Borrowings (Tables)

12 Months Ended

Dec. 31, 2011


	December 31, 2011			December 31, 2010
Convertible Senior Notes	$	310,000		$	310,000
Unamortized debt discount		(1,070	)		(2,311	)
Debt discount		(4,285	)		(8,567	)

Total	$	304,645		$	299,122

Principal Repayments


	December 31, 2011 (Restated, see note 2)
2012	$	78,504
2013		304,645
2014		0
2015		0
2016 and beyond		932,089

Total	$	1,315,238

Income Taxes

16. Income Taxes

The Company operates in several tax jurisdictions primarily: the United States of America, Poland, Hungary, Russia and Ukraine. All subsidiaries file their own corporate tax returns as well as account for their own deferred tax assets and liabilities. The Company does not file a tax return in United States of America based upon its consolidated income, but does file a return in the United States based on its income taxable in the United States of America.

Statutory rate reconciliation for continuing operations:


	Year ended December 31,
	2011			2010			2009
	(Restated, see note 2)			(Restated, see note 2)
Tax (benefit)/expense at statutory rate	$	(445,922	)	$	(56,582	)	$	33,864
Tax rate differences		201,837			22,293			(15,259	)
Valuation allowance for net operating losses		61,293			29,675			2,611
Permanent differences		218,068			(22,103	)		(2,721	)

Income tax (benefit)/expense	$	35,276		$	(26,717	)	$	18,495

The permanent differences for 2011 of $218.1 million are primarily the result of impairment charges recognized during the year of $1,057.8 million.

The Company’s significant components of the provision for income taxes from continuing operations were as follows:


	2011			2010			2009
Current (foreign)	$	(14,687	)	$	(17,391	)	$	(20,453	)
Deferred (domestic)		(1,499	)		3,367			(1,372	)
Deferred (foreign)		(19,090	)		40,741			3,330

	$	(35,276	)	$	26,717		$	(18,495	)

The Company is headquartered in the US. Pre-tax book income earned from continuing operations in the US (domestic) and outside the US (foreign) in 2011, 2010 and 2009 was as follows:


	2011			2010			2009
Pre-tax income - domestic	$	(9,394	)	$	(21,068	)	$	(68,365	)
Pre-tax income - foreign		(1,278,714	)		(135,317	)		159,537

	$	(1,288,108	)	$	(156,385	)	$	91,172

Total income tax payments during 2011, 2010 and 2009 were $5,139 thousand, $29,544 thousand and $16,270 thousand respectively. CEDC has paid no U.S. income taxes and has U.S. net operating loss carry-forward totaling $23,332 thousand.

The Company’s US Net Operating Loss (NOL) carry-forward may be restricted under Section 382 of the Internal Revenue Code (“IRC”). IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of more than 50 percentage points. As a result, the taxable income for any post change year that may be offset by a pre-change NOL may not exceed the general IRC Section 382 limitation, which is the fair market value of the pre-change entity multiplied by the IRC long-term tax exempt rate. The Company has not completed an analysis to determine whether or to what extent limitations under IRC Section 382 apply to its US NOL carryforward.

Significant components of the Company’s deferred tax assets are as follows:


	December 31,
	2011			2010			2009
	(Restated, see note 2)			(Restated, see note 2)
Deferred tax assets
Accrued expenses, deferred income and prepaid	$	20,149		$	11,163		$	15,693
Allowance for doubtful accounts receivable		3,050			6,493			6,252
Fair value adjustments from acquisitions in Russia		23,152			66,797			42,769
Unrealized foreign exchange losses		29,224			8,510			13,386
Net operating loss carry-forward benefit		54,708			70,596			45,910
Valuation allowance		(86,118	)		(35,778	)		(4,380	)

