Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2012
INCOME TAXES

NOTE 8. INCOME TAXES

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

 

     December 31,  
   2010     2011     2012  
   (Dollars in thousands)  

Current:

       

Federal

    $ (4 )    $ (8 )    $ 8   

State

      286        282        198   
  

 

 

    

 

 

    

 

 

  
     282        274        206   
  

 

 

    

 

 

    

 

 

  

Deferred:

       

Federal

      1,887        4,425        3,649   

State

      526        1,411        (3,702 ) 
  

 

 

    

 

 

    

 

 

  
     2,413        5,836        (53 ) 
  

 

 

    

 

 

    

 

 

  

Provision for (benefit from) income taxes

    $ 2,695      $ 6,110      $ 153   
  

 

 

    

 

 

    

 

 

  

Discontinued operations are reported net of the tax benefit of $0.03 million in 2010, $0.5 million in 2011 and $(0.06) million in 2012.

 

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

 

     December 31,  
     2011     2012  
     (Dollars in thousands)  

Deferred tax assets:

     

Financial statement accruals not currently deductible

    $ 6,303      $ 6,146   

Net operating loss, AMT credit and other carryforwards

      54,327        58,702   

State taxes

      100        103   

Other

      2,864        3,014   
  

 

 

    

 

 

  

Total deferred tax assets

      63,594        67,965   

Valuation allowance for deferred tax assets

      (2,798 )      (2,913 ) 
  

 

 

    

 

 

  

Net deferred tax assets

    $ 60,796      $ 65,052   
  

 

 

    

 

 

  

Deferred tax liabilities:

     

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

    $ 8,794      $ 5,032   

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

      89,824        100,040   

Unrecognized tax benefits

      3,852        1,325   
  

 

 

    

 

 

  

Total deferred tax liabilities

      102,470        106,397   
  

 

 

    

 

 

  

Net deferred tax liabilities

    $ (41,674 )    $ (41,345 ) 
  

 

 

    

 

 

  

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

 

     December 31,  
     2011     2012  
     (Dollars in thousands)  

Deferred income tax asset per balance sheet

    $ 6,403      $ 6,248   

Deferred income tax liability per balance sheet

      (48,077 )      (47,593 ) 
  

 

 

    

 

 

  
   $ (41,674 )    $ (41,345 ) 
  

 

 

    

 

 

  

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

 

     Year Ended December 31,  
     2010      2011     2012  
     (Dollars in thousands)  

Statutory federal income tax rate (at 35%)

    $ 1,638       $ 4,364      $ 1,637   

Effect of state taxes, net of federal

      525         1,102        (2,278 ) 

Permanent items

      174         696        788   

ISO benefit

      338         —          —     

Other, net

      20         (52 )      6   
  

 

 

     

 

 

    

 

 

  

Provision for income taxes

    $ 2,695       $ 6,110      $ 153   
  

 

 

     

 

 

    

 

 

  

At December 31, 2012, we had net operating loss carryforwards for federal income tax purposes of approximately $125.9 million that expire in 2020 through 2032 and for state income tax purposes of approximately $844.5 million that expire in years 2013 through 2032. For financial reporting purposes at December 31, 2012, we had a valuation allowance of $2.9 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.