Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.6.0.2
INCOME TAXES
 12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
Significant components of the provision for income tax expense are as follows:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(in thousands)
Current:
 
 
 
 
 
 
  Federal
 
$
564

 
$
543

 
$
17

  Foreign
 
29,902

 
23,811

 
12,727

  State
 
5,454

 
7,379

 
9,550

Total current
 
35,920

 
31,733

 
22,294

Deferred:
 
 
 
 
 
 
  Federal
 
5,113

 
(355
)
 
(10,827
)
  Foreign
 
(11,703
)
 
(8,278
)
 
(4,249
)
  State
 
(1,301
)
 
(978
)
 
(2,588
)
Total deferred
 
(7,891
)
 
(9,611
)
 
(17,664
)
Income tax expense
 
$
28,029

 
$
22,122

 
$
4,630

 
 
 
 
 
 
 

The domestic income (loss) before income taxes was $1.1 million, $(21.4) million and $(16.2) million for 2016, 2015 and 2014, respectively. Foreign income (loss) before income taxes was $47.2 million, $27.8 million and $(83.6) million for 2016, 2015 and 2014, respectively.
Significant components of the Company’s deferred tax liabilities and assets are as follows:
 
 
December 31,
 
 
2016
 
2015
 
 
(in thousands)
Deferred tax liabilities:
 
 
 
 
          Intangible assets
 
$
189,131

 
$
209,316

          Prepaid expenses
 
8,770

 
6,429

          Long-term debt
 
3,835

 
5,644

          Other
 
6,077

 
20,759

Total deferred tax liabilities
 
207,813

 
242,148

Deferred tax assets:
 
 
 
 
          Accrued expenses
 
45,839

 
41,113

          Net operating loss carryforwards
 
563,461

 
578,805

          Foreign tax credit carryforwards
 
59,977

 
56,282

          Equity compensation
 
32,452

 
26,432

          Other
 
—

 
1,949

Total gross deferred tax assets
 
701,729

 
704,581

          Valuation allowance
 
681,566

 
658,104

          Total deferred tax assets
 
20,163

 
46,477

          Net deferred tax liabilities
 
$
(187,650
)
 
$
(195,671
)

Each reporting period, the Company evaluates the realizability of all of its deferred tax assets in each tax jurisdiction. As of December 31, 2016, the Company continued to maintain a full valuation allowance against its net deferred tax assets in certain jurisdictions due to sustained pre-tax losses. As a result of the valuation allowances, no tax benefits have been recognized for losses incurred in those tax jurisdictions in 2016, 2015 and 2014.
During 2016 and 2015, the Company recorded net deferred tax liabilities of $15.9 million and $29.2 million, respectively, due principally to differences in financial reporting and tax bases in assets acquired in business combinations.
As of December 31, 2016, the Company has United States federal, state and foreign deferred tax assets related to net operating loss carryforwards of $232.6 million, $68.2 million and $262.7 million, respectively. Based on current statutory carryforward periods, these losses will expire on various dates beginning in 2025. The Company’s federal net operating loss is subject to statutory limitations on the amount that can be used in any given year.
The reconciliation of income tax computed at the United States federal statutory rates to income tax expense (benefit) is:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(in thousands)
Income tax expense (benefit) at United States statutory rates
 
$
16,914

 
$
2,223

 
$
(34,937
)
State income taxes, net of federal tax benefits
 
3,264

 
3,959

 
7,548

Differences between foreign and United States statutory rates
 
(11,116
)
 
(5,356
)
 
(10,735
)
Non-United States income inclusions and exclusions
 
(1,678
)
 
1,206

 
(284
)
United States income inclusions and exclusions
 
(1,317
)
 
2,095

 
(1,396
)
Nondeductible items
 
3,210

 
4,736

 
55,469

Tax contingencies
 
2,390

 
2,063

 
950

Tax expense from acquired goodwill
 
5,936

 
4,483

 
1,299

Tax return to accrual
 
(1,071
)
 
(551
)
 
(7,013
)
Change in valuation allowance
 
11,820

 
7,116

 
(7,467
)
Other, net
 
(323
)
 
148

 
1,196

 
 
$
28,029

 
$
22,122

 
$
4,630

 
 
 
 
 
 
 

Income tax expense is principally attributable to the Company’s earnings in foreign tax jurisdictions along with state income taxes.
Amounts included in differences between foreign and United States statutory rates are impacted by changes in the mix of international earnings subject to various tax rates which can differ greatly in their proximity to the United States statutory rate. In 2015, there was an increase in taxable foreign earnings in jurisdictions whose statutory rates are closer to the United States statutory rate which reduced the amount of this difference as compared to other years. The differences between statutory rates is also impacted by the Company’s Luxembourg affiliates and tax rulings which include the application of a reduced Luxembourg effective rate to the net income before tax resulting from the Company’s financing activities in Luxembourg.
Nondeductible items in 2014 are primarily the Company’s goodwill impairment in its International Concerts reporting unit, which was not deductible for income tax purposes. There were no impairments of goodwill in 2016 or 2015.
In 2014, the Company had higher tax return to accrual impacts from its international operations as compared to 2016 and 2015, primarily related to deductions that were able to be carried back to prior returns and therefore created a tax benefit.
The increase in the change in valuation allowance in 2016 resulted primarily from an increase in the income within jurisdictions with full valuation allowances, including the United States. The increase in 2015 was attributable to an increase in net operating losses in certain international jurisdictions that are fully valued for tax purposes.
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(in thousands)
Balance at January 1
 
$
14,022

 
$
12,619

 
$
12,860

Additions:
 
 
 
 
 
 
          Increase for current year positions
 
—

 
1,606

 
306

          Increase for prior year positions
 
1,978

 
274

 
1,089

          Decrease for prior year positions
 
(3
)
 
—

 
—

          Interest and penalties for prior years
 
546

 
525

 
511

Reductions:
 
 
 
 
 
 
          Expiration of applicable statute of limitations
 
—

 
—

 
(236
)
          Settlements for prior year positions
 
(1,188
)
 
(852
)
 
(1,225
)
Foreign exchange
 
(238
)
 
(150
)
 
(686
)
Balance at December 31
 
$
15,117

 
$
14,022

 
$
12,619

 
 
 
 
 
 
 

All of these unrecognized tax benefits would favorably impact the effective tax rate if recognized at some point in the future. It is not expected that the total amounts of unrecognized tax benefits will increase or decrease materially within the next 12 months.
The Company regularly assesses the likelihood of additional assessments in each taxing jurisdiction resulting from current and subsequent years’ examinations. Liabilities for income taxes are established for future income tax assessments when it is probable there will be future assessments and the amount can be reasonably estimated. Once established, liabilities for uncertain tax positions are adjusted only when there is more information available or when an event occurs necessitating a change to the liabilities. The Company believes that the resolution of income tax matters for open years will not have a material effect on its consolidated financial statements although the resolution of income tax matters could impact the Company’s effective tax rate for a particular future period.
The tax years 2005 through 2016 remain open to examination by the tax jurisdictions to which the company is subject.