Deferred tax asset, net of valuation allowance	$	44,165		$	127,781		$	119,630

Deferred tax liability
Trademarks		78,956			110,832			140,592
Unrealized foreign exchange gains		13,320			535			12,266
Remeasurement of previously held equity interest in subsidiaries		1,265			47,354			49,182
Property, plant and equipment revaluation		6,735			0			0
Customer relationships		1,425			0			0
Timing differences in finance type leases		339			349			0
Deferred income		1,265			276			563
ASC 470 impact		1,500			2,998			4,433
Other		4,283			9,771			1,036

Deferred tax liability		109,088		$	172,115		$	208,072

Total deferred tax asset, net of valuation allowance		44,165			127,781			119,630
Total deferred tax liability		109,088			172,115			208,072

Total net deferred tax		(64,923	)		(44,334	)		(88,442	)

Classified as
Current deferred tax asset		4,717			80,956			82,609
Non-current deferred tax asset		21,488			44,028			27,123
Non-current deferred tax liability		(91,128	)		(169,318	)		(198,174	)

Total net deferred tax	$	(64,923	)	$	(44,334	)	$	(88,442	)

The Company’s valuation allowance relates primarily to losses carried forward in Poland and Russia, that we believe it is more likely than not will not be utilized in the future.

During 2011 due to underlying performance of certain of the Company’s subsidiaries the Company determined that an additional non cash valuation allowance for deferred tax assets of $61.3 million was required and took the charge during the year. Additionally, the Company did not recognize a tax asset for losses at these subsidiaries therefore the tax expense for the profitable entities was not offset by a tax benefit at loss making entities.

Tax losses can be carried forward for the following periods:


Hungary*			Unrestricted period
U.S.			20 years
Russia			10 years
Poland			5 years

*	In some circumstances the Tax Office’s permission to carry the loss forward is required.

The Company adopted the provisions of ASC 740-10-25 “Income taxes.” ASC 740-10-25 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. ASC 740-10-25 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties.

The following table summarizes the changes in the accrual for unrecognized income tax benefits and related interest and penalties for the years ended December 31, 2011, 2010 and 2009:


	2011				2010				2009
	Unrecognized income tax benefits		Interest and penalties		Unrecognized income tax benefits		Interest and penalties		Unrecognized income tax benefits		Interest and penalties
Balance, beginning of the period	$	3,000	$	0	$	0	$	0	$	0	$	0
Amounts assumed at acquisitions		0		0		0		0		0		0
Additions based on tax positions related to the current year		0		0		0		0		0		0
Additions of tax positions of prior years		5,044		2,093		3,000		0		0		0
Reductions of tax positions of current year		0		0		0		0		0		0
Reductions of tax positions of prior year		3,000		0		0		0		0		0
Lapse of statute of limitations		0		0		0		0		0		0
Foreign currency translation adjustment		0		0		0		0		0		0

Balance, end of period	$	5,044	$	2,093	$	3,000	$	0	$	0	$	0

The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expenses.

The Company files income tax returns in the U.S., Poland, Hungary, Russia and Ukraine, as well as in various other countries throughout the world in which we conduct our business. The major tax jurisdictions and their earliest fiscal years that are currently open for tax examinations are 2006 in the U.S., Poland and Hungary and 2008 in Russia and Ukraine.

Tax liabilities (including corporate income tax, Value Added Tax (VAT), social security and other taxes) of the Company’s subsidiaries may be subject to examinations by the tax authorities for up to certain period from the end of the year the tax is payable, as follows:


Poland			5 years
Hungary			6 years
Russia			3 years

CEDC’s state and federal income tax returns are also subject to examination by the U.S. tax authorities. The IRS is auditing the Company’s 2009 and 2010 federal income tax returns. As the application of tax laws and regulations, and transactions are susceptible to varying interpretations, amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities.

