Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

INCOME TAXES

5. INCOME TAXES:

The Company recorded a tax expense of $163 thousand and $382 thousand for the three- and nine-month periods ended September 30, 2012, respectively. The Company recorded a tax provision of $299 thousand and $651 thousand during the three- and nine-month periods ended September 30, 2011, respectively. The reported tax expense for the three- and nine-month periods ended September 30, 2012 is based upon an effective tax rate of 17.0% and 25.7%, respectively, related to our combined federal and state income tax rates, foreign income tax provisions and the recognition of U.S. deferred tax liabilities for differences between the book and tax basis of goodwill. The reported tax expense for the three- and nine-month periods ended September 30, 2011 is based upon an effective tax rate of 16.2% and 22.4%, respectively.

We have deferred tax assets that have arisen primarily as a result of timing differences, net operating loss carryforwards and tax credits. Our ability to realize a deferred tax asset is based on our ability to generate sufficient future taxable income within the applicable carryforward period and subject to any applicable limitations. We assess, on a routine periodic basis, the estimated future realizability of the gross carrying value of our deferred tax assets on a more likely than not basis. Our periodic assessments take into consideration both positive evidence (future profitability projections for example) and negative evidence (recent and historical financial performance for example) as it relates to evaluating the future recoverability of our deferred tax assets.

We have a full valuation allowance against our deferred tax assets at September 30, 2012. The establishment of a full valuation allowance against the gross carrying value of our deferred tax assets does not prohibit or limit the Company’s ability to realize a tax benefit in future periods. All existing deferred tax assets, net operating loss carryforwards and credits will be available, subject to possible statutory limitations, to reduce certain future federal and state income tax obligations.