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Income Taxes | 12 Months Ended
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Dec. 30, 2018
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. Also on December 22, 2017, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provided companies with additional guidance on how to account for the 2017 Tax Act in their financial statements, allowing companies to use a measurement period. As of December 31, 2017, we made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax on previously undistributed foreign earnings in accordance with SAB 118. Deferred Tax Assets and Liabilities At the date of enactment, the Company had a net deferred tax asset for the difference between the tax basis and the book basis of the U.S. assets and liabilities. A significant portion of this deferred tax asset balance was subject to a valuation allowance. Due to the 2017 Tax Act, the future impact associated with the reversal of the net deferred tax asset will be subject to tax at a lower corporate tax rate. Consequently in 2017, the Company recorded a $40 million reduction to the its deferred tax asset due to the remeasurement of the U.S. deferred tax assets and liabilities for the reduction in the corporate tax rate from 35% to 21%. At December 30, 2018, the Company has finalized its provisional estimate for the remeasurement of existing deferred tax balances with no additional adjustment. Transition Tax The one-time transition tax is based on the Company’s total post-1986 earnings and profit (“E&P”) for which they had previously deferred U.S. income taxes. In 2017, the Company recorded a provisional amount for a one-time transition tax, resulting in a $6.2 million decrease to deferred tax assets due to the reduction in net operating loss carryforwards. The decrease to deferred tax assets was offset by a corresponding decrease to the valuation allowance. In 2018, the Company recorded a $2.2 million decrease to deferred tax assets to finalize the provisional calculation for the one-time transition tax for foreign E&P. This refinement was a result of completing the data gathering and analysis based on the 2017 Tax Act and guidance issued to date in 2018, including IRS Notices 2018-07, 2018-13 and 2018-26. No provision has been made for deferred taxes related to any remaining historical outside basis differences in the Company’s non-U.S. subsidiaries as it continues to assert indefinite reinvestment on outside basis differences not related to amounts that have been previously taxed in the U.S. or undistributed earnings generated after December 31, 2017. In addition to the changes described above, the 2017 Act imposes a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. The computation of GILTI is generally intended to impose tax on the earnings of a foreign corporation that are deemed to exceed a certain threshold return relative to the underlying business investment. The Company has made a policy election to treat future taxes related to GILTI as a current period expense in the reporting period in which the tax is incurred. 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 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. The components of income (loss) from continuing operations before income taxes for the years ended December 30, 2018, December 31, 2017, and December 25, 2016 are comprised of the following (in millions):
| 2018 |  | 2017 |  | 2016
Domestic | $ | 2.2 |  |  | $ | (60.5 | ) |  | $ | (61.3 | )
Foreign | 6.5 |  |  | 3.4 |  |  | 9.5 |
Total | $ | 8.7 |  |  | $ | (57.1 | ) |  | $ | (51.8 | )
The provision (benefit) for income taxes from continuing operations for the years ended December 30, 2018, December 31, 2017, and December 25, 2016 are comprised of the following (in millions):
| 2018 |  | 2017 |  | 2016
Federal income taxes: |  |  |  |  |
Current | $ | (0.4 | ) |  | $ | (2.9 | ) |  | $ | (0.5 | )
Deferred | (1.8 | ) |  | (9.0 | ) |  | 3.8 |
Total Federal | (2.2 | ) |  | (11.9 | ) |  | 3.3 |
State and local income taxes |  |  |  |  |
Current | 0.4 |  |  | 0.5 |  |  | 0.2 |
Deferred | 1.4 |  |  | (0.3 | ) |  | 0.7 |
Total State and local | 1.8 |  |  | 0.2 |  |  | 0.9 |
Foreign income taxes: |  |  |  |  |
Current | 4.8 |  |  | 2.0 |  |  | 1.5 |
Deferred | 0.2 |  |  | (0.5 | ) |  | 0.1 |
Total Foreign | 5.0 |  |  | 1.5 |  |  | 1.6 |
Total | $ | 4.6 |  |  | $ | (10.2 | ) |  | $ | 5.8 |
A reconciliation of the total income tax provision (benefit) to the amount computed by applying the statutory federal income tax rate of 21% to the income from continuing operations before income taxes for the year ended December 30, 2018, and 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 and December 25, 2016 is as follows (in millions):
| 2018 |  | 2017 |  | 2016
Income tax (benefit) at federal statutory rate | $ | 1.8 |  |  | $ | (20.0 | ) |  | $ | (18.1 | )
State taxes, net of federal tax benefit and valuation allowance | 0.9 |  |  | 0.5 |  |  | 0.1 |
Difference in tax rates between U.S. and foreign | 0.7 |  |  | — |  |  | 0.1 |
Increase (decrease) in valuation allowance | 4.7 |  |  | (45.6 | ) |  | 18.9 |