Components Of Income Tax Expense


	Year ended December 31,
	2011			2010			2009
	(Restated, see note 2)			(Restated, see note 2)
Tax (benefit)/expense at statutory rate	$	(445,922	)	$	(56,582	)	$	33,864
Tax rate differences		201,837			22,293			(15,259	)
Valuation allowance for net operating losses		61,293			29,675			2,611
Permanent differences		218,068			(22,103	)		(2,721	)

Income tax (benefit)/expense	$	35,276		$	(26,717	)	$	18,495

Components Of Provision For Income Taxes From Continuing Operations


	2011			2010			2009
Current (foreign)	$	(14,687	)	$	(17,391	)	$	(20,453	)
Deferred (domestic)		(1,499	)		3,367			(1,372	)
Deferred (foreign)		(19,090	)		40,741			3,330

	$	(35,276	)	$	26,717		$	(18,495	)

Pre-Tax Book Income Earned From Continuing Operations


	2011			2010			2009
Pre-tax income - domestic	$	(9,394	)	$	(21,068	)	$	(68,365	)
Pre-tax income - foreign		(1,278,714	)		(135,317	)		159,537

	$	(1,288,108	)	$	(156,385	)	$	91,172

Components Of Deferred Tax Assets And Liabilities


	December 31,
	2011			2010			2009
	(Restated, see note 2)			(Restated, see note 2)
Deferred tax assets
Accrued expenses, deferred income and prepaid	$	20,149		$	11,163		$	15,693
Allowance for doubtful accounts receivable		3,050			6,493			6,252
Fair value adjustments from acquisitions in Russia		23,152			66,797			42,769
Unrealized foreign exchange losses		29,224			8,510			13,386
Net operating loss carry-forward benefit		54,708			70,596			45,910
Valuation allowance		(86,118	)		(35,778	)		(4,380	)

Deferred tax asset, net of valuation allowance	$	44,165		$	127,781		$	119,630

Deferred tax liability
Trademarks		78,956			110,832			140,592
Unrealized foreign exchange gains		13,320			535			12,266
Remeasurement of previously held equity interest in subsidiaries		1,265			47,354			49,182
Property, plant and equipment revaluation		6,735			0			0
Customer relationships		1,425			0			0
Timing differences in finance type leases		339			349			0
Deferred income		1,265			276			563
ASC 470 impact		1,500			2,998			4,433
Other		4,283			9,771			1,036

Deferred tax liability		109,088		$	172,115		$	208,072

Total deferred tax asset, net of valuation allowance		44,165			127,781			119,630
Total deferred tax liability		109,088			172,115			208,072

Total net deferred tax		(64,923	)		(44,334	)		(88,442	)

Classified as
Current deferred tax asset		4,717			80,956			82,609
Non-current deferred tax asset		21,488			44,028			27,123
Non-current deferred tax liability		(91,128	)		(169,318	)		(198,174	)

Total net deferred tax	$	(64,923	)	$	(44,334	)	$	(88,442	)

Summary Of Tax Losses Carried Forward


Hungary*			Unrestricted period
U.S.			20 years
Russia			10 years
Poland			5 years

*	In some circumstances the Tax Office’s permission to carry the loss forward is required.

Changes In Accrual For Unrecognized Income Tax Benefits And Related Interest And Penalties


	2011				2010				2009
	Unrecognized income tax benefits		Interest and penalties		Unrecognized income tax benefits		Interest and penalties		Unrecognized income tax benefits		Interest and penalties
Balance, beginning of the period	$	3,000	$	0	$	0	$	0	$	0	$	0
Amounts assumed at acquisitions		0		0		0		0		0		0
Additions based on tax positions related to the current year		0		0		0		0		0		0
Additions of tax positions of prior years		5,044		2,093		3,000		0		0		0
Reductions of tax positions of current year		0		0		0		0		0		0
Reductions of tax positions of prior year		3,000		0		0		0		0		0
Lapse of statute of limitations		0		0		0		0		0		0
Foreign currency translation adjustment		0		0		0		0		0		0

Balance, end of period	$	5,044	$	2,093	$	3,000	$	0	$	0	$	0

Summary Of Tax Examinations


Poland			5 years
Hungary			6 years
Russia			3 years