5.	INCOME TAXES:

The Company recorded a tax provision of $1.5 million and $2.0 million for the three- and six-month periods ended June 30, 2014. The reported tax expense for the three- and six month periods ended June 30, 2014 is based upon an estimated annual effective tax rate of 46.3% and 45.2%, respectively, related to our combined federal and state income tax rates, foreign income tax provisions, the recognition of U.S. deferred tax liabilities for differences between the book and tax basis of goodwill and other descrete items. The Company recorded a tax provision of $140 thousand and $219 thousand for the three- and six-month periods ended June 30, 2013. The reported tax expense for the three- and six month periods ended June 30, 2013 is based upon an estimated annual effective tax rate of 9.0% and 29.4%, respectively.

The reported estimated annual effective tax rate for the three- and six-month periods ended June 30, 2013 is lower than the statutory rate due to a full valuation allowance being provided against our deferred tax assets, which includes significant federal net operating loss carryforwards.

We assess the realizability of our deferred tax assets and assess the need for a valuation allowance on an ongoing basis. The periodic assessment of the net carrying value of our deferred tax assets under the applicable accounting rules is highly judgmental. We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is significant judgment involved, and our conclusion could be materially different should certain of our expectations not transpire.

When assessing all available evidence, we consider the extent to which we have generated pre-tax income or losses over the most recent three-year period to be an important piece of objective evidence. During the year ended December 31, 2013, we emerged from a cumulative three year pre-tax loss position, which removed this important piece of negative evidence from our evaluation, as a result we concluded the asset was realizable and we reversed $36.2 million of the previously established deferred tax asset valuation allowance.

Our policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense. This policy has been consistently applied in all periods. During the three- and six-month periods ended June 30, 2014, we recognized, as a part of income tax expense, $20 thousand and $40 thousand, respectively, in interest and penalties related to our unrecognized tax benefits. During the three- and six-month periods ended June 30, 2013, we recognized, as a part of income tax expense, $22 thousand and $43 thousand, respectively, in interest and penalties related to our unrecognized tax benefits.

We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open to examination by a taxing authority. As of June 30, 2014, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, was $108 thousand. We have identified no other uncertain tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the twelve months ending June 30, 2015. We remain subject to examination until the statute of limitations expires for each respective tax jurisdiction.