Income Taxes

3 Months Ended

Mar. 31, 2013

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 and have established a valuation allowance in accordance with ASC Topic 740. The tax expense for the three months ended March 31, 2013 primarily relates to a discrete item to record a deferred tax liability for adjustments in connection with the tax amortization of indefinite-life goodwill. The Company will continue to incur deferred tax expense in the future as tax amortization occurs. The expected tax benefit from operating loss during the three months ended March 31, 2013 was offset by the recording of additional valuation allowance. Our January 3, 2012 acquisition resulted in the recording of deferred tax liabilities on the opening balance sheet due to higher book than tax bases for fixed assets and amortizable intangible assets.  This discrete event had the one-time effect of reducing our valuation allowance by approximately $3.4 million on that date, though this amount was offset by approximately $2.5 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 are as follows:

	Three Months Ended March 31,
	2013		2012
Statutory U.S. Federal income tax rate	(35.0	)%	(35.0	)%
State income taxes, net of U.S. Federal income tax	(3.1	)	(3.3	)
Permanent items	1.0		1.2
Valuation allowance	38.2		(14.7	)
Other	6.6		0.1
Effective income tax rate	7.7	%	(51.7	)%

At March 31, 2013, the Company had available unused federal net operating loss carryforwards of approximately $187.4 million. The net operating loss carryforwards will expire at various dates from 2019 through 2034.