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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | 13. INCOME TAXES The components of pretax loss from continuing operations for the years ended December 31, 2014, 2013 and 2012 are as follows (dollars in thousands):
|  | For the Year Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
U.S |  | $ | (72,504 | ) |  | $ | (88,103 | ) |  | $ | (64,913 | )
Foreign |  |  | — |  |  |  | 522 |  |  |  | (3,876 | )
Total |  | $ | (72,504 | ) |  | $ | (87,581 | ) |  | $ | (68,789 | )
The provision for (benefit from) income taxes from continuing operations for the years ended December 31, 2014, 2013 and 2012 consists of the following (dollars in thousands):
|  | For the Year Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Current (benefit) provision |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (10,168 | ) |  | $ | 31,010 |  |  | $ | 18,849 |
State and local |  |  | (346 | ) |  |  | 677 |  |  |  | 4,011 |
Total current (benefit) provision |  |  | (10,514 | ) |  |  | 31,687 |  |  |  | 22,860 |
Deferred provision (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 13,445 |  |  |  | 1,023 |  |  |  | (25,982 | )
State and local |  |  | 805 |  |  |  | (2,566 | ) |  |  | (826 | )
Total deferred provision (benefit) |  |  | 14,250 |  |  |  | (1,543 | ) |  |  | (26,808 | )
Total provision for (benefit from) income taxes |  | $ | 3,736 |  |  | $ | 30,144 |  |  | $ | (3,948 | )
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, 2014, 2013 and 2012 is as follows (dollars in thousands):
|  | For the Year Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Statutory U.S. federal income tax rate |  |  | (35.0 | )% |  |  | (35.0 | )% |  |  | (35.0 | )%
State and local income taxes |  |  | (4.3 | ) |  |  | (4.0 | ) |  |  | (4.1 | )
Nondeductible goodwill |  |  | 1.1 |  |  |  | 3.5 |  |  |  | 39.6 |
Valuation allowance |  |  | 39.0 |  |  |  | 86.2 |  |  |  | 2.4 |
Federal Audit Settlement |  |  | 4.5 |  |  |  | — |  |  |  | — |
Tax credits |  |  | — |  |  |  | (6.2 | ) |  |  | — |
Other |  |  | (0.1 | ) |  |  | (10.1 | ) |  |  | (8.6 | )
Effective income tax rate |  |  | 5.2 | % |  |  | 34.4 | % |  |  | (5.7 | )%
The effective tax rates for the years ended December 31, 2014 and 2013 decreased by 39.0% and 86.2%, respectively, due to valuation allowances of $71.8 million and $80.5 million, respectively. The 2014 effective tax rate was negatively impacted by the settlement of a federal income tax audit covering the years ended December 31, 2008 through December 31, 2012. The 2013 effective tax rate benefitted 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 13.2%. 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 39.6%. 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 6.8%. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits as of December 31, 2014, 2013 and 2012 is as follows (dollars in thousands):
|  | 2014 |  |  | 2013 |  |  | 2012 |
Gross unrecognized tax benefits, beginning of the year |  | $ | 13,900 |  |  | $ | 24,479 |  |  | $ | 29,892 |
Additions for tax positions of prior years |  |  | 129 |  |  |  | 3,582 |  |  |  | — |
Reductions for tax positions of prior years |  |  | — |  |  |  | — |  |  |  | (3,548 | )
Additions for tax positions related to the current year |  |  | 931 |  |  |  | 813 |  |  |  | 958 |
Reductions due to settlements |  |  | (4,064 | ) |  |  | (13,707 | ) |  |  | (2,531 | )
Reductions due to lapse of applicable statute of limitations |  |  | (1,578 | ) |  |  | (1,267 | ) |  |  | (292 | )
Subtotal |  |  | 9,318 |  |  |  | 13,900 |  |  |  | 24,479 |
Interest and penalties |  |  | 2,820 |  |  |  | 3,107 |  |  |  | 3,794 |
Total gross unrecognized tax benefits, end of the year |  | $ | 12,138 |  |  | $ | 17,007 |  |  | $ | 28,273 |
The total amount of net unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods was $8.0 million and $12.7 million for the years ended December 31, 2014 and 2013, respectively. At December 31, 2014, 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 $1.4 million and $7.9 million, respectively. We record interest and penalties related to unrecognized tax benefits within provision for (benefit from) income taxes on our consolidated statements of loss and comprehensive loss. The total amount of accrued interest and penalties resulting from such unrecognized tax benefits was $2.8 million and $3.1 million as of the years ended December 31, 2014 and 2013, respectively. For the years ended December 31, 2014, 2013, and 2012, we recognized less than $0.1 million of benefit, $0.7 million of benefit and $0.5 million of benefit, 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 and local jurisdictions. CEC and its subsidiaries are routinely examined by tax authorities in these jurisdictions. As of December 31, 2014, CEC had been examined by the Internal Revenue Service through our tax year ending December 31, 2012. In addition, a number of state and local examinations are currently ongoing. It is possible that these state examinations may be resolved within twelve months. Due to the potential for resolution of 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 $2.0 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, 2014 and 2013 are as follows (dollars in thousands):
