Income Taxes

9 Months Ended

Sep. 30, 2012

Income Tax Uncertainties [Abstract]

Income Taxes

10. Income Taxes

The Company recorded a provision for corporate income taxes of $7,524 and $1,795 for the nine months ended September 30, 2012 and 2011, respectively, reflecting an effective income tax rate of 38% and 37%, respectively. The Company's forecasted annual effective tax rates of 39% and 34% at September 2012 and 2011, respectively, were favorably impacted 5% and 8%, respectively, due to tax benefits derived from the captive insurance arrangement. The increase in the forecasted annual income before the provision for corporate income taxes for 2012 has reduced the effect of the captive insurance arrangement on the Company's annual effective tax rate when compared to 2011. The provision for corporate income taxes for the nine months ended September 30, 2012 includes a discrete tax benefit of $225, or a 1% decrease to the effective tax rate for the nine months ended September 30, 2012 related to the loss on extinguishment of debt recorded in connection with the August 2012 debt repricing and adjustments to prior year estimated jurisdictional tax rates. The provision for corporate income taxes for the nine months ended September 30, 2011 includes a discrete tax provision of $132, or a 3% increase to the effective tax rate, related to the loss on extinguishment of debt offset by a provision related to adjustments to prior year estimated jurisdictional tax rates.

As of September 30, 2012, $750 represents the amount of unrecognized tax benefits that, if recognized would affect the Company's effective tax rate in 2012.

The Company recognizes both interest accrued related to unrecognized tax benefits and penalties in income tax expense, if deemed applicable. As of September 30, 2012, the amount accrued for interest was $289.

The Company files federal income tax returns, a foreign jurisdiction return and multiple state and local jurisdiction tax returns. The Company is no longer subject to examinations of its federal income tax returns by the Internal Revenue Service for years 2009 and prior. The following state and local jurisdictions are currently examining the Company's respective returns for the years indicated: New York State (2006, 2007, 2008, 2009), and New York City (2006, 2007, 2008). These examinations are ongoing and the Company is working with the respective taxing authorities and providing all requested information. The Company does not currently believe that it is reasonably possible that the reserve for uncertain tax positions will significantly change within the next twelve months; however it is difficult to predict the final outcome or timing of resolution of any particular tax matter.

As of September 30, 2012, the Company had net deferred tax assets of $32,967. Quarterly, the Company assesses the weight of all positive and negative evidence to determine whether the net deferred tax asset is realizable. In 2011, the Company returned to profitability while in 2010 and 2009, the Company incurred losses. In 2012, the Company had profitable first, second and third quarters and expects to be profitable for the full year 2012. The Company has historically been a taxpayer and projects that it will be in a three year cumulative income position, as of December 31, 2012. In addition, the Company, based on recent trends, projects future income sufficient to realize the deferred tax assets during the periods when the temporary tax deductible differences reverse. With the exception of the deductions related to the Company's captive insurance arrangement for state taxes, taxable income has been and is projected to be the same as federal. The state net deferred tax asset balance as of September 30, 2012 is $20,716. The Company has federal and state net operating loss carry-forwards which the Company believes will be realized within the available carry-forward period, except for a small state net operating loss carry-forward in Rhode Island due to the short carry-forward period in that state. Accordingly, the Company concluded that it is more likely than not that the deferred tax assets will be realized. If actual results do not meet the Company's forecasts and the Company incurs losses in 2012 and beyond, a valuation allowance against the deferred tax assets may be required in the future.