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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In December 2017, the 2017 Tax Act was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for a one-time transition tax on certain foreign earnings and the acceleration of depreciation for certain assets placed into service after September 27, 2017 as well as prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, modification of NOL carryforwards, capitalization of research and development expenditures (starting in 2022), additional limitations on executive compensation deductions and limitations on the deductibility of interest. On December 22, 2017, the SEC issued SAB 118, which provides companies with additional guidance on how to account for the 2017 Tax Act in its financial statements, allowing companies to use a measurement period. At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the 2017 Tax Act; however, as described below, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. For these items, the Company recognized provisional amounts in accordance with SAB 118, which are included as a component of income tax expense from continuing operations. The Company expects to finalize these provisional estimates before the end of 2018 after completing its review and analysis, including review and analysis of any interpretations issued during this measurement period. With the adoption of a minimum tax on foreign earnings, the Company will be subject to tax on global intangible low-taxed income (“GILTI”) in future years. The Company is continuing to evaluate this provision and will not make a policy election on how to account for GILTI (as a period expense or as part of its rate on deferred taxes) until it has the necessary information available, including the interpretations of the new rules, to analyze the impacts and complete its analysis. The Company will make an election before the end of 2018. Because the Company has not made a policy election, no amounts for GILTI are included in its deferred taxes. Reduction of the U.S. Corporate Income Tax Rate The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s net deferred liability was remeasured to reflect the reduction in the U.S. corporate income tax rate from 35% to 21%, resulting in a $6.9 million income tax benefit for the year ended December 31, 2017 and a corresponding $6.9 million decrease in net deferred tax liabilities as of December 31, 2017. Modification of Net Operating Loss Carryforward Periods The Company scheduled the expected reversal of deferred tax assets and liabilities and determined that approximately $6.3 million of federal deferred tax assets will likely generate a net operating loss with an indefinite-lived carryforward period. As such, $6.3 million of federal deferred tax assets were recognized without the need for a valuation allowance. These assets were netted with indefinite-lived deferred tax liabilities and resulted in a benefit recorded to income taxes. Transition Tax on Foreign Earnings The one-time transition tax on certain foreign earnings resulted in a $6.2 million decrease to deferred tax assets due to the reduction in net operating loss carryforwards. The decrease in deferred tax assets was offset by a corresponding decrease to the valuation allowance. The determination of the transition tax requires further analysis regarding the amount and composition of the Company’s historical foreign earnings, which is expected to be completed before the end of 2018. Effective January 1, 2018, the 2017 Tax Act requires the acceleration of revenue for tax purposes for certain types of revenue. The new rules require the Company to not defer revenue on unbilled accounts receivable later than when the amounts are recognized as revenue for book purposes. This change impacts several accounting methods previously used by the Company and is expected to result in an acceleration of taxability of such revenue beginning in 2018 as compared with prior U.S. tax laws. Additionally, future interest deductions of the Company will be limited to 30% of tax adjusted EBITDA through 2021. Although the Company believes the significant impacts from the 2017 Tax Act are those described above, it continues to review and evaluate the other provisions of the 2017 Tax Act. This review could result in changes to the amounts that it has provisionally recorded. The Company expects to complete this review and evaluation before the end of 2018. The components of income (loss) from continuing operations before income taxes for the years ended December 31, 2017, December 25, 2016, and December 27, 2015 are comprised of the following (in millions):
| 2017 |  | 2016 |  | 2015
Domestic | $ | (54.2 | ) |  | $ | (61.8 | ) |  | $ | (54.2 | )
Foreign | 3.4 |  |  | 9.5 |  |  | 9.6 |
Total | $ | (50.8 | ) |  | $ | (52.3 | ) |  | $ | (44.6 | )
The provision (benefit) for income taxes from continuing operations for the years ended December 31, 2017, December 25, 2016, and December 27, 2015 are comprised of the following (in millions):
| 2017 |  | 2016 |  | 2015
Federal income taxes: |  |  |  |  |
Current | $ | (0.7 | ) |  | $ | (0.5 | ) |  | $ | (15.7 | )
Deferred | (9.0 | ) |  | 4.0 |  |  | 1.4 |
Total Federal | (9.7 | ) |  | 3.5 |  |  | (14.3 | )
State and local income taxes |  |  |  |  |
Current | 0.7 |  |  | 2.3 |  |  | 0.8 |
Deferred | (0.7 | ) |  | 0.7 |  |  | — |
Total State and local | — |  |  | 3.0 |  |  | 0.8 |
Foreign income taxes: |  |  |  |  |
Current | 2.0 |  |  | 1.5 |  |  | 1.2 |
Deferred | (0.5 | ) |  | 0.1 |  |  | 0.9 |
Total Foreign | 1.5 |  |  | 1.6 |  |  | 2.1 |
Total | $ | (8.2 | ) |  | $ | 8.1 |  |  | $ | (11.4 | )
A reconciliation of the total income tax provision (benefit) to the amount computed by applying the statutory federal income tax rate of 35% to the loss from continuing operations before income taxes for the years ended December 31, 2017, December 25, 2016, and December 27, 2015 is as follows (in millions):
