Income Taxes

9 Months Ended

Jun. 30, 2011

Income Taxes [Abstract]

Income Taxes

7. Income Taxes:

The Company recorded a provision for income taxes amounting to $1.1 million or 30.4% of income before income taxes for the three months ended June 30, 2011, compared to a provision of $0.9 million or 34.5% of income before income taxes for the three months ended June 30, 2010. The Company recorded a provision for income taxes amounting to $3.1 million or 32.6% of income before income taxes for the nine months ended June 30, 2011, compared to a provision of $2.8 million or 27.8% of income before income taxes for the nine months ended June 30, 2010. The difference in the effective tax rate between the three and nine months ended June 30, 2011 and June 30, 2010 is mainly due to the U.K. tax deduction on intra-group interest expense no longer being an allowable deduction effective October 1, 2010, the utilization of loss carry forwards in the U.S. for which no benefit had been previously recorded and permanent differences, mainly related to acquisition costs that are not deductible for income tax purposes.

As of June 30, 2011, the Company has recorded a full valuation allowance against its U.S. deferred tax assets as management believes it is not more likely than not that these deferred tax assets will be utilized prior to their expiration. Subsequent recognition of these deferred tax assets would result in an income tax benefit in the year of such recognition. The Company’s public offering in July 2004 of its common shares caused an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended, (the “Code”). Accordingly, Section 382 imposes an annual limit on the Company’s ability to utilize it net operating loss carryforward. The Company has discovered that, upon the ownership change triggered by the 2004 public offering, an election required under Section 382 of the Code to include the value of its foreign subsidiaries for purposes of determining the annual net operating loss utilization limitation had not been filed. Absent this election, the annual net operating utilization limitation would be negligible. The Company has requested a private letter ruling from the Internal Revenue Service seeking relief which would allow for a retroactive election and believes it is more likely than not that such relief will be obtained. An inability to use a significant portion of the Company’s federal net operating loss carryforward could have a material adverse effect on its consolidated financial position and results of operations.

As of June 30, 2011, the Company has not recorded any unrecognized tax benefits, which remains unchanged from September 30, 2010.