(4) Income Taxes

The provision for income taxes from continuing operations consists of:

	2013		2012
Current:
Federal	$	3,825,000	$	507,000
State		749,000		251,000
Foreign		19,000		37,000
		4,593,000		795,000
Deferred:
Federal		84,000		1,183,000
State		150,000		133,000
		234,000		1,316,000
Income tax expense	$	4,827,000	$	2,111,000

The effective income tax rate from continuing operations for fiscal year 2013 was 47.1%, compared to the previous year's effective tax rate of 54.9%. The lower income tax rate in fiscal 2013 was primarily due to a non-tax deductible impairment loss of $1,791,000 in fiscal year 2012.

The foreign operations had a pre-tax loss of $193,000 in fiscal 2013 compared with $307,000 in pre-tax loss in fiscal 2012. Calgary facility shutdown cost $566,000 in fiscal 2012, was included in the foreign operation pre-tax loss. The earnings associated with the Company's foreign subsidiary in Japan are reported net of tax and are included in operating income.

The following is a reconciliation of the difference between the actual provision for income taxes and the provision computed by applying the federal statutory tax rate on income from continuing operations before income taxes:

	2013			2012
Income before income taxes and noncontrolling interest	$	10,250,000		$	3,849,000
Federal income tax computed at statutory rate	$	3,485,000		$	1,178,000
State income taxes, net of federal benefits		527,000			254,000
Foreign income not subject to U.S. tax		66,000			104,000
Foreign tax		19,000			37,000
Dividend received		167,000			-
Goodwill impairment		-			609,000
Earn-out adjustment		(34,000	)		(136,000	)
Other, principally non-deductible expenses		145,000			65,000
Other		452,000			-
Income tax expense	$	4,827,000		$	2,111,000

Deferred income taxes on the consolidated balance sheets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The primary components of the Company's deferred tax assets and liabilities at January 31 were as follows:

	2013					2012
	Current		Non-current			Current		Non-current
Deferred tax assets:
Bad debts reserves	$	341,000	$	-		$	263,000	$	-
Vacation accrual		1,098,000		-			1,065,000		-
State taxes		712,000		-			493,000		-
Deferred compensation		1,568,000		-			1,219,000		-
Net operating loss		209,000		-			211,000		-
Accrued costs on discontinued operations		186,000		-			188,000		-
Acquisition costs		240,000		-			242,000		-
Other		605,000		-			219,000		-
Total deferred tax assets	$	4,959,000	$	-		$	3,900,000	$	-

Deferred tax liabilities:
Goodwill & other intangibles	$	-	$	(3,793,000	)	$	-	$	(3,317,000	)
Gain on involuntary conversion		-		(1,166,000	)		-		(1,176,000	)
Tax over book depreciation		-		(10,604,000	)		-		(8,761,000	)
Deferred compensation		-		(112,000	)		-		(92,000	)
Other		-		(786,000	)		-		(144,000	)
Total deferred tax liabilities	$	-	$	(16,461,000	)	$	-	$	(13,490,000	)
Net deferred tax asset (liability)	$	4,959,000	$	(16,461,000	)	$	3,900,000	$	(13,490,000	)

The Company has reviewed its positions in recording income and expenses and has no reason to record a liability for income tax uncertainties. The Company files income tax returns in the U.S. on a federal basis and in many U.S. states and foreign jurisdictions. Certain tax years remain open to examination by the major taxing jurisdictions to which the Company is subject. The Company does not anticipate that its total unrecognized tax benefits will significantly change due to the settlement of examinations or the expiration of statutes of limitations during the next twelve months.