INCOME TAXES

6 Months Ended

Jun. 30, 2012

INCOME TAXES

INCOME TAXES

NOTE E — INCOME TAXES

The Company’s statutory federal tax rate is 35%. State tax rates vary among states and average approximately 6.0% to 6.5%, although some state rates are much higher and a small number of states do not impose an income tax. The effective tax benefit rates for the six months ended June 30, 2012 and 2011 were 61.6% and 36.3%, respectively. A reconciliation of the 2012 rate to the statutory federal rate is shown in the table below. For both 2012 and 2011, the difference between the Company’s effective tax rate and the federal statutory rate primarily results from the effect of state income taxes, nondeductible expenses, changes in the cash surrender value of life insurance and policy proceeds, the alternative fuel tax credit and changes in valuation allowances for deferred tax assets. The most significant factor in the higher tax benefit rate for the six months ended June 30, 2012 was an $8.0 million decrease in the valuation allowance related to deferred tax assets, including federal and state net operating loss carryforwards, as discussed in the following paragraph.

The Company evaluated the total deferred tax assets at June 30, 2012 and concluded that the assets did not exceed the amount for which realization is more likely than not. In making this determination, the Company considered the future reversal of existing taxable temporary differences, taxable income in carryback years, future taxable income and tax planning strategies. The accounting for the purchase of Panther on June 15, 2012 resulted in the recording of substantial net deferred tax liabilities. As of June 30, 2012, deferred tax liabilities which will reverse in future years exceeded deferred tax assets. In addition, taking into account the changes in capitalization as a result of the acquisition, Panther would have had substantial taxable income in recent years. After adjusting historical taxable income for interest expense under the Company’s ownership structure, Panther’s income during the twenty-four-month period ending June 30, 2012 would have exceeded the Company’s pre-tax loss reported for that period, resulting in combined taxable income for purposes of evaluating the need for a valuation allowance. This estimated net combined taxable income in recent periods and the fact that reversing deferred tax liabilities exceeded reversing deferred tax assets as of June 30, 2012 resulted in a change in management’s judgment as to whether a valuation allowance for deferred federal tax assets was required. Therefore, the valuation allowance for deferred tax assets related to federal and state net operating loss carryforwards was decreased by $8.0 million in the quarter ended June 30, 2012.

The alternative fuel tax credit expired on December 31, 2011. The alternative fuel tax credit recorded for the six months ended June 30, 2011 amounted to $0.5 million. During the six months ended June 30, 2012, the Company received refunds of $2.6 million of federal and state taxes paid in prior years, primarily from loss carrybacks, and the Company paid state and foreign income taxes of $0.4 million.

Reconciliation between the effective income tax rate, as computed on loss before income taxes, and the statutory federal income tax rate for the six months ended June 30, 2012 is presented in the following table:

	Six Months Ended
	June 30, 2012
	($ thousands)
Income tax benefit at the statutory federal rate	$	(5,758	)	(35.0	)%
Federal income tax effects of:
Increase in valuation allowances for the three months ended March 31, 2012	4,640			28.2
Reversal of valuation allowances for the three months ended June 30, 2012	(7,973		)	(48.5	)
Effect of permanent differences and other	(871		)	(5.3	)
State income taxes	(169		)	(1.0	)
Total income tax benefit	$	(10,131	)	(61.6	)%