11.

INCOME TAXES:

The Company’s effective tax rate as applied to pre-tax loss was 38% and (130)% for the three months ended September 30, 2012 and 2011, respectively. The change in the Company’s effective tax rate for these periods was due primarily to changes in federal and state valuation allowances during each period, as well as the effect of the change in the estimated annual effective rate as applied to prior quarters’ income during the 2011 period, partially offset by the effect of permanent tax adjustments related to nondeductible transaction costs associated with the Marriott sale transaction in the 2012 period.

The Company’s effective tax rate as applied to pre-tax income (loss) was 6% and 49% for the nine months ended September 30, 2012 and 2011, respectively. The decrease in the Company’s effective tax rate for the 2012 period was due primarily to increases in permanent tax adjustments related to nondeductible transaction costs associated with the Marriott sale transaction and compensation adjustments, partially offset by changes in the Company’s federal and state valuation allowance.

Under FASB Accounting Standards Codification 740-270, “Income Taxes – Interim Reporting,” each interim period is considered an integral part of the annual period and tax expense is measured using an estimated annual effective rate. Estimates of the annual effective tax rate at the end of interim periods are, of necessity, based on evaluation of possible future events and transactions and may be subject to subsequent refinement or revision. For the nine months ended September 30, 2011, the Company used the annual effective tax rate based on estimated ordinary income for the year ended December 31, 2011. However, for the nine months ended September 30, 2012, the Company determined that its ordinary income for the year ending December 31, 2012 cannot be reliably estimated because the expected amount of income from operations, combined with significant permanent differences (i.e. nondeductible transaction costs), are such that a minor change in estimated ordinary income for 2012 could result in a material change in the estimated annual effective tax rate. As a result, the Company has determined that the actual effective tax rate for the nine months ending September 30, 2012 is the best estimate of the annual effective rate.

As of September 30, 2012 and December 31, 2011, the Company had $13.9 million and $14.1 million of unrecognized tax benefits, respectively, of which $7.4 million would affect the Company’s effective tax rate if recognized. These liabilities are recorded in other long-term liabilities in the accompanying condensed consolidated balance sheets. The Company estimates the overall decrease in unrecognized tax benefits in the next twelve months will be approximately $13.1 million, mainly due to the expiration of various statutes of limitations. As of September 30, 2012 and December 31, 2011, the Company had accrued $2.4 million and $2.1 million, respectively, of interest and $0.1 million of penalties related to uncertain tax positions.