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Income Taxes
12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Income tax expense (benefit) was (in thousands):
 
2013
 
2012
 
2011
Current expense (benefit):
 
 
(Recast)
 
(Recast)
Federal
$
(224
)
 
$
9,913

 
$
2,775

State
5,143

 
3,148

 
4,353

Foreign
1,530

 
1,949

 
2,232

 
6,449

 
15,010

 
9,360

Deferred expense (benefit):
 
 
 
 
 
Federal
85,512

 
47,501

 
46,485

State
4,273

 
(2,010
)
 
2,368

Foreign
4,748

 
1,113

 
279

 
$
94,533

 
46,604

 
49,132

Income tax expense
$
100,982

 
$
61,614

 
$
58,492



The Company’s effective tax rate was 39.4%, 30.5% and 36.3%, for the years ended December 31, 2013, 2012 and 2011, respectively. Actual tax expense differs from the “expected” tax expense (computed by applying the U.S. Federal corporate income tax rate of 35% to earnings before income taxes) as follows (in thousands):
 
2013
 
2012
 
2011
 
 
 
(Recast)
 
(Recast)
Computed “expected” tax expense
$
89,742

 
$
70,595

 
$
56,433

Increase (decrease) in income taxes resulting from:
 
 
 
 
 
State income taxes, net of federal income tax benefit
6,912

 
6,627

 
7,470

Central pre-affiliation earnings taxed as S-Corp
(4,986
)
 
(9,118
)
 
(4,342
)
State tax rate change in deferred items
711

 
(6,414
)
 
(2,178
)
Foreign tax rate change in deferred items
5,023

 

 

Effect of providing taxes on mark-to-market adjustment of derivatives recorded in accumulated OCI

 
1,785

 
5,270

Other
3,580

 
(1,861
)
 
(4,161
)
Income tax expense
$
100,982

 
$
61,614

 
$
58,492


The components of the net deferred tax asset (liability) as of December 31, 2013 and 2012 were (in thousands):
 
2013
 
2012
Deferred tax assets:
 
 
(Recast)
Self-insurance accruals
$
49,810

 
$
43,877

Allowance for doubtful accounts
6,968

 
7,843

Derivative financial instruments
4,537

 
5,021

Vacation accrual
3,899

 
3,541

Minimum tax credit
5,061

 
5,995

Net operating loss
4,529

 
74,929

Amortization of stock options
10,782

 
12,628

Other
17,259

 
12,304

Total deferred tax assets
102,845

 
166,138

Valuation allowance

 

Total deferred tax assets, net
102,845

 
166,138

Deferred tax liabilities:
 
 
 
Property and equipment, principally due to differences in depreciation
(393,239
)
 
(363,082
)
Prepaid taxes, licenses and permits deducted for tax purposes
(12,897
)
 
(10,218
)
Cancellation of debt
(9,401
)
 
(9,409
)
Intangible assets
(119,567
)
 
(122,434
)
Other
(7,354
)
 
(5,211
)
Total deferred tax liabilities
(542,458
)
 
(510,354
)
Net deferred tax liability
$
(439,613
)
 
$
(344,216
)

These amounts are presented in the accompanying consolidated balance sheets in the indicated captions, except the current deferred tax liability which is included in accrued liabilities, at December 31, 2013 and 2012 as follows (in thousands):
 
2013
 
2012
 
 
 
(Recast)
Current deferred tax asset
$
46,833

 
$
98,235

Current deferred tax liability
(2,246
)
 
(1,070
)
Noncurrent deferred tax liability
(484,200
)
 
(441,381
)
Net deferred tax liability
$
(439,613
)
 
$
(344,216
)

As of December 31, 2013, the Company had fully utilized the Federal net operating loss carryforward from prior years, The Company has state net operating loss carryforwards remaining, with an estimated tax effect of $4.5 million, available at December 31, 2013. The state net operating losses will expire at various times between 2014 and 2030. The Company has not established a valuation allowance as it has been determined that, based upon available evidence, a valuation allowance is not required. All other deferred tax assets are expected to be realized and utilized by continued profitability in future periods.
U.S. income and foreign withholding taxes have not been provided on approximately $9.8 million of cumulative undistributed earnings of foreign subsidiaries. The earnings are considered to be permanently reinvested outside the U.S. As the Company intends to reinvest these earnings indefinitely outside the U.S., it is not required to provide U.S. income taxes on them until they are repatriated in the form of dividends or otherwise.
The reconciliation of our unrecognized tax benefits for the years ending December 31, 2013, 2012 and 2011, is as follows (in thousands):
 
2013
 
2012
 
2011
Unrecognized tax benefits at beginning of year
$
2,385

 
$
2,332

 
$
5,702

Increases for tax positions taken prior to beginning of year

 
149

 
28

Decreases for tax positions taken prior to beginning of year

 
(53
)
 
(3,106
)
Settlements

 
(43
)
 
(292
)
Unrecognized tax benefits at end of year
$
2,385

 
$
2,385

 
$
2,332


As of December 31, 2013, the Company had unrecognized tax benefits totaling approximately $2.4 million, all of which would favorably impact our effective tax rate if subsequently recognized.
During the year ended December 31, 2011, the Company concluded its federal examination for certain of its subsidiaries for tax years 2005, 2006 and the short period ending May 10, 2007. In addition, the Company concluded its California examination for certain of its subsidiaries for tax years 1997, 1998, 2003 and 2004. The Company also concluded various other state examinations for certain of its subsidiaries during the years ended December 31, 2013, 2012 and 2011. The conclusion of these examinations resulted in $0.0 million, $0.1 million and $0.5 million, of additional tax payments made during 2013, 2012 and 2011, respectively. Also in conjunction with these examinations, interest and/or penalties in the amount of $0.3 million were paid during 2011 . Certain of the Company’s subsidiaries are currently under examination by the state of California for the 2005, 2006 and May 10, 2007 tax years. In addition, other state jurisdictions are conducting examinations for years ranging from 2010 to 2012. The Company, during 2014, anticipates concluding its California examination for 2005, 2006 and May 10, 2007. At the completion of these examinations, management does not expect any adjustments that would have a material impact on the Company’s effective tax rate. Years subsequent to 2009 remain subject to examination.
The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Accrued interest and penalties as of December 31, 2013, 2012 and 2011, were approximately $1.5 million, $1.3 million, and $1.1 million, respectively. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.
The Company anticipates that the total amount of unrecognized tax benefits may decrease by approximately $0.7 million during the next twelve months, which will not have a material impact on the financial statements.