|  | December 31, |
|  | 2014 |  |  | 2013 |
Deferred income tax assets: |  |  |  |  |  |  |  |
Accrued occupancy |  | $ | 1,728 |  |  | $ | 1,633 |
Deferred rent obligations |  |  | 9,248 |  |  |  | 10,095 |
Foreign tax credits |  |  | 32,998 |  |  |  | 12,026 |
Valuation allowance foreign tax credits |  |  | (6,264 | ) |  |  | (3,116 | )
Compensation and employee benefits |  |  | 14,225 |  |  |  | 17,947 |
Tax net operating loss carry forwards |  |  | 34,067 |  |  |  | 7,220 |
Valuation allowance |  |  | (34,067 | ) |  |  | (7,220 | )
Allowance for doubtful accounts |  |  | 2,269 |  |  |  | 1,201 |
Covenant not-to-compete |  |  | 37 |  |  |  | 70 |
Accrued settlements and legal |  |  | 828 |  |  |  | 1,904 |
Deferred compensation |  |  | 1,777 |  |  |  | 498 |
Accrued restructuring and severance |  |  | 1,070 |  |  |  | 2,057 |
Equity method for investments |  |  | 19 |  |  |  | — |
General business tax credits |  |  | 450 |  |  |  | — |
Depreciation and amortization |  |  | 142 |  |  |  | — |
Other |  |  | 822 |  |  |  | 1,575 |
Valuation allowance deferred tax assets |  |  | (55,995 | ) |  |  | (8,250 | )
Total deferred income tax assets |  |  | 3,354 |  |  |  | 37,640 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | — |  |  |  | 19,387 |
Other |  |  | 3,354 |  |  |  | 4,003 |
Total deferred income tax liabilities |  |  | 3,354 |  |  |  | 23,390 |
Net deferred income tax assets |  | $ | — |  |  | $ | 14,250 |
Net deferred income tax assets for continuing operations as of December 31, 2014 and 2013 are reflected in the consolidated balance sheets as follows (dollars in thousands):
|  | December 31, |
|  | 2014 |  |  | 2013 |
Current deferred income tax assets, net |  | $ | — |  |  | $ | 3,606 |
Non-current deferred income tax assets, net |  |  | — |  |  |  | 10,644 |
Net deferred income tax assets |  | $ | — |  |  | $ | 14,250 |
As of December 31, 2014, we have net operating loss carry forwards, for federal and state income tax purposes, of approximately $63.9 million and $247.9 million, respectively. These net operating loss carry forwards are available to offset various future taxable income, if any, and expire between 2015 and 2034. Additionally, we have federal and state net operating loss carrybacks approximating $97.5 million and $3.5 million, respectively. We intend to apply these carrybacks against prior year’s taxable income to generate a refund of federal and state tax of approximately $14.1 million and $0.2 million, respectively. The federal net operating loss carryback will also increase the overall domestic loss account balance by approximately $52.3 million and the foreign tax credit carryforward available to reduce the tax attributable to future domestic income by approximately $18.3 million. In assessing the continued 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, 2014. 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, 2014, we continued to record a valuation allowance against our deferred tax assets and increased our valuation allowance by $67.5 million, bringing our cumulative valuation allowance to $150.4 million as of December 31, 2014. Valuation allowance expense of $80.5 million was recorded during the year ended December 31, 2013 within loss from continuing operations on our statement of loss and comprehensive loss, which increased the cumulative valuation allowance to $82.9 million. For the year ended December 31, 2014, gross valuation allowance expense of $71.8 million is reduced by $4.3 million for various deferred tax adjustments that would otherwise impact Stockholder’s Equity. Our total valuation allowance of $150.4 million recorded within our consolidated balance sheet as of December 31, 2014 consists of $96.3 million in continuing operations and $54.1 million from discontinued operations. Included in the valuation allowance total for continuing operations are $6.3 million and $34.1 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 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.

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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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