Avid 2014 Annual Report Download - page 52

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2014 Compared to 2013
The change in interest and other income (expense), net for 2014, compared to 2013, was primarily the result of changes in the
valuation of a deferred compensation plan. During 2014, there was an increase in the valuation of the plan obligations resulting in
net expense recorded in other income (expense), compared to a decrease in the valuation in 2013 that resulted in net income
recorded as other income (expense).
2013 Compared to 2012
The change in interest and other income (expense), net for 2013, compared to 2012, was primarily the result of changes in the
valuation of a deferred compensation plan. During 2013, there was a decrease in the valuation of the plan resulting in net income
recorded in other income (expense), compared to an increase in the valuation in 2012 that resulted in net expense recorded as
other income (expense).
Provision for Income Taxes
Provision for Income Taxes for the Years Ended December 31, 2014 and 2013
(dollars in thousands)
2014 Change 2013
Provision $ % Provision
Provision for income taxes $ 2,188 $ (751) (25.6)% $ 2,939
Provision for Income Taxes for the Years Ended December 31, 2013 and 2012
(dollars in thousands)
2013 Change 2012
Provision $ % Provision
Provision for income taxes $ 2,939 $ (1,110) (27.4)% $ 4,049
Our effective tax rate, which represents our tax provision as a percentage of income before tax, was 12.9%, 12.2% and 7.9%,
respectively, for 2014, 2013 and 2012. Our 2014 provision for income taxes decreased by $0.8 million from 2013, primarily as a
result of a $0.3 million benefit for the reversal of a previously accrued Canada withholding tax penalty and a $0.5 million benefit
associated with a change in the Company’s indefinite reinvestment assertion with respect to its Canadian subsidiary. During
2013, there were no significant discrete tax items that impacted the tax provision. The tax provision of $4.0 million for 2012
included the following discrete items: a $2.3 million withholding tax liability, including interest and penalties, on a Canadian
dividend; a $1.4 million tax provision associated with an Irish income tax audit; a $0.5 million tax provision associated with a
change in the Company’s indefinite reinvestment assertion with respect to its Canadian subsidiary; and the adjustment of a
valuation allowance against certain foreign deferred tax assets of $0.7 million; largely offset by a $3.8 million benefit for a refund
claim related to a previously accrued Canadian withholding tax liability and a $0.7 million benefit for the release of a tax reserve.
We have significant net deferred tax assets that are primarily a result of tax credits and operating loss carryforwards. The
realization of the net deferred tax assets is dependent upon the generation of sufficient future taxable income in the applicable tax
jurisdictions. We regularly review our deferred tax assets for recoverability with consideration for such factors as historical
losses, projected future taxable income, the expected timing of the reversals of existing temporary differences, and tax planning
strategies. ASC Topic 740, Income Taxes, requires us to record a valuation allowance when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Based on the magnitude of our deferred tax assets at December 31,
2014 and our level of historical U.S. losses, we have determined that the uncertainty regarding the realization of these assets is
sufficient to warrant the need for a full valuation allowance against our U.S. deferred tax assets. We have also determined that a
valuation allowance is warranted on a portion of our foreign deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Sources of Cash