Income Taxes

12 Months Ended

Dec. 25, 2011

Income Taxes

Income Taxes

Note 8. Income Taxes

        The following table summarizes the activity related to the Company's unrecognized tax benefits (in millions):

	Total
Balance at December 28, 2008	$	12.8
Expiration of applicable statutes of limitations		(0.3	)
Foreign currency translation		0.1
Balance at December 27, 2009		12.6
Increases related to prior periods (acquired entities)		0.3
Increases related to current year tax positions		0.2
Expiration of applicable statutes of limitations		(0.7	)
Balance at December 26, 2010		12.4
Increases related to prior periods (acquired entities)		0.6
Increases related to current year tax positions		0.2
Expiration of applicable statutes of limitations		(0.6	)
Settlements with taxing authorities		(2.4	)
Balance at December 25, 2011	$	10.2

        Included in the balance of unrecognized tax benefits at December 25, 2011, are $10.2 million of tax benefits that, if recognized, would affect the effective tax rate. Included in this amount is $7.2 million that would become a deferred tax asset if the tax benefit were recognized. As such, this benefit may be impacted by a corresponding valuation allowance depending upon the Company's consolidated financial position at the time the benefits are recognized.

        The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. For the years ended December 27, 2009, December 26, 2010 and December 25, 2011, the Company recorded $0.1 million, $0.1 million and $0.3 million, respectively, in interest or penalties. These amounts are netted by a benefit for interest and penalties related to the reversal of prior positions as noted above of $0.2 million, $0.4 million, and $0.4 million for the years ended December 27, 2009, December 26, 2010, and December 25, 2011, respectively. As of December 27, 2009, December 26, 2010, and December 25, 2011, the Company had recorded total interest and penalties of $0.7 million, $0.5 million, and $0.4 million, respectively.

        The Company believes that it is reasonably possible that as much as $0.4 million of unrecognized tax benefits will expire within 12 months of December 25, 2011 due to the expiration of various applicable statutes of limitations.

        The Company is subject to taxation in the U.S. and various states, local and foreign tax jurisdictions. The Company's tax years for 2000 and forward are subject to examination by the U.S. and state tax authorities due to the existence of net operating loss carryforwards. Generally, the Company's tax years for 2002 and forward are subject to examination by various foreign tax authorities.

        In assessing the realizability of deferred tax assets, management considers on a periodic basis, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As such, management has determined that it is appropriate to maintain a full valuation allowance against its deferred tax assets, with the exception of an amount equal to its deferred tax liabilities which can be expected to reverse and certain foreign and separate state deferred tax assets. Management will continue to evaluate the necessity to maintain a valuation allowance against its deferred tax asset.

        As of December 25, 2011 and December 26, 2010, the Company had $13.0 million and $0.0 million, respectively, of undistributed earnings attributable to foreign subsidiaries. It is the Company's intention to permanently reinvest undistributed earnings of its foreign subsidiaries. The Company has not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences resulting from earnings for certain foreign subsidiaries which are permanently reinvested outside the U.S. It is not practicable to determine the amount of unrecognized deferred tax liability associated with these temporary differences.

        The components of income (loss) before incomes taxes and equity earnings are listed below:

	2009			2010		2011
Domestic	$	(37.3	)	$	1.9	$	(21.8	)
Foreign		—			—		(1.0	)
Total	$	(37.3	)	$	1.9	$	(22.8	)

        The provision (benefit) for income taxes from continuing operations for the years ended December 27, 2009, December 26, 2010, and December 25, 2011 are comprised of the following (in millions):

	2009		2010			2011
Federal income taxes:
Current	$	0.0	$	0.1		$	(1.5	)
Deferred		1.0		1.6			0.6
Total Federal		1.0		1.7			(0.9	)
State and local income taxes
Current		0.0		(12.6	)		3.1
Deferred		0.0		(1.8	)		0.8
Total State and local		0.0		(14.4	)		3.9
Foreign income taxes:
Current		0.0		0.0			0.4
Deferred		0.0		0.0			(1.5	)
Total Foreign		0.0		0.0			(1.1	)
Total	$	1.0	$	(12.7	)	$	1.9

