Earthlink 2014 Annual Report Download - page 45

Table of Contents
Income tax (provision)
benefit
The following table presents the components of the income tax (provision) benefit for the years ended December 31, 2012, 2013 and 2014 :
During the year ended December 31, 2012, the current and non-
cash deferred benefits were primarily due to the tax impact of changes to our
state deferred income tax rates and the resulting impact on the re-
measurement of deferred tax assets and liabilities recorded on the balance sheet
as of January 1, 2012; the release of valuation allowance related to specific state net operating losses; and the reversal of state related uncertain
tax positions in the current year due to statute expirations. During the year ended December 31, 2013, the current tax benefit was primarily
related to the current release of uncertain tax positions related to prior years, partially offset by expense for Canadian tax amounts payable,
current state taxes and penalties and interest related to uncertain tax positions. During the year ended December 31, 2013, the non-
cash deferred
tax provision was due primarily to the recording of a valuation allowance against deferred tax assets (as further described below). During the
year ended December 31, 2014, the current tax benefit was primarily related to the current release of uncertain tax positions related to prior
years, partially offset by expense for Canadian tax amounts payable, current year state taxes and penalties and interest related to uncertain tax
positions. The non-cash deferred tax expense was due primarily to the amortization of deferred tax liabilities with indefinite useful lives.
The tax provision for the year ended December 31, 2013 includes a $266.3 million non-
cash charge to record a valuation allowance against our
deferred tax assets. During the three months ended December 31, 2013, we entered into a three-
year cumulative loss position. For purposes of
assessing the realization of the deferred tax assets, this cumulative loss position is considered significant negative evidence. Also during the three
months ended December 31, 2013, management reassessed its projections of future taxable income. This change in projections, coupled with its
cumulative loss position caused management to modify its assessment of the realizability of its deferred tax asset and conclude that a full
valuation allowance, exclusive of our deferred tax liabilities with indefinite useful lives and our capital loss carryforward, was necessary.
We will reassess the realization of the deferred tax assets each reporting period. To the extent that our financial results improve and the deferred
tax assets becomes realizable, we will reduce the valuation allowance through earnings.
Loss from discontinued operations, net of tax
The following table presents summarized results of operations related to discontinued operations for the years ended
December 31, 2012, 2013
and 2014 :
The operating results of the our telecom systems business acquired as part of ITC^DeltaCom have been separately presented as discontinued
operations for all periods presented. On August 2, 2013, we sold our telecom systems business. We received $0.6 million
of cash upon
completion of the sale and had a $0.4 million
receivable as of December 31, 2014 for contingent consideration expected to be received. We have
no significant continuing involvement in the operations or significant continuing direct cash flows. The telecom systems results of operations
were previously included in our Business Services segment.
40
Year Ended December 31,
2012
2013 2014
(in thousands)
Current benefit
$
1,224
$
1,639
$
5,335
Deferred (provision ) benefit
107
(212,870
)
(591
)
Total income tax (provision) benefit
$
1,331
$
(211,231
)
$
4,744
Year Ended December 31,
2012 2013 2014
(in thousands)
Revenues
$
13,842
$
6,141
$
116
Operating costs and expenses
(17,860
)
(8,102
)
(497
)
Income tax benefit
1,600
—
—
Loss from discontinued operations, net of tax
$
(2,418
)
$
(1,961
)
$
(381
)