| INCOME TAXES |
NOTE 9—INCOME TAXES Current income tax expense represents the amounts expected to be reported on the Company’s income tax returns, and deferred tax expense or benefit represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized. The Company evaluates its deferred tax assets each period to determine if a valuation allowance is required based on whether it is “more likely than not” that some portion of the deferred tax assets would not be realized. The ultimate realization of these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods on a federal, state and foreign jurisdiction basis. The Company conducts its evaluation by considering all available positive and negative evidence, including historical operating results, forecasts of future profitability, the duration of statutory carryforward periods, and the outlooks for the motion picture industry and broader economy, among others. A significant piece of objective negative evidence evaluated was the cumulative losses incurred over the three-year period ended December 31, 2025 for each taxing jurisdiction. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections of future taxable income. The Company maintains a valuation allowance against U.S. deferred tax assets as well as international jurisdictions in which it operates, with the exception of Finland. The income tax provision reflected in the consolidated statements of operations consists of the following components: | | | | | | | | | | | | Year Ended | (In millions) | | December 31, 2025 | | December 31, 2024 | | December 31, 2023 | Current: | | | | | | | | | | Federal | | $ | — | | $ | — | | $ | — | Foreign | | | 1.4 | | | 2.4 | | | 1.9 | State | | | 1.3 | | | (1.8) | | | 0.8 | Total current | | | 2.7 | | | 0.6 | | | 2.7 | Deferred: | | | | | | | | | | Federal | | | 0.4 | | | 0.5 | | | 0.4 | Foreign | | | 0.4 | | | (0.3) | | | (0.2) | State | | | 1.0 | | | 1.3 | | | 0.5 | Total deferred | | | 1.8 | | | 1.5 | | | 0.7 | Total provision | | $ | 4.5 | | $ | 2.1 | | $ | 3.4 |
Pre-tax losses consisted of the following: | | | | | | | | | | | | Year Ended | (In millions) | | December 31, 2025 | | December 31, 2024 | | December 31, 2023 | Domestic | | $ | (445.9) | | $ | (192.4) | | $ | (216.7) | Foreign | | | (182.0) | | | (158.1) | | | (176.5) | Total | | $ | (627.9) | | $ | (350.5) | | $ | (393.2) |
The difference between the effective tax rate on net loss from continuing operations before income taxes and the U.S. federal income tax statutory rate is as follows: | | | | | | | | | | | | | | | | | | Year Ended | (In millions) | | December 31, 2025 | | | December 31, 2024 | | | December 31, 2023 | Income tax expense (benefit) at the federal statutory rate | | $ | (131.9) | 21.0 | % | | $ | (73.6) | 21.0 | % | | $ | (82.5) | 21.0 | % | State and Local Income Taxes (1) | | | (21.1) | 3.4 | % | | | (5.8) | 1.7 | % | | | (16.8) | 4.3 | % | State Valuation allowance adjustments | | | 23.4 | (3.7) | % | | | 5.0 | (1.4) | % | | | 18.1 | (4.6) | % | Foreign Tax Effects | | | | | | | | | | | | | | | | United Kingdom | | | | | | | | | | | | | | | | Statutory Tax Rate Difference between the UK and the United States | | | (5.4) | 0.9 | % | | | (5.0) | 1.4 | % | | | (3.7) | 0.9 | % | Valuation allowance adjustments | | | 33.5 | (5.3) | % | | | 29.6 | (8.4) | % | | | 35.2 | (9.0) | % | Other | | | 5.4 | (0.9) | % | | | 2.1 | (0.6) | % | | | — | — | % | Italy | | | | | | | | | | | | | | | | Valuation allowance adjustments | | | 1.4 | (0.2) | % | | | 6.0 | (1.7) | % | | | 12.1 | (3.1) | % | Return-to-provision | | | (0.2) | 0.0 | % | | | (3.9) | 1.1 | % | | | (7.0) | 1.8 | % | Other | | | (0.3) | 0.0 | % | | | (2.4) | 0.7 | % | | | (3.1) | 0.8 | % | Germany | | | | | | | | | | | | | | | | Nondeductible items | | | 3.3 | (0.5) | % | | | 0.9 | (0.3) | % | | | 0.9 | (0.2) | % | Valuation allowance adjustments | | | (5.5) | 0.9 | % | | | 0.2 | (0.1) | % | | | (1.4) | 0.4 | % | Other | | | 1.4 | (0.2) | % | | | 1.5 | (0.4) | % | | | (2.5) | 0.6 | % | Other Foreign Jurisdictions | | | 6.4 | (1.0) | % | | | 6.4 | (1.8) | % | | | 8.2 | (2.1) | % | Enactment of New Tax Laws | | | | | | | | | | | | | | | | Change in Tax Rate | | | — | — | % | | | — | — | % | | | — | — | % | Enactment of Cross-Border Tax Laws | | | | | | | | | | | | | | | | Global Intangible low-taxed income (GILTI) | | | — | — | % | | | — | — | % | | | — | — | % | Tax Credits | | | (1.4) | 0.2 | % | | | (1.5) | 0.4 | % | | | (1.3) | 0.3 | % | Change in Valuation Allowances | | | 78.9 | (12.6) | % | | | 37.1 | (10.6) | % | | | 51.7 | (13.2) | % | Nontaxable or nondeductible items | | | | | | | | | | | | | | | | Nondeductible compensation | | | 4.3 | (0.7) | % | | | 9.5 | (2.7) | % | | | 3.9 | (1.0) | % | Litigation | | | — | — | % | | | (8.4) | 2.4 | % | | | 20.8 | (5.3) | % | Disqualified debt interest | | | 7.5 | (1.2) | % | | | 3.8 | (1.1) | % | | | (38.4) | 9.8 | % | Other | | | 0.5 | (0.1) | % | | | 0.6 | (0.2) | % | | | (2.7) | 0.7 | % | Changes in unrecognized tax benefits | | | — | — | % | | | — | — | % | | | (0.2) | 0.1 | % | Other Adjustments | | | 4.3 | (0.7) | % | | | — | — | % | | | 12.1 | (3.1) | % | Income tax expense/Effective income tax rate | | $ | 4.5 | (0.7) | % | | $ | 2.1 | (0.6) | % | | $ | 3.4 | (0.9) | % |
