XML 60 R18.htm IDEA: XBRL DOCUMENT v3.2.0.727
Income Taxes
6 Months Ended
Jun. 30, 2015
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 12. INCOME TAXES

The Company calculates its quarterly income tax provision in accordance with the guidance provided by ASC 740-270, “Interim Income Tax Accounting,” whereby the Company forecasts its estimated annual effective tax rate and then applies that rate to its year-to-date pre-tax book income (loss). Income tax expense for the three and six months ended June 30, 2015 was $14.6 million and $12.8 million, respectively. A discrete tax benefit of $2.8 million related to the loss on extinguishment of Convertible Notes was included in the provision for income taxes for the three and six months ended June 30, 2015. The provision for income taxes was higher than the tax computed at the U.S. federal statutory rate due primarily to state income taxes and non-deductible stock-based compensation. Income tax expense for both the three and six months ended June 30, 2014 was $1.6 million.

The effective tax rate was 36.1% for both the three and six months ended June 30, 2015. The effective tax rate was 3.3% and 4.3% for the three and six months ended June 30, 2014, respectively. The increase in the effective tax rate for the three and six months ended June 30, 2015 as compared to the prior year periods was due to the release of a portion of the valuation allowance during the fourth quarter of 2014.

The Company reduced its current Federal and state taxes payable by $13.6 million related to excess tax benefits from stock-based compensation, increasing additional paid-in capital. In addition, the Company recorded a credit to additional paid-in capital of $4.4 million related to certain tax impacts of the extinguishment of Convertible Notes.

The Company records a valuation allowance to reduce deferred tax assets to reflect the net amount that is more likely than not to be realized. Based upon the weight of available evidence at December 31, 2014, the Company determined that it was more likely than not that a portion of its deferred tax assets would be realizable and consequently released the valuation allowance against Federal and certain state net deferred tax assets and recorded a discrete tax benefit of $33.4 million during the fourth quarter of 2014. The decision to reverse a portion of the valuation allowance was made after management considered all available evidence, both positive and negative, including but not limited to the historical operating results, income or loss in recent periods, cumulative income in recent years, forecasted earnings, forecasted future taxable income, and significant risk and uncertainty related to forecasts. The release of the valuation allowance resulted in the recognition of certain deferred net tax assets and a decrease to income tax expense.

The future effective tax rate is subject to volatility and may be materially impacted by various internal and external factors. These factors may include, but are not limited to, the amount of income tax benefits and charges from: interpretations of existing tax laws; changes in tax laws and rates; future levels of research and development expenditures; changes in the mix of earnings in countries with differing statutory tax rates in which the Company may conduct business; changes in the valuation of deferred tax assets and liabilities; state income taxes; the tax impact of stock-based compensation; accounting for uncertain tax positions; closure of statute of limitations or settlement of tax audits; changes in estimates of prior years’ items; tax costs for acquisition-related items; changes in accounting standards; non-deductible officers’ compensation; limitations on the utilization of net operating losses and tax credits due to changes in ownership; and overall levels of income before taxes.