v3.3.1.900

INCOME TAXES | 12 Months Ended
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Dec. 31, 2015
INCOME TAXES |
INCOME TAXES | NOTE 9—INCOME TAXES The Income tax provision reflected in the Consolidated Statements of Operations consists of the following components:
(In thousands) |  | 12 Months Ended December 31, 2015 |  | 12 Months Ended December 31, 2014 |  | 12 Months Ended December 31, 2013 |
Current: |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 10,278 |  | $ | — |  | $ | — |
Foreign |  |  | — |  |  | — |  |  | — |
State |  |  | (2,263 | ) |  | 1,250 |  |  | 4,045 |
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Total current |  |  | 8,015 |  |  | 1,250 |  |  | 4,045 |
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Deferred: |  |  |  |  |  |  |  |  |  |
Federal |  |  | 46,935 |  |  | 43,869 |  |  | (229,778 | )
Foreign |  |  | — |  |  | — |  |  | — |
State |  |  | 4,725 |  |  | (11,439 | ) |  | (36,820 | )
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Total deferred |  |  | 51,660 |  |  | 32,430 |  |  | (266,598 | )
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Total provision (benefit) |  |  | 59,675 |  |  | 33,680 |  |  | (262,553 | )
Tax provision from discontinued operations |  |  | — |  |  | 210 |  |  | 830 |
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Total provision (benefit) from continuing operations |  | $ | 59,675 |  | $ | 33,470 |  | $ | (263,383 | )
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The Company has recorded no alternative minimum taxes as the consolidated tax group for which it is a member expects no alternative minimum tax liability, due to the utilization of tax credits. Pre-tax income (losses) consisted of the following:
(In thousands) |  | 12 Months Ended December 31, 2015 |  | 12 Months Ended December 31, 2014 |  | 12 Months Ended December 31, 2013 |
Domestic |  | $ | 163,531 |  | $ | 97,303 |  | $ | 103,526 |
Foreign |  |  | — |  |  | 457 |  |  | (1,679 | )
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Total |  | $ | 163,531 |  | $ | 97,760 |  | $ | 101,847 |
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The difference between the effective tax rate on earnings from continuing operations before income taxes and the U.S. federal income tax statutory rate is as follows:
(In thousands) |  | 12 Months Ended December 31, 2015 |  | 12 Months Ended December 31, 2014 |  | 12 Months Ended December 31, 2013 |
Income tax expense at the federal statutory rate |  | $ | 57,237 |  | $ | 34,035 |  | $ | 34,902 |
Effect of: |  |  |  |  |  |  |  |  |  |
State income taxes |  |  | 6,180 |  |  | 195 |  |  | 1,479 |
Increase (decrease) in reserve for uncertain tax positions |  |  | (1,031 | ) |  | 1,050 |  |  | 2,193 |
Federal and state credits |  |  | (2,686 | ) |  | (2,985 | ) |  | (2,600 | )
Change in net operating loss carryforward for excess tax deductions |  |  | — |  |  | — |  |  | (28,206 | )
Permanent items |  |  | 101 |  |  | 1,485 |  |  | 537 |
Other |  |  | 155 |  |  | (1,100 | ) |  | (6,088 | )
Valuation allowance |  |  | (281 | ) |  | 790 |  |  | (265,600 | )
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Income tax expense (benefit) |  | $ | 59,675 |  | $ | 33,470 |  | $ | (263,383 | )
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Effective income tax rate |  |  | 36.5 | % |  | 34.4 | % |  | (264.1 | )%
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The significant components of deferred income tax assets and liabilities as of December 31, 2015 and December 31, 2014 are as follows:
|  | December 31, 2015 |  | December 31, 2014 |
|  | Deferred Income Tax |  | Deferred Income Tax |
(In thousands) |  | Assets |  | Liabilities |  | Assets |  | Liabilities |
Tangible assets |  | $ | — |  | $ | (131,793 | ) | $ | — |  | $ | (113,456 | )
Accrued liabilities |  |  | 28,390 |  |  | — |  |  | 31,430 |  |  | — |
Intangible assets |  |  | — |  |  | (121,495 | ) |  | — |  |  | (101,725 | )
Receivables |  |  | — |  |  | (5,264 | ) |  | — |  |  | (5,206 | )
Investments |  |  | — |  |  | (230,568 | ) |  | — |  |  | (233,005 | )
Capital loss carryforwards |  |  | — |  |  | — |  |  | 50 |  |  | — |
Pension, postretirement and deferred compensation |  |  | 38,183 |  |  | — |  |  | 33,581 |  |  | — |
Corporate borrowings |  |  | — |  |  | — |  |  | 19,127 |  |  | — |
Deferred revenue |  |  | 179,133 |  |  | — |  |  | 154,583 |  |  | — |
Lease liabilities |  |  | 135,215 |  |  | — |  |  | 111,250 |  |  | — |
Capital and financing lease obligations |  |  | 33,130 |  |  | — |  |  | 35,654 |  |  | — |
Alternative minimum tax and other credit carryovers |  |  | 17,520 |  |  | — |  |  | 21,802 |  |  | — |
Charitable contributions |  |  | — |  |  | — |  |  | 158 |  |  | — |
Net operating loss carryforwards |  |  | 183,961 |  |  | — |  |  | 228,302 |  |  | — |