| (1) | State taxes in California, Illinois, New Jersey and New York made up the majority (greater than 50%) of the tax effect in this category for 2025. California, Illinois and New York made up the majority in 2024 and 2023. |
The significant components of deferred income tax assets and liabilities as of December 31, 2025 and December 31, 2024 are as follows: | | | | | | | | | | | | | | | December 31, 2025 | | December 31, 2024 | | | Deferred Income Tax | | Deferred Income Tax | (In millions) | | Assets | | Liabilities | | Assets | | Liabilities | Tangible assets | | $ | — | | $ | (55.9) | | $ | — | | $ | (60.8) | Right-of-use assets | | | — | | | (802.2) | | | — | | | (831.5) | Accrued liabilities | | | 13.7 | | | — | | | 11.2 | | | — | Intangible assets | | | — | | | (135.5) | | | — | | | (128.0) | Receivables | | | — | | | (2.2) | | | 12.1 | | | — | Investments | | | 2.5 | | | — | | | 44.4 | | | — | Capital loss carryforwards | | | 2.1 | | | — | | | 4.6 | | | — | Pension and deferred compensation | | | 16.1 | | | — | | | 15.5 | | | — | Corporate borrowings | | | — | | | (1.1) | | | — | | | (52.8) | Disallowed interest | | | 785.1 | | | — | | | 663.2 | | | — | Deferred revenue | | | 164.9 | | | — | | | 163.2 | | | — | Lease liabilities | | | 1,041.5 | | | — | | | 1,077.5 | | | — | Other credit carryovers | | | 32.6 | | | — | | | 31.1 | | | — | Net operating loss carryforwards | | | 769.3 | | | — | | | 727.9 | | | — | Total | | $ | 2,827.8 | | $ | (996.9) | | $ | 2,750.7 | | $ | (1,073.1) | Less: Valuation allowance | | | (1,866.6) | | | — | | | (1,711.5) | | | — | Net deferred income taxes | | $ | 961.2 | | $ | (996.9) | | $ | 1,039.2 | | $ | (1,073.1) |
A rollforward of the Company’s valuation allowance for deferred tax assets is as follows: | | | | | | | | | | | | | | | | Additions | | Charged | | | | | | Balance at | | Charged | | (Credited) | | | | | Beginning of | | to | | to Other | | Balance at | (In millions) | | Period | | Expenses(1) | | Accounts(2) | | End of Period | Calendar Year 2025 | | | | | | | | | | | Valuation allowance-deferred income tax assets | | $ | 1,711.5 | | 126.1 | | 29.0 | | $ | 1,866.6 | Calendar Year 2024 | | | | | | | | | | | Valuation allowance-deferred income tax assets | | $ | 1,641.3 | | 84.5 | | (14.3) | | $ | 1,711.5 | Calendar Year 2023 | | | | | | | | | | | Valuation allowance-deferred income tax assets | | $ | 1,513.0 | | 122.1 | | 6.2 | | $ | 1,641.3 |
| (1) | Primarily relates to the Company’s increase in the current year’s federal, state, and international net operating losses. |
| (2) | Primarily relates to amounts resulting from the Company’s changes in deferred tax assets and associated valuation allowance that are not related to income statement activity, as well as amounts charged to other comprehensive income. |
The Company has federal income tax net operating loss carryforwards of $1,780.1 million. Approximately $313.7 million will expire between 2026 and 2037 and will be limited annually due to certain change in ownership provisions of the Code. Approximately $1,466.4 million can be used indefinitely. The Company’s foreign net operating losses of $1,068.4 million can be used indefinitely. The Company also has state income tax loss carryforwards of $3,042.6 million. Approximately $2,254.9 million may be used over various periods ranging from 1 to 20 years. Approximately $787.7 million can be used indefinitely. A reconciliation of the change in the amount of unrecognized tax benefits was as follows: | | | | | | | | | | | | Year Ended | (In millions) | | December 31, 2025 | | December 31, 2024 | | December 31, 2023 | Balance at beginning of period | | $ | 5.5 | | $ | 5.5 | | $ | 7.4 | Gross decreases—expiration of statute of limitations | | | — | | | — | | | (1.9) | Balance at end of period | | $ | 5.5 | | $ | 5.5 | | $ | 5.5 |
The Company, or one of its subsidiaries, files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. Generally, tax years beginning after December 31, 2006 are still open to examination by various taxing authorities. Additionally, as discussed above, the Company has net operating loss (“NOL”) carryforwards for tax years ended December 31, 2007 through December 31, 2025, in the U.S. and various state jurisdictions which have carryforwards of varying lengths of time. These NOLs are subject to adjustment based on the statute of limitations applicable to the return in which they are utilized, not the year in which they are generated. Various state, local and foreign income tax returns are also under examination by taxing authorities. The Company does not believe that the outcome of any examination will have a material impact on its consolidated financial statements.
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