Income Taxes

The components of income (loss) from continuing operations before income taxes and equity earnings are listed below (in millions):



	2011			2012			2013
Domestic	$	(20.7	)	$	(120.3	)	$	(39.4	)
Foreign	(0.9		)	5.8			7.5
Total	$	(21.6	)	$	(114.5	)	$	(31.9	)

The provision (benefit) for income taxes from continuing operations for the years ended December 25, 2011, December 30, 2012, and December 29, 2013 are comprised of the following (in millions):



	2011			2012			2013
Federal income taxes:
Current	$	(1.5	)	$	—		$	(1.7	)
Deferred	0.6			(3.5		)	0.3
Total Federal	(0.9		)	(3.5		)	(1.4		)
State and local income taxes
Current	3.1			0.8			2.0
Deferred	0.8			0.4			(0.7		)
Total State and local	3.9			1.2			1.3
Foreign income taxes:
Current	0.4			0.1			0.1
Deferred	(1.5		)	0.6			—
Total Foreign	(1.1		)	0.7			0.1
Total	$	1.9		$	(1.6	)	$	—

A reconciliation of the 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 for the years ended December 25, 2011, December 30, 2012 and December 29, 2013 is as follows (in millions):



	2011			2012			2013
Income tax expense (benefit) at federal statutory rate	$	(7.6	)	$	(40.1	)	$	(11.1	)
State taxes, net of federal tax benefit and valuation allowance	3.1			0.7			1.8
Difference in tax rates between U.S. and foreign	(0.1		)	(1.5		)	(2.6		)
Release of foreign valuation allowance	(0.7		)	—			—
Increase (decrease) in federal valuation allowance	4.7			14.2			13.0
Nondeductible expense	0.4			0.3			0.7
Increase (decrease) in reserve for uncertain tax positions	(1.7		)	0.1			(1.4		)
Transaction costs	2.3			0.1			—
Changes to indefinite life items and separate state deferred taxes	1.5			(3.0		)	(0.4		)
Impact of purchase accounting	—			—			—
Goodwill impairment	—			27.6			—
Total	$	1.9		$	(1.6	)	$	—

The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities as of December 30, 2012 and December 29, 2013 are as follows (in millions):



	2012			2013
Deferred tax assets:
Allowance for doubtful accounts	$	0.4		$	0.7
Sundry accruals	3.3			2.8
Vacation accrual	5.1			5.2
Stock-based compensation	4.6			6.1
Payroll related accruals	2.7			3.3
Lease accruals	9.7			9.1
Investments	1.9			1.9
Net operating loss carryforwards	124.8			118.2
Tax credit carryforwards	3.7			5.1
Deferred revenue	2.1			2.4
Reserves and other	10.2			10.2
	168.5			165
Valuation allowance	(110.4		)	(123.1		)
Total deferred tax assets, net of allowance	58.1			41.9
Deferred tax liabilities:
Unearned revenue	(42.0		)	(35.8		)
Other intangibles	(15.7		)	(4.7		)
Property and equipment, principally due to differences in depreciation	(7.9		)	(7.7		)
Other	—			(0.9		)
Total deferred tax liabilities	(65.6		)	(49.1		)
Net deferred tax asset (liability)	$	(7.5	)	$	(7.2	)

In assessing the Company's ability to realize 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 the Company's deferred tax assets, with the exception of an amount equal to its deferred tax liabilities, which can be expected to reverse over a definite life and certain foreign and separate state deferred tax assets. Management will continue to evaluate the necessity to maintain a valuation allowance against the Company's net deferred tax assets. During fiscal 2013, the Company recorded a net increase in its federal valuation allowance of $13.0 million.

At December 29, 2013, the Company had federal tax loss carryforwards of $325.4 million and various state tax loss carryforwards of $237.4 million including net operating losses resulting from stock options of $14.4 million for federal and state, which if recognized would result in additional paid-in-capital. The federal tax loss carryforwards will begin to expire in 2018 and state tax loss carryforwards will begin to expire in 2014 in certain states.

Federal and state income tax laws impose restrictions on the utilization of net operating loss (“NOL”) and tax credit carryforwards in the event that an “ownership change” occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”). In general, an ownership change occurs when shareholders owning 5% or more of a “loss corporation” (a corporation entitled to use NOL or other loss carryovers) have increased their ownership of stock in such corporation by more than 50 percentage points during any 3-year period. The annual base Section 382 limitation is calculated by multiplying the loss corporation's value at the time of the ownership change by the greater of the long-term tax-exempt rate determined by the Internal Revenue Service in the month of the ownership change or the two preceding months. This base limitation is subject to adjustments, including an increase for built-in gains recognized in the five year period after the ownership change. In March 2010, an “ownership change” occurred that will limit the utilization of NOL carryforwards. In July 2011, another “ownership change” occurred. The March 2010 ownership change limitation is more restrictive. In prior years the company acquired corporations with NOL carryforwards at the date of acquisition (Acquired NOLs). The Acquired NOLs are subject to separate limitations that may further restrict the use of Acquired NOLs. As a result, the Company's federal annual utilization of NOL carryforwards will be limited to at least $27 million a year for the five years succeeding the March 2010 ownership change and at least $11.6 million for each year thereafter subject to separate limitations for Acquired NOL. If the entire limitation amount is not utilized in a year, the excess can be carried forward and utilized in future years. For the year ended December 29, 2013, 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 cause 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 NOL 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.

The Company has not provided deferred U.S. income taxes or foreign withholding taxes of approximately $15.7 million on temporary differences relating to the outside basis in its investment in foreign subsidiaries which are essentially permanent in duration. It is the Company's intention to permanently reinvest undistributed earnings of its foreign subsidiaries. As of December 29, 2013 the Company has $16.0 million of cash and cash equivalents available for distribution.

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

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



Balance as of December 26, 2010	$	12.4
Increases related to prior periods (acquired entities)	0.5
Increases related to current year tax positions	0.2
Expiration of applicable statutes of limitations	(0.6		)
Settlements with taxing authorities	(2.4		)
Balance as of December 25, 2011	10.1
Increases related to prior periods (acquired entities)	3.7
Increases related to current year tax positions	—
Expiration of applicable statutes of limitations	(0.1		)
Settlements with taxing authorities	(0.3		)
Balance as of December 30, 2012	13.4
Increases related to prior periods (acquired entities)	3.3
Increases related to current year tax positions	1.7
Expiration of applicable statutes of limitations	(2.6		)
Settlements with taxing authorities	—
Balance as of December 29, 2013	$	15.8

Included in the balance of unrecognized tax benefits at December 29, 2013, are $15.8 million of tax benefits that, if recognized, would affect the effective tax rate. Included in this amount is $14.5 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 25, 2011, December 30, 2012 and December 29, 2013, the Company recorded $0.3 million, $0.4 million and $0.2 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 $0.4 million, $0.1 million, and $0.2 million for the years ended December 25, 2011, December 30, 2012, and December 29, 2013, respectively. As of December 25, 2011, December 30, 2012, and December 29, 2013, the Company had recorded total interest and penalties of $0.4 million, $0.7 million, and $0.7 million, respectively.

The Company believes that that no material amount of the liabilities for uncertain tax positions will expire within 12 months of December 29, 2013.