| 2017 |  | 2016 |  | 2015
Income tax (benefit) at federal statutory rate | $ | (17.8 | ) |  | $ | (18.3 | ) |  | $ | (15.6 | )
State taxes, net of federal tax benefit and valuation allowance | 0.7 |  |  | 0.2 |  |  | (0.2 | )
Difference in tax rates between U.S. and foreign | — |  |  | 0.1 |  |  | (0.7 | )
Increase (decrease) in valuation allowance | (45.6 | ) |  | 19.1 |  |  | — |
Nondeductible expense | 1.1 |  |  | 0.7 |  |  | 0.8 |
Increase in reserve for uncertain tax positions | 1.3 |  |  | 2.2 |  |  | 0.9 |
Changes to indefinite life items and separate state deferred taxes | (2.2 | ) |  | 4.1 |  |  | 3.4 |
One-time transition tax on previously undistributed foreign earnings | 6.2 |  |  | — |  |  | — |
Goodwill impairment | 8.1 |  |  | — |  |  | — |
Impact related to the 2017 Tax Act | 40.0 |  |  | — |  |  | — |
Total | $ | (8.2 | ) |  | $ | 8.1 |  |  | $ | (11.4 | )
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of December 31, 2017 and December 25, 2016 are as follows (in millions):
| 2017 |  | 2016
Deferred tax assets: |  |  |
Allowance for doubtful accounts | $ | 0.2 |  |  | $ | 0.4 |
Sundry accruals | 1.5 |  |  | 2.2 |
Vacation accrual | 3.2 |  |  | 4.7 |
Stock-based compensation | 3.1 |  |  | 5.2 |
Payroll related accruals | 2.1 |  |  | 2.9 |
Lease accruals | 2.5 |  |  | 4.5 |
Investments | 1.3 |  |  | 2.0 |
Net operating loss carryforwards | 95.7 |  |  | 124.8 |
Tax credit carryforwards | 9.5 |  |  | 9.4 |
Deferred revenue | 1.9 |  |  | 2.5 |
Reserves and other | 6.1 |  |  | 11.9 |
| 127.1 |  |  | 170.5 |
Valuation allowance | (87.5 | ) |  | (133.1 | )
Total deferred tax assets, net of valuation allowance | 39.6 |  |  | 37.4 |
Deferred tax liabilities: |  |  |
Unearned revenue | (38.8 | ) |  | (43.0 | )
Other intangibles | (5.4 | ) |  | (7.0 | )
Property and equipment, principally due to differences in depreciation | (0.7 | ) |  | (2.0 | )
Other | (1.7 | ) |  | (2.7 | )
Total deferred tax liabilities | (46.6 | ) |  | (54.7 | )
Net deferred tax liability | $ | (7.0 | ) |  | $ | (17.3 | )
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 2017, the Company recorded a net decrease in its federal valuation allowance of $47.8 million. At December 31, 2017, the Company had federal tax loss carryforwards of $390.7 million and various state tax loss carryforwards of $348.7 million. The federal tax loss carryforwards will begin to expire in 2020 and state tax loss carryforwards will begin to expire in 2018 in certain states. Federal and state income tax laws impose restrictions on the utilization of net operating losses (“NOLs”) 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 NOLs 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 was limited to at least $27.0 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 NOLs. 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 31, 2017, 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. However, future equity offerings or acquisitions that have equity as a component of the purchase price could also cause an “ownership change.” If and when any other “ownership change” occurs, utilization of the NOLs or other tax attributes may be further limited. As discussed elsewhere, deferred tax assets relating to the NOLs 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 $7.7 million on temporary differences relating to the outside basis in its investment in foreign subsidiaries, which are essentially permanent in duration. As of December 31, 2017, all accumulated undistributed earnings of our foreign subsidiaries were subject to the one-time transition tax on foreign earnings required by the 2017 Tax Act. It is the Company’s intention to permanently reinvest undistributed earnings of its foreign subsidiaries. As of December 31, 2017, the Company has $10.7 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 NOL carryforwards. Generally, the Company’s tax years for 2002 and later are subject to examination by various foreign tax authorities, as well. The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):
Balance as of December 28, 2014 | $ | 16.4 |
Increases related to prior periods (acquired entities) | 0.4 |
Increases related to current year tax positions | 0.9 |
Decreases related to disposition | (0.5 | )
Balance as of December 27, 2015 | 17.2 |
Increases related to prior periods (acquired entities) | 1.4 |
Increases related to current year tax positions | 0.2 |
Expiration of applicable statutes of limitations | (0.2 | )
Balance as of December 25, 2016 | 18.6 |
Increases related to prior periods | 0.4 |
Increases related to current year tax positions | 1.1 |
Expiration of applicable statutes of limitations | (0.6 | )
Decrease in federal tax rate | (3.9 | )
Balance as of December 31, 2017 | $ | 15.6 |
Included in the balance of unrecognized tax benefits at December 31, 2017, are $15.6 million of tax benefits that, if recognized, would affect the effective tax rate. Included in this amount is $11.0 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 31, 2017, December 25, 2016 and December 27, 2015, the Company recorded $0.5 million, $0.9 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 $0.2 million, $0.0 million, and $0.1 million for the years ended December 31, 2017, December 25, 2016, and December 27, 2015, respectively. As of December 31, 2017, December 25, 2016, and December 27, 2015, the Company had recorded total interest and penalties of $2.2 million, $1.9 million and $1.0 million, respectively. The Company believes that it is reasonably possible that as much as $0.4 million of the liabilities for uncertain tax positions will expire within 12 months of December 31, 2017 due to the expiration of various applicable statues of limitations.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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