorded against deferred tax assets. A significant piece of objective negative evidence evaluated is the cumulative loss incurred over the three-year period ended December 31, 2013. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth as projections for future growth into the future are less objectively verifiable. As a result of our assessment, as of December 31, 2013, a valuation allowance of $72.2 million has been recorded. The valuation allowance expense of $72.2 million was recorded within loss from continuing operations on our statement of (loss) income and comprehensive (loss) income in the current year; $18.0 million of this expense is related to assets from discontinued operations to reduce the deferred tax assets recorded within discontinued operations as of December 31, 2013. Our total valuation allowance of $82.5 million recorded within our consolidated balance sheet as of December 31, 2013 consists of $72.2 million, of which $18.0 million is recorded within our discontinued operations balance sheet as well as $3.1 million and $7.2 million recorded for foreign tax credits and net operating loss carryforwards, respectively. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased, if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. We will continue to evaluate our valuation allowance in future years for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset. See Note 5 “Discontinued Operations” of the notes to our consolidated financial statements for income tax expense disclosures related to the sale of our International Segment.

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- 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 Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 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=26873400&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 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: 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 6: 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
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