Income Taxes

The reported effective tax rate for the three months ended March 31, 2014 and 2013 was 0.3% and 10.2%, respectively. The change in effective tax rate primarily results from valuation allowances recorded in the three months ended March 31, 2014. The Company continues to generate losses at its United Kingdom (“UK”) subsidiary. The larger than expected current period losses, when combined with prior losses and future income projections, indicate that it is more likely than not that the UK deferred tax assets will not be realized. Therefore, during the three months ended March 31, 2014, a valuation allowance of $2,740 was recorded against all the previously existing deferred tax assets of the UK subsidiary. Additionally, the current period losses generated by the UK subsidiary during the three months ended March 31, 2014 were not benefited nor are future losses expected to be benefited until the entity returns to profitability and evidence suggests that it is more likely than not that the deferred tax assets will be realized. The impact on the quarterly income tax provision of not benefiting the quarterly losses was approximately $500. The deferred tax assets of the UK subsidiary are comprised primarily of net operating loss carry forwards with no expiration.

In the U.S., the Company is in a net deferred tax asset position as of March 31, 2014, and projects that it will remain in a net deferred tax asset position through December 31, 2014. The Company does not currently have sufficient sources of projected income to cover the net deferred tax asset that is projected at December 31, 2014. Therefore, the Company recorded a valuation allowance and did not provide a tax benefit on a portion of the losses generated by the U.S. during the three months ended March 31, 2014. The impact on the quarterly income tax provision of not benefiting the quarterly losses was approximately $2,500. Continued operating losses in future periods and changes to the sources of income identified to utilize the U.S. deferred tax assets that differ significantly from current estimates may result in additional benefits not being recognized and a valuation allowance being recorded against some or all of the remaining U.S. deferred tax assets.

The following tax years remain open to examination by the major taxing jurisdictions to which the Company is subject:



U.S. Federal	2010 to 2013
U.S. States	2009 to 2013
Foreign	2008 to 2013

A 2011 and 2012 income tax audit of the Company's Canadian subsidiary is in process as of March 31, 2014. To date, no issues have been raised and no adjustments have been proposed. The Company’s gross unrecognized tax benefits are not significant.

The Company received its 2012 federal tax refund of $2,590 during October 2013.