Nondeductible expense | 0.6 |  |  | 1.1 |  |  | 0.7 |
Increase in reserve for uncertain tax positions | 4.0 |  |  | 1.3 |  |  | 0.1 |
Changes to indefinite life items and separate state deferred taxes | (0.7 | ) |  | (1.8 | ) |  | 4.0 |
One-time transition tax on previously undistributed foreign earnings | 2.2 |  |  | 6.2 |  |  | — |
Goodwill impairment | — |  |  | 8.1 |  |  | — |
Decrease in deferred taxes related to disposition | (9.6 | ) |  | — |  |  | — |
Impact related to the 2017 Tax Act | — |  |  | 40.0 |  |  | — |
Total | $ | 4.6 |  |  | $ | (10.2 | ) |  | $ | 5.8 |
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of December 30, 2018 and December 31, 2017 are as follows (in millions):
| 2018 |  | 2017
Deferred tax assets: |  |  |
Allowance for doubtful accounts | $ | 0.6 |  |  | $ | 0.2 |
Sundry accruals | 1.1 |  |  | 1.5 |
Vacation accrual | 2.7 |  |  | 3.2 |
Stock-based compensation | 4.2 |  |  | 3.1 |
Payroll related accruals | 2.4 |  |  | 2.1 |
Lease accruals | 2.0 |  |  | 2.5 |
Investments | 1.3 |  |  | 1.3 |
Net operating loss carryforwards | 81.7 |  |  | 95.7 |
Capital loss carryforwards | 1.9 |  |  | — |
Tax credit carryforwards | 9.9 |  |  | 9.5 |
Deferred revenue | 1.5 |  |  | 1.9 |
Reserves and other | 10.8 |  |  | 6.1 |
| 120.1 |  |  | 127.1 |
Valuation allowance | (92.2 | ) |  | (87.5 | )
Total deferred tax assets, net of valuation allowance | 27.9 |  |  | 39.6 |
Deferred tax liabilities: |  |  |
Unearned revenue | (23.9 | ) |  | (38.8 | )
Other intangibles | (8.9 | ) |  | (5.4 | )
Property and equipment, principally due to differences in depreciation | (0.9 | ) |  | (0.7 | )
Other | (1.2 | ) |  | (1.7 | )
Total deferred tax liabilities | (34.9 | ) |  | (46.6 | )
Net deferred tax liability | $ | (7.0 | ) |  | $ | (7.0 | )
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 2018, the Company recorded a net increase in its valuation allowance of $4.7 million. At December 30, 2018, the Company had federal tax loss carryforwards of $346.9 million and various state tax loss carryforwards of $263.1 million. The federal tax loss carryforwards will begin to expire in 2020 and state tax loss carryforwards will begin to expire in 2019 in certain states. Additionally, the state capital loss carryforward generated in 2018 will begin to expire in 2023. 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 30, 2018, 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 $8.4 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 30, 2018, the Company has $12.0 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 NOL carryforwards. Generally, the Company’s tax years for 2002 and later are subject to examination by various foreign tax authorities, as well. During 2018 the Company was notified by the Internal Revenue Service that its federal income tax return for the calendar year ending December 27, 2015 has been selected for examination. The Company is currently in the process of responding to the information requested. Additionally, the Company had previously been notified by the New York State Department of Taxation and Finance that it had been selected for examination for the calendar years income tax returns ending December 28, 2014, December 27, 2015, and December 25, 2016. As of December 30, 2018, the New York State examination has been finalized with no significant impact to the tax years identified above. The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):
Balance as of December 27, 2015 | $ | 17.2 |
Increases related to prior periods | 1.4 |
Increases related to current year tax positions | 0.2 |
Decreases related to disposition | (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 |
Increases related to prior periods | 0.5 |
Increases related to current year tax positions | 4.0 |
Expiration of applicable statutes of limitations | (0.4 | )
Decreases related to prior year tax positions | (0.3 | )
Decreases related to disposition | (1.7 | )
Balance as of December 30, 2018 | $ | 17.7 |
Included in the balance of unrecognized tax benefits at December 30, 2018, are $17.7 million of tax benefits that, if recognized, would affect the effective tax rate. Included in this amount is $11.2 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 30, 2018, December 31, 2017 and December 25, 2016, the Company recorded $0.6 million, $0.5 million, and $0.9 million, respectively, in interest or penalties. These amounts are netted by a benefit for interest and penalties related to the reversal of prior positions and the disposition of PSS as noted above, of $1.1 million, $0.2 million, and $0.0 million for the years ended December 30, 2018, December 31, 2017, and December 25, 2016, respectively. As of December 30, 2018, December 31, 2017, and December 25, 2016, the Company had recorded total interest and penalties of $1.6 million, $2.2 million and $1.9 million, respectively. The Company believes that it is reasonably possible that as much as $0.1 million of the liabilities for uncertain tax positions will expire within 12 months of December 30, 2018 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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