Note 8 Income Taxes

The provision (benefit) for income taxes consists of:



(dollars in thousands)		2013		2012		2011
Current:
Federal	$	26,994	$	30,258	$	24,518
State		6,774		2,534		781
Deferred:
Federal		8,184		12,107		12,731
State		2,193		3,504		3,992
	$	44,145	$	48,403	$	42,022

The reconciliation of income taxes computed at the federal statutory rate (35% in 2013, 2012 and 2011) to the provision for income taxes is:



(dollars in thousands)		2013		2012		2011
Income taxes at federal statutory rate	$	40,553	$	45,820	$	41,151
State income taxes, net of federal income tax benefit		5,828		3,925		2,558
Other		(2,236)		(1,342)		(1,687)
Provision for income taxes (effective tax rate 38.1%, 37.0% and 35.7%, respectively)	$	44,145	$	48,403	$	42,022

Cash paid for income taxes was $26,350,000, $27,500,000 and $21,000,000 in 2013, 2012 and 2011 respectively.

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 28, 2013 and December 29, 2012, are:



(dollars in thousands)		2013		2012
Deferred tax assets:
Accounts receivable	$	585	$	426
Compensated absences		403		510
Long term employment incentives		2,785		2,891
Employee benefit plans		4,221		3,784
General liability insurance		1,223		1,113
Postretirement benefit obligations		7,037		6,255
Net operating loss carryforwards		5,736		6,535
Total deferred tax assets		21,990		21,514
Deferred tax liabilities:
Inventories		(6,809)		(6,241)
Unrealized gains on marketable securities		(2,753)		(3,506)
Nondeductible accruals and other		(4,745)		(1,995)
Depreciation		(109,836)		(102,301)
Total deferred tax liabilities		(124,143)		(114,043)
Net deferred tax liability	$	(102,153)	$	(92,529)
Current deferred liability - net	$	(4,219)	$	(3,420)
Noncurrent deferred liability - net		(97,934)		(89,109)
Net deferred tax liability	$	(102,153)	$	(92,529)

Note 8 Income Taxes (continued)

The following table summarizes the activity related to the Company’s unrecognized tax benefits:



(dollars in thousands)		2013		2012
Unrecognized tax benefits at beginning of year	$	225	$	161
Increases based on tax positions related to the current year		-		-
Additions for tax positions of prior year		-		64
Reductions for tax positions of prior years		-		-
Settlements		(225)		-
Expiration of the statute of limitations for assessment of taxes		-		-
Unrecognized tax benefits at end of year	$	-	$	225

During 2013, the Company completed a final settlement with a state taxing authority resulting in a $225,000 state tax benefit net of Federal income taxes. During 2012 the Company completed a final settlement with a state taxing authority resulting in a $64,000 state tax benefit net of Federal income taxes.

The Company’s U.S. Federal income tax filings have been examined by the Internal Revenue Service through 2008. The Company or one of its subsidiaries files tax returns in various states. The tax years subject to examination in Pennsylvania, where the majority of the Company's revenues are generated, are 2010 to 2013.

The Company has net operating loss carryforwards of $88 million available for state income tax purposes. The net operating losses will begin to expire starting in 2027. The Company expects to fully utilize these net operating loss carryforwards.