Note 9 - Taxes on Income

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 9:  Taxes on Income

The reconciliation of income taxes computed at U.S. federal statutory rates to income tax expense (benefit) for the years ended December 31, 2013, 2012 and 2011 is summarized below. Significant reconciling items are described further in the paragraphs that follow.

(In thousands)	2013		2012			2011
Income taxes computed at federal statutory tax rate (35%)	$	5,838	$	19,720		$	3,893
Increase (reduction) in income taxes resulting from:
State and local provision/benefit		1,845		2,944			98
Change in rate differential		-		(2,722	)		3,049
NOL adjustments		-		694			(1,638	)
Non-deductible merger-related expenses		3,385		-			-
Exclusion on taxes of WXXA and WLAJ loss (income)		625		(15	)		-
Release of valuation allowance		-		-			(96,777	)
Reorganization items and fresh start adjustments		-		-			462
Cancellation of debt benefit		-		-			(2,013	)
Stock-based compensation tax deficiencies		475		-			-
Other		157		(241	)		126
Income tax expense (benefit)	$	12,325	$	20,380		$	(92,800	)

In 2013, because the merger transaction was a tax-free exchange, certain transaction costs were capitalized into the basis of stock and will not be deductible.

The Company's framework for assessing the recoverability of deferred tax assets weighs the sustainability of recent operating profitability and the predictability of future operating profitability. During 2011, the Company experienced significant favorable developments including a return to sustainable operating profits within its primary operations. In order to demonstrate the predictability and sufficiency of future operating profitability, the Company considered its forecasts of future income using comparisons to historical results. The Company also considered sufficiency of future taxable income necessary to support the realizability of the NOLs. As of December 31, 2011, the positive evidence outweighed the historical negative evidence regarding the likelihood that the deferred tax assets will be realized, resulting in a net valuation allowance release in the amount of approximately $96.8 million.

In March 2011, the Bankruptcy Court entered a final decree closing the bankruptcy cases of the Predecessor and its subsidiaries. Generally, the discharge of a debt obligation for an amount less than the adjusted issue price creates cancellation of indebtedness income (“CODI”), which must be included in the Company’s taxable income. However, recognition of CODI is limited for a taxpayer if the discharge is granted by the Bankruptcy Court or pursuant to a plan of reorganization approved by the Bankruptcy Court. The Company’s plan qualified for this bankruptcy exclusion rule and allowed the Company to exclude substantially all of the gain on the settlement of debt obligations from taxable income.

The financial results of WXXA and WLAJ are consolidated by the Company in accordance with the VIE accounting guidance. However, the Company does not reflect a tax provision for WXXA and WLAJ’s income or loss in its financial results since their tax liability will flow through to an unrelated party, Shield Media, LLC, a single-member LLC owned by an individual.

Significant components of income taxes are as follows:

(In thousands)	2013		2012			2011
Federal	$	-	$	383		$	-
State		741		1,293			132
Current		741		1,676			132
Federal		9,486		18,845			(83,014	)
State		2,098		(141	)		(9,918	)
Deferred		11,584		18,704			(92,932	)
Income tax expense (benefit)	$	12,325	$	20,380		$	(92,800	)

Temporary differences, which gave rise to significant components of the Company's deferred tax liabilities and assets at December 31, 2013, and 2012, were as follows:

(In thousands)	2013			2012
Deferred tax liabilities:
Difference between book and tax bases of intangible assets	$	(249,251	)	$	(45,592	)
Property and equipment		(50,826	)		(27,772	)
Other comprehensive income items		(3,227	)		-
Other		-			(1,245	)
Total deferred tax liabilities		(303,304	)		(74,609	)
Deferred tax assets:
Employee benefits		78,503			1,761
Other comprehensive income items		-			681
Net operating losses		269,268			87,770
Minimum tax credit carryforwards and other		5,750			383
Total deferred tax assets		353,521			90,595
Net deferred tax assets	$	50,217		$	15,986
Current deferred tax assets		(7,506	)		(1,647	)
Deferred tax assets, long-term	$	42,711		$	14,339

At December 31, 2013, the Company projects federal Net Operating Loss (NOL) carryforwards available to reduce future federal taxable income in the amount of approximately $681 million ($239 million deferred tax asset or DTA). This federal NOL is comprised of $226 million of Young historical losses, $362 million of Legacy Media General historical losses and $93 million of combined NOL in the current year. At December 31, 2013, the Company also has significant state NOL carryforwards in varying amounts available to reduce future state taxable income for which it has recorded a DTA of approximately $30 million. These federal and state NOLs will expire at various dates through 2033.

Pursuant to Section 382 of the Internal Revenue Code, the Company underwent an ownership change for tax purposes (i.e., a more than 50% change in stock ownership in aggregated 5% shareholders) as a result of the merger transaction in November of 2013. As a result, the use of the Young ($226 million) and Legacy Media General ($362 million) historical NOL carryforwards and tax credits generated prior to the ownership change will be subject to annual Section 382 use limitation. The Young NOLs are subject to two previous Section 382 ownership changes and will generally be subject to the annual base limitation of approximately $11.1 million that resulted from the first ownership change upon emergence from bankruptcy. The Legacy Media General NOLs will generally be subject to an annual Section 382 base limitation of approximately $15.2 million. The Company determined that it had a net unrealized built-in gain (NUBIG) at the time of the 2013 merger with respect to both Young and Legacy Media General NOLs. Pursuant to Section 382(h) of the Internal Revenue Code, the Company is able to increase its Section 382 annual base limitation with respect to the Legacy Media General NOLs by an incremental limitation of $54.7 million in the first five years following the ownership change. The Young NOLs are generally subject to a more restrictive Section 382 limitation and are unable to take advantage of the incremental limitation, but have unused Section 382 limitations from prior years of approximately $54.6 million that will be available to increase the annual base limitation.

The Company has analyzed the various layers of losses and related restrictions on utilization and has concluded that it will be able to utilize substantially all of its NOLs.

As of December 31, 2013, the Company's unrecognized tax benefits totaled approximately $1.4 million including interest. A reconciliation of the beginning and ending balances of the gross liability for uncertain tax positions is as follows:

(In thousands)	2013		2012		2011
Uncertain tax position liability at the beginning of the year	$	16	$	16	$	34
Additions for tax positions for prior years		8		-		-
Reductions for tax positions for prior years		-		-		(18	)
Additions resulting from merger transaction		1,422		-		-
Uncertain tax position liability at the end of the year	$	1,446	$	16	$	16

The entire balance of the liability for uncertain tax positions would impact the effective rate (net of related asset for uncertain tax positions) if underlying tax positions were sustained or favorably settled. The Company recognizes interest and penalties accrued related to uncertain tax positions in the provision for income taxes. As of December 31, 2013, the liability for uncertain tax positions included approximately $462 thousand of estimated interest and penalties.

For federal tax purposes, the Company’s tax returns have been audited or closed by statute through 2009 and remain subject to audit for years 2010 and beyond. The Company has various state income tax examinations ongoing and at varying stages of completion, but generally its state income tax returns have been audited or closed to audit through 2009.

While the Company does not anticipate any significant changes to the amount of liabilities for unrecognized tax benefits within the next twelve months, there can be no assurance that the outcomes from any tax examinations will not have a significant impact on the amount of such liabilities, which could have an impact on the operating results or financial position of the Company.