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Total |  | $ | 615,532 |  | $ | (489,120 | ) | $ | 635,937 |  | $ | (453,392 | )
Less: Valuation allowance |  |  | (509 | ) |  | — |  |  | (790 | ) |  | — |
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Net deferred income taxes |  | $ | 615,023 |  | $ | (489,120 | ) | $ | 635,147 |  | $ | (453,392 | )
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A rollforward of the Company's valuation allowance for deferred tax assets is as follows:
(In thousands) |  | Balance at Beginning of Period |  | Additions Charged (Credited) to Expenses |  | Charged (Credited) to Goodwill |  | Charged (Credited) to Other Accounts(1) |  | Balance at End of Period |
Calendar Year 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Valuation allowance—deferred income tax assets |  | $ | 790 |  |  | (281 | ) |  | — |  |  | — |  | $ | 509 |
Calendar Year 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Valuation allowance—deferred income tax assets |  | $ | — |  |  | 790 |  |  | — |  |  | — |  | $ | 790 |
Calendar Year 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Valuation allowance—deferred income tax assets |  | $ | 248,420 |  |  | (265,600 | ) |  | 11,088 |  |  | 6,092 |  | $ | — |
(1) | Primarily relates to amounts resulting from the Company's tax sharing arrangement, changes in deferred tax assets and associated valuation allowance that are not related to income statement activity as well as amounts charged to other comprehensive income.
During the twelve months ended December 31, 2015, the Company received a favorable state ruling that resulted in a reduction of uncertain tax positions and, as a result, the Company recorded a net discrete tax benefit of approximately $2,900,000. The $2,900,000 consisted of $2,100,000 net discrete benefit for reduction of uncertain tax positions and $800,000 related to establishing a receivable for amounts previously paid. During the twelve months ended December 31, 2015, the Company received a notice of proposed adjustment from the Internal Revenue Service based upon its ongoing review of the Company's tax return for the fiscal period ended March 29, 2012. As a result of this notification, the Company recorded a net discrete tax provision of $1,000,000 for interest on the proposed adjustment ($610,000 net of tax), reinstated approximately $9,200,000 of deferred tax assets and recorded current interest and taxes payable of $10,200,000. The Company's federal income tax loss carryforward of $542,102,000 will begin to expire in 2017 and will completely expire in 2034 and will be limited annually due to certain change in ownership provisions of the Internal Revenue Code. The Company also has state income tax loss carryforwards of $321,105,000, which may be used over various periods ranging from 1 to 20 years. From 2008 to 2012, prior to Wanda acquiring Holdings, the Company's entity generated significant net deferred tax assets primarily from debt carrying costs and asset impairments combined with reduced operating profitability. At December 31, 2015 and December 31, 2014, the Company recorded net deferred tax assets of $126,198,000 and $181,782,000, respectively. The Company evaluates its deferred tax assets each period to determine if a valuation allowance is required based on whether it is "more likely than not" that some portion of the deferred tax assets would not be realized. The ultimate realization of these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods. The Company conducts its evaluation by considering all available positive and negative evidence. This evaluation considers, among other factors, historical operating results, forecasts of future profitability, the duration of statutory carryforward periods, and the outlooks for the U.S. motion picture and broader economy. Based on the Company's evaluation through December 31, 2015, the Company continued to reserve a portion of its net deferred tax assets due to uncertainty of their realization and dependence upon future taxable income. Consistent with the above process, the Company evaluated the need for a valuation allowance against its net deferred tax assets at December 31, 2013, and determined that the valuation allowance against its federal deferred tax assets and all of its state deferred tax assets dependent upon future taxable income was no longer appropriate. Accordingly, the Company reversed $265,600,000 of valuation allowance in the fourth quarter of 2013. This reversal is reflected as a non-cash income tax benefit recorded in the fourth quarter of 2013 in the accompanying consolidated statements of operations. In addition, AMCE utilized a portion of proceeds from the public offering of Holdings common stock during 2013 along with cash generated from