Income Taxes

The Company adjusts its effective tax rate each quarter based on its current estimated annual effective tax rate. The Company also records the tax impact of certain discrete items, unusual or infrequently occurring tax events and the effects of changes in tax laws or rates, in the interim period in which they occur. In addition, the Company evaluates its deferred tax assets quarterly to determine if a valuation allowance is required.

The Company considered whether a valuation allowance should be recorded against deferred tax assets based on the likelihood that the benefits of the deferred tax assets would or would not ultimately be realized in future periods. In making this assessment, significant weight was given to evidence that could be objectively verified such as recent operating results and less consideration was given to less objective indicators such as future earnings projections.

After consideration of positive and negative evidence, including the recent history of losses, the Company cannot conclude that it is more likely than not that it will generate future earnings sufficient to realize the Company's deferred tax assets. Accordingly, the Company is maintaining a valuation allowance against its deferred tax assets. The Company decreased its valuation allowance by $1.0 million in the three months ended March 31, 2014 to $78.9 million. The valuation allowance at June 30, 2013 was $82.5 million.

A summary of the income tax expense recorded for the three and nine months ended March 31, 2014 and 2013 is as follows:



(In thousands)	Three Months Ended March 31,						Nine Months Ended March 31,
	2014			2013			2014			2013
Income (loss) before taxes	$	2,702		$	(1,346	)	$	9,925		$	(5,115	)

Income tax expense (benefit) at statutory rate	919			(457		)	3,375			(1,739		)
State income tax expense (benefit), net of federal tax benefit	173			(140		)	759			(4		)
Valuation allowance	(986		)	475			(3,568		)	1,791
Other permanent items	90			82			338			321
Income tax expense (benefit)	$	196		$	(40	)	$	904		$	369

As of March 31, 2014 and June 30, 2013, the Company had not recognized the following tax benefits in its consolidated financial statements:



	As of
(In thousands)	March 31, 2014		June 30, 2013
Total unrecognized tax benefits*	$	3,211	$	3,211
Unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate, subject to the valuation allowance*	$	3,064	$	3,064

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* Excluding interest and penalties

The Company believes it is reasonably possible that $3.2 million of its total unrecognized tax benefits could be released in the next 12 months.