Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2011
INCOME TAXES

NOTE 9. INCOME TAXES

The consolidated provision (benefit) for income taxes from continuing operations for Salem consisted of the following:

 

     December 31,  
   2009     2010     2011  
   (Dollars in thousands)  

Current:

       

Federal

    $ (237 )    $ (4 )    $ (8 ) 

State

      293        286        282   
  

 

 

    

 

 

    

 

 

  
     56        282        274   
  

 

 

    

 

 

    

 

 

  

Deferred:

       

Federal

      (3,038 )      1,887        4,425   

State

      (1,228 )      526        1,411   
  

 

 

    

 

 

    

 

 

  
     (4,266 )      2,413        5,836   
  

 

 

    

 

 

    

 

 

  

Provision for (benefit from) income taxes

    $ (4,210 )    $ 2,695      $ 6,110   
  

 

 

    

 

 

    

 

 

  

Discontinued operations are reported net of the tax benefit of $0.1 million in 2009, $0.03 million in 2010 and $0.5 million in 2011.

 

The consolidated deferred tax asset and liability consisted of the following:

 

     December 31,  
     2010     2011  
     (Dollars in thousands)  

Deferred tax assets:

     

Financial statement accruals not currently deductible

    $ 5,928      $ 6,303   

Net operating loss, AMT credit and other carryforwards

      49,382        54,327   

State taxes

      100        100   

Other

      2,656        2,864   
  

 

 

    

 

 

  

Total deferred tax assets

      58,066        63,594   

Valuation allowance for deferred tax assets

      (2,644 )      (2,798 ) 
  

 

 

    

 

 

  

Net deferred tax assets

    $ 55,422      $ 60,796   
  

 

 

    

 

 

  

Deferred tax liabilities:

     

Excess of net book value of property, plant, equipment and software for financial reporting purposes over tax basis

    $ 9,138      $ 8,794   

Excess of net book value of intangible assets for financial reporting purposes over tax basis

      78,952        89,824   

Unrecognized tax benefits

      3,654        3,852   
  

 

 

    

 

 

  

Total deferred tax liabilities

      91,744        102,470   
  

 

 

    

 

 

  

Net deferred tax liabilities

    $ (36,322 )    $ (41,674 ) 
  

 

 

    

 

 

  

The following table reconciles the above net deferred tax liabilities to the financial statements:

 

     December 31,  
     2010     2011  
     (Dollars in thousands)  

Deferred income tax asset per balance sheet

    $ 5,974      $ 6,403   

Deferred income tax liability per balance sheet

      (42,296 )      (48,077 ) 
  

 

 

    

 

 

  
   $ (36,322 )    $ (41,674 ) 
  

 

 

    

 

 

  

A reconciliation of the statutory federal income tax rate to the provision for income tax is as follows:

 

     Year Ended December 31,  
     2009     2010      2011  
     (Dollars in thousands)  

Statutory federal income tax rate (at 35%)

    $ (4,365 )    $ 1,638       $ 4,364   

Effect of state taxes, net of federal

      (608 )      525         1,102   

Permanent items

      1,316        174         696   

ISO benefit

      —          338         —     

Other, net

      (553 )      20         (52 ) 
  

 

 

    

 

 

     

 

 

  

Provision for (benefit from) income taxes

    $ (4,210 )    $ 2,695       $ 6,110   
  

 

 

    

 

 

     

 

 

  

At December 31, 2011, we had net operating loss carryforwards for federal income tax purposes of approximately $115.3 million that expire in 2020 through 2031 and for state income tax purposes of approximately $790.0 million that expire in years 2012 through 2031. For financial reporting purposes at December 31, 2011, we had a valuation allowance of $2.8 million, net of federal benefit, to offset a portion of the deferred tax assets related to state net operating loss carryforwards that may not be realized.