
D –		INCOME TAXES

Under guidance contained in Topic 740 of the Accounting Standards Codification^TM (the “Codification”), deferred taxes are determined by applying the provisions of enacted tax laws and rates for the jurisdictions in which the Company operates to the estimated future tax effects of the differences between the tax basis of assets and liabilities and their reported amounts in the Company’s financial statements. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which the Company operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur. During the three and nine months ended September 30, 2011, the Company analyzed and made no adjustment to the valuation allowance. During the nine months ended September 30, 2010, the Company reduced the previously recorded valuation allowance by $4.0 million due to its estimate of taxable income that it projected would be generated in the near future and more likely than not result in the realization of its deferred tax assets. The reduction in the valuation allowance was recorded as a discrete item in the second quarter of 2010.

The Company has calculated an estimated effective annual tax rate for the current annual reporting period, excluding any discrete items, of 41% as of September 30, 2011. The estimated annual rate differs from the statutory rate primarily due to the estimate of state income taxes and non-deductible expenses for the period. Based upon this estimated effective annual tax rate, the Company has recorded a tax provision of $9.2 million on pre-tax income of $22.1 million for the nine months ended September 30, 2011. The Company has also recorded additional tax expense of $2.1 million as a discrete item during the three months ended September 30, 2011 related to a revaluation of its deferred tax assets due to the limitations imposed on its net operating losses under Section 382 of the Internal Revenue Code. For the nine months ended September 30, 2010, the Company recorded a tax provision of $3.1 million on a pre-tax income of $5.8 million, based upon its estimated effective annual rate as of that period. In addition, the Company recorded a $4.0 million tax benefit resulting from a decrease in our valuation allowance as a discrete item during the nine months ended September 30, 2010.