XML 36 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
3 Months Ended
Mar. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

Our quarterly income tax benefit for income taxes is measured using an estimated annual effective tax rate for the period, adjusted for discrete items that occurred within the periods presented.

For the three months ended March 31, 2013, we recorded an income tax benefit of $1.1 million, which represents an effective tax rate of 1.8%. The effective tax rate for the three months ended March 31, 2013 differs from the federal statutory rate of 35.0% primarily due to changes in recorded valuation allowances, permanent differences, the impact of state income taxes, and changes in deferred tax liabilities related to the stock basis of subsidiaries.

The Company recorded an increase in its valuation allowance of $19.3 million during the three months ended March 31, 2013 as a result of the increase in deferred tax assets primarily attributable to book losses, which decreased the effective tax rate for the three months ended March 31, 2013 by approximately 31.9%.

For the three months ended March 31, 2012, we recorded an income tax benefit of $1.2 million, which represents an effective tax rate of 2.1%. The effective tax rate for the three months ended March 31, 2012 differs from the federal statutory rate of 35.0% primarily due to changes in recorded valuation allowances, the impact of state income taxes and changes in deferred tax liabilities related to the stock basis of subsidiaries.
The Debt Repurchases resulted in a tax gain of $69.8 million for the three months ended March 31, 2012. Generally, the discharge of a debt obligation for an amount less than the adjusted issue price creates cancellation of debt income ("CODI"), which must be included in the taxpayer's taxable income. However, in accordance with Internal Revenue Code ("IRC") Section 108, in lieu of recognizing taxable income from CODI, the Company is required to reduce existing tax attributes. As a result, the Company recognized an estimated decrease in deferred tax assets relating to net operating losses and the basis of amortizable and depreciable property of approximately $27.2 million. These decreases were offset by a decrease in recorded valuation allowance during the three months ended March 31, 2012.

The Company recorded a decrease in the valuation allowance during the three months ended March 31, 2012 as a result of the Debt Repurchases. In addition, the valuation allowance was decreased during the three months ended March 31, 2012 as a result of the reduction in estimated useful lives of certain intangible assets, which was a change in circumstances that resulted in a change in judgment about the Company's ability to realize deferred tax assets in future years. The resulting decrease in income tax expense allocated to the three months ended March 31, 2012 relating to the changes in valuation allowance was$25.6 million, which reduced the effective tax rate for the three months ended March 31, 2012 by approximately 45.5%.