DE
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841500624
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(State or other jurisdiction of
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(IRS Employer
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incorporation)
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Identification No.)
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[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
The Company believes that the restatement does not reflect any economic impact on the Company, any trends in the Company's business or any current or prospective impact on the Company's results of operations. The restatement does not impact the Company's cash balances, the timing of its future ability to use net operating loss carryforwards ("NOLs") or the Company's compliance with its debt covenants. No facts have changed that supported the original recording of the net deferred tax asset in 2001 or the Company's decision to continue to carry the asset on its balance sheet prior to the restatement. The Company believes that the restatement reflects technical accounting adjustments only, based on interpretations of the Financial Accounting Standards Board's Accounting Standards Codification Topic 740, Accounting for Income Taxes.
This restatement will result in the establishment of a non-cash valuation allowance against a tax asset that was originally recorded in 2001 and the recognition of non-cash tax expense in the periods from the fourth quarter of 2006 until the first quarter of 2010, all of which will be reversed in the second quarter of 2010. There is no impact to tax expense for any periods subsequent to June 30, 2010. As a result of the restatement, the impact (unaudited) to the previously reported beginning accumulated deficit as of January 1, 2008 will be an increase of $51.1 million. Income tax expense will increase $9.1 million and $9.2 million in 2008 and 2009, respectively, and the income tax benefit will increase $69.4 million in 2010.
The deferred tax asset that is being reversed as a result of this restatement and then re-recognized in the second quarter of 2010 properly appears and will continue to appear on the Company's consolidated balance sheet. The amount of that asset will be reduced as the Company continues to utilize its NOLs. The applicable accounting guidance does not permit the Company to rely on actual earnings results to support the previous accounting treatment; however, the passage of time and the Company's actual results ultimately supported the recognition of the income tax benefit related to the deferred tax asset in 2010.
The accounting rules applicable to deferred tax assets are complex and highly technical. Those rules involve a high degree of management judgment that our management believed was reasonable at the time, was supported by the advice of third-party tax professionals and was included in the previously filed consolidated financial statements reported on by the Company's current independent registered public accounting firm.
Management has evaluated the effect of the facts leading to the restatement of the Affected Financial Statements on its prior conclusions of the adequacy of internal controls over financial reporting and disclosure controls and procedures and has concluded that a material weakness exists in the area of accounting for income taxes specific to tax planning strategies related to the need for a valuation allowance against deferred tax assets. Accordingly, remediation is currently underway to address this deficiency.
Forward Looking Statements
Certain statements in this report, including the Company's estimates regarding the time for filing and impact of the restatement on the Company's financial statements and information about the potential reduction of the deferred tax asset and other future impacts are forward-looking statements under the Private Securities Litigation Reform Act of 1995 that reflect management's views with respect to future events and financial performance. These statements are based on management's current expectations and are subject to risks and uncertainties, including future events and additional facts that the Company may obtain after the date of this report. The Company undertakes no obligations to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
tw telecom inc.
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Date: November 07, 2011
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By:
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/s/ Tina Davis
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Tina Davis
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Senior Vice President and Deputy General Counsel
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