an offering of 5.875% Senior Subordinated Notes due 2022 to purchase approximately 77.33% of its 8.75% Senior Notes due 2019, which lowered the amount of indebtedness and lower overall borrowing costs for the Company. These subsequent events also were additional positive evidence considered by management. The Company has identified a prudent and feasible tax planning strategy which involves the conversion of NCM units into NCM, Inc. common stock that, when executed, generates significant taxable income. The conversion is within the control of the Company and the Company executes the conversion when it becomes necessary to prevent its net operating loss and / or capital loss carryforwards from expiring unrealized. On December 30, 2015, the Company converted 200,000 of its NCM units to NCM, Inc. shares and recognized approximately $4,600,000 of capital gain pursuant to the tax planning strategy described above. See Note 5—Investments for additional information. The accounting for deferred taxes is based upon an estimate of future results. Differences between estimated and actual results could have a material impact on the Company's consolidated results of operations, its financial position and the ability to fully realize its deferred tax assets over time. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time. If future results are significantly different from the Company's estimates and judgments, the Company may be required to record a valuation allowance against some or all of its deferred tax assets prospectively. A reconciliation of the change in the amount of unrecognized tax benefits was as follows:
(In millions) |  | 12 Months Ended December 31, 2015 |  | 12 Months Ended December 31, 2014 |  | 12 Months Ended December 31, 2013 |
Balance at beginning of period |  | $ | 30.5 |  | $ | 27.4 |  | $ | 21.9 |
Gross increases—current period tax positions |  |  | 1.7 |  |  | 1.6 |  |  | 3.8 |
Gross increases—prior period tax positions |  |  | 1.1 |  |  | 1.5 |  |  | 2.2 |
Favorable resolutions with authorities |  |  | (2.2 | ) |  | — |  |  | (0.5 | )
Lapse of statute of limitations |  |  | (1.0 | ) |  | — |  |  | — |
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Balance at end of period |  | $ | 30.1 |  | $ | 30.5 |  | $ | 27.4 |
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The Company's effective tax rate is not expected to be significantly impacted by the ultimate resolution of the uncertain tax positions. The Company recognizes income tax-related interest expense and penalties as income tax expense and general and administrative expense, respectively. The amount of interest expense related to federal uncertain tax positions recognized for the year ended December 31, 2015 was $1,000,000. The Company analyzed and reviewed the remaining state uncertain tax positions to determine the necessity of accruing interest and penalties. The amount of interest to be accrued was immaterial in nature, due to jurisdictions with uncertain tax positions having overpayments to the Company or the amount of the uncertain tax position itself was small in nature. There are currently unrecognized tax benefits which the Company anticipates will be resolved in the next 12 months; however, the Company is unable at this time to estimate what the impact on its unrecognized tax benefits will be. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. An IRS examination of the tax years February 28, 2002 through December 31, 2003 of the former Loews Cineplex Entertainment Corporation and subsidiaries was concluded during fiscal 2007. An IRS examination for the tax years ended March 31, 2005 and March 30, 2006 was completed during 2009. Generally, tax years beginning after March 28, 2002 are still open to examination by various taxing authorities. Additionally, the Company has net operating loss ("NOL") carryforwards for tax years ended October 31, 2000 through March 28, 2002 in the U.S. and various state jurisdictions which have carryforwards of varying lengths of time. These NOLs are subject to adjustment based on the statute of limitations applicable to the return in which they are utilized, not the year in which they are generated. Various state, local and foreign income tax returns are also under examination by taxing authorities. The Company does not believe that the outcome of any examination will have a material impact on its financial statements.

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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 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 2: 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 Reference 3: 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 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 + Details
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