Income Taxes

12 Months Ended

Dec. 31, 2012

INCOME TAXES

8. INCOME TAXES

The provision (benefit) for income taxes from continuing operations for the years ended December 31, 2012, 2011 and 2010 (in millions):

	2012		2011		2010
Current
Federal	$	—	$	—	$	(1.1	)
State		0.6		0.4		0.1
Foreign		0.3		0.6		0.3
		0.9		1.0		(0.7	)
Deferred
Federal		4.8		4.4		(2.8	)
State		0.4		0.4		0.1
		5.2		4.8		(2.7	)
Total provision for taxes	$	6.1	$	5.8	$	(3.4	)

The income tax provision (benefit) differs from the amount of income tax determined by applying the U.S. federal income tax rate of 34% to pre-tax income for the years ended December 31, 2012, 2011 and 2010 due to the following (in millions):

	2012			2011			2010
Computed “expected” tax provision (benefit)	$	6.7		$	(0.8	)	$	(7.4	)
Change in income tax resulting from:
State taxes, net of federal benefit		1.2			0.4			0.1
Goodwill impairment		—			—			2.9
Foreign taxes		0.3			0.6			0.3
Change in valuation allowance		(2.2	)		5.6			1.0
FIN 48 adjustment		—			—			(0.4	)
Other		0.1			—			0.1
	$	6.1		$	5.8		$	(3.4	)

The components of the deferred tax assets and liabilities at December 31, 2012, 2011 and 2010 consist of the following (in millions):

	2012			2011
Deferred tax assets:
Accrued expenses	$	2.8		$	3.0
Accounts receivable		2.8			2.6
Net operating loss carryforward		110.5			103.7
Stock-based compensation		4.4			4.3
Capital loss in investment in a domestic subsidiary		10.2			10.4
Intangible assets		25.8			36.6
Credits		0.8			1.0
Other		3.5			3.4
		160.8			165.0
Valuation allowance		(145.5	)		(148.4	)
Net deferred tax assets	$	15.3		$	16.6
Deferred tax liabilities:
Non-long lived intangible assets	$	(4.3	)	$	(4.3	)
Long-lived Intangible assets		(48.3	)		(42.9	)
Property and equipment		(2.0	)		(3.0	)
Deferred state taxes		(5.5	)		(5.9	)
		(60.1	)		(56.1	)
	$	(44.8	)	$	(39.5	)

Deferred income tax amounts are classified on the balance sheet as follows (in millions):

	2012			2011
Prepaid expenses and other current assets	$	0.4		$	0.5
Deferred income taxes		(45.2	)		(40.0	)
	$	(44.8	)	$	(39.5	)

As of December 31, 2012, the Company has federal and state net operating loss carryforwards of approximately $294.3 and $210.1 million, respectively, available to offset future taxable income. The federal net operating loss carryforwards will expire during the years 2020 through 2032. The state net operating loss carryforwards will expire during the years 2013 through 2033. Of the $210.1 million of state net operating loss carryforwards, $13.3 million will expire in 2013.

For the years ended December 31, 2012 and 2011, the Company had a valuation allowance of $145.5 million and $148.4 million, respectively, as the Company believes that it is more likely than not that its tax assets will not be fully realized.

As of December 31, 2012, the Company’s utilization of its available net operating loss carryforwards against future taxable income is not restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. However in subsequent periods, the utilization of its available net operating loss carryforwards against future taxable income may be restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. These rules in general provide that an ownership change occurs when the percentage shareholdings of 5% direct or indirect shareholders of a loss corporation have in aggregate increased by more than 50 percentage points during the immediately preceding three years.

The Company addresses uncertainty in tax positions according to the provisions of ASC 740, “Income Taxes”, which clarifies the accounting for income taxes by establishing the minimum recognition threshold and a measurement attribute for tax positions taken or expected to be taken in a tax return in order to be recognized in the financial statements.

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

	Amount
Balance at December 31, 2010	$	6.4
Change in balances related to tax positions		—
Balance at December 31, 2011	$	6.4
Change in balances related to tax positions		—
Balance at December 31, 2012	$	6.4

As of December 31, 2012, the Company had $6.4 million of gross unrecognized tax benefits for uncertain tax positions, of which $0.9 million would affect the effective tax rate if recognized.

The Company does not anticipate that the amount of unrecognized tax benefits as of December 31, 2012 will significantly increase or decrease within the next 12 months.

The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. As of December 31, 2012, the Company had no significant accrued interest and penalties related to uncertain tax positions due to the net operating loss.

The Company is subject to taxation in the United States, various states and Mexico. The tax years 2009 to 2012 and 2008 to 2012 remain open to examination by federal and state taxing jurisdictions, respectively, and the tax years 2002 to 2012 remain open to examination by foreign jurisdiction. Net operating losses from years from which the statute of limitations have expired (2008 and prior for federal and 2007 and prior for state) could be adjusted in the event that the taxing jurisdictions challenge the amounts of net operating loss carryforwards from such years.

Entravision Holdings, LLC [Member]

INCOME TAXES

5. INCOME TAXES

The provision (benefit) for income taxes for the years ended December 31, 2012, 2011, and 2010 is as follows (in millions):

	2012		2011		2010
Current
Federal		$—		$—		$—
State		—		—		—
Foreign		—		—		—
		—		—		—
Deferred
Federal		3.4		2.9		(2.8	)
State		0.6		0.5		(0.4	)
		4.0		3.4		(3.2	)
Total provision (benefit) for taxes	$	4.0	$	3.4	$	(3.2	)

The income tax provision (benefit) differs from the amount of income tax determined by applying the U.S. federal income tax rate of 34% to pre-tax income for the years ended December 31, 2012, 2011, and 2010 due to the following (in millions):

	2012		2011		2010
Computed “expected” tax provision (benefit)	$	—	$	—	$	(5.2	)
Change in income tax resulting from:
State taxes, net of federal benefit		—		—		(0.5	)
Change in valuation allowance		4.0		3.2		2.8
Other		—		0.2		(0.3	)
	$	4.0	$	3.4	$	(3.2	)

The components of the deferred tax assets and liabilities at December 31, 2012 and 2011 consist of the following (in millions):

	2012			2011
Deferred tax assets:
Net operating loss carryforward		84.4			77.9
Long-lived Intangible assets		20.6			28.6
		105.0			106.5
Valuation allowance		(105.0	)		(106.5	)
Net deferred tax assets	$	—		$	—
Deferred tax liabilities:
Long-lived Intangible assets	$	(32.2	)	$	(28.3	)

As of December 31, 2012, the Company has federal and state net operating loss carryforwards of approximately $225.4 million available to offset future taxable income. The net operating loss carryforwards will expire during the years 2020 through 2032.

For the years ended December 31, 2012 and 2011, the Company had a valuation allowance of $105.0 million and $106.5 million, respectively, as the Company believes that it is more likely than not that the deferred tax assets will not be fully realized.

As of December 31, 2012, the Company’s utilization of its available net operating loss carryforwards against future taxable income is not restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. However in subsequent periods, the utilization of its available net operating loss carryforwards against future taxable income may be restricted pursuant to the “change in ownership” rules in Section 382 of the Internal Revenue Code. These rules in general provide that an ownership change occurs when the percentage shareholdings of 5% direct or indirect shareholders of a loss corporation have in aggregate increased by more than 50 percentage points during the immediately preceding three years.