        A reconciliation of total income tax provision (benefit) to the amount computed by applying the statutory federal income tax rate of 35% to income (loss) from continuing operations before income tax provision (benefit) for the years ended December 27, 2009, December 26, 2010 and December 25, 2011 is as follows (in millions):

	2009			2010			2011
Income tax expense (benefit) at federal statutory rate	$	(13.1	)	$	0.6		$	(7.9	)
State taxes, net of federal tax benefit and valuation allowance		1.0			1.9			3.1
Difference in tax rates between U.S. and foreign		—			—			(0.1	)
Release of foreign valuation allowance		—			—			(0.7	)
Increase (decrease) in federal valuation allowance		1.7			(2.3	)		5.0
Nondeductible expense		0.1			0.2			0.4
Decrease in reserve for uncertain tax positions		—			(0.2	)		(1.7	)
Transaction costs		—			0.7			2.3
Changes to indefinite life items and separate state deferred taxes		—			—			1.5
Impact of purchase accounting		—			(13.6	)		—
Nondeductible goodwill impairment charges		11.3			—			—
Total	$	1.0		$	(12.7	)	$	1.9

        The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities as of December 26, 2010 and December 25, 2011 are as follows (in millions):

	2010			2011
Deferred tax assets:
Allowance for doubtful accounts	$	0.7		$	0.8
Sundry accruals		3.4			7.8
Vacation accrual		2.3			5.0
Stock-based compensation		4.1			4.9
Property and equipment, principally due to differences in depreciation		0.1			—
Payroll related accruals		—			2.3
Lease accruals		—			9.5
Investments		2.3			2.1
Net operating loss carryforwards		71.9			104.1
Tax credit carryforwards		0.3			3.5
Deferred revenue		0.2			1.5
Reserves and other		6.1			9.8
		91.4			151.3
Valuation allowance		(70.5	)		(98.8	)
Total deferred tax assets, net of allowance		20.9			52.5
Deferred tax liabilities:
Unearned revenue		(0.1	)		(15.4	)
Other intangibles		(28.1	)		(37.3	)
Property and equipment, principally due to differences in depreciation		(2.4	)		(10.1	)
Total deferred tax liabilities		(30.6	)		(62.8	)
Net deferred tax asset (liability)	$	(9.7	)	$	(10.3	)

        At December 25, 2011, the Company had federal tax loss carryforwards of $269.4 million and various state tax loss carryforwards of $242.4 million including net operating losses resulting from stock options of approximately $14.4 million for federal and state, which if recognized would result in additional paid-in capital. The federal tax loss carryforwards expire beginning in 2019 through 2030, and the various state tax loss carryforwards expire beginning in 2012 through 2030. Federal and state tax laws impose restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an "ownership change" for tax purposes as defined by Section 382 of the Internal Revenue Code. In March 2010, an "ownership change" occurred which will limit the utilization of the loss carryforwards. As a result, the Company's federal annual utilization of NOL carryforwards will be limited to $28.1 million a year for the five years succeeding the ownership change and $11.6 million per year thereafter. If the entire limitation amount is not utilized in a year, any excess can be carried forward and utilized in future years. For the year ended December 25, 2011, there was no impact of such limitations on the income tax provision since the amount of taxable income did not exceed the annual limitation amount. In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could also result in an "ownership change". If and when any other "ownership change" occurs, utilization of the NOL or other tax attributes may be further limited. As discussed elsewhere, deferred tax assets relating to the Federal and combined states net operating loss and credit carryforwards are offset by a full valuation allowance. In addition, utilization of state tax loss carryforwards is dependent upon sufficient taxable income apportioned to the states.

        In assessing the realizability of deferred tax assets, management considers, on a periodic basis, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. During fiscal 2011, the Company recorded a net increase in its valuation allowance of $28.3 million. Of this amount, a $29.3 million increase relates to current year acquisitions, and a $1.0 million decrease is related to a decrease in the deferred tax asset which does not impact the tax provision.