Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

15. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  We evaluate the recoverability of our deferred tax assets by scheduling the expected reversals of deferred tax assets and liabilities in order to determine whether net operating loss carry forwards are recoverable prior to expiration in accordance with ASC Topic 740. We determined that neither expected reversals of these deferred tax assets and liabilities nor future earnings or other assumptions assured recoverability of all of our net operating loss carry forwards prior to their expiration and accordingly established a valuation allowance in the third quarter of 2010.  The April 1, 2011 acquisition of Emergent Group resulted in larger deferred tax liabilities than deferred tax assets due to opening balance sheet deferred tax liabilities recorded for intangibles and fixed assets.  This discrete event had the one-time effect of reducing our valuation allowance by approximately $8.3 million on that date, though this amount was offset by approximately $8.0 million of additional valuation allowance resulting from year-to-date losses. In future reporting periods, we will continue to assess the likelihood that deferred tax assets will be realizable.

Reconciliations between the Company’s effective income tax rate and the U.S. statutory rate follow:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Statutory U.S. Federal income tax rate	(35.0	)%	(35.0	)%	(35.0	)%	(35.0	)%
State income taxes, net of U.S. Federal income tax	(3.7	)	(4.8	)	(3.6	)	(4.8	)
Permanent items	3.3		0.5		2.7		1.0
Valuation allowance	36.7		56.6		(1.2	)	28.0
Other	(3.7	)	(2.1	)	1.2		1.0
Effective income tax rate	(2.4	)%	15.2	%	(35.9	)%	(9.8	)%

At September 30, 2011, the Company had available unused federal net operating loss carryforwards of approximately $152.3 million.  The net operating loss carryforwards will expire at various dates from 2020 through 2030.