10. Income Taxes

The provision for income tax expense (benefit) consists of the following:

	Year ended December 31

	2012			2011		2010
Current:
Federal	$	(3,994	)	$	2,697	$	—
State		289			326		231

		(3,705	)		3,023		231
Deferred:
Federal		7,375			7,855		363
State		474			454		278

		7,849			8,309		641

	$	4,144		$	11,332	$	872

A reconciliation of income tax expense computed at the federal statutory rate to the provision for income taxes for the years ended December 31, 2012, 2011 and 2010 is as follows:

	2012			2011			2010

Federal income tax expense at statutory rate	$	3,555		$	10,630		$	862
State taxes, net of federal benefit		218			1,522			7
Valuation allowance changes		451			(47	)		311
Change in uncertain tax positions, net		8			(150	)		(349	)
Research and development credit		(26	)		(111	)		(117	)
Rate change		67			(162	)		95
Manufacturing tax benefits		—			(552	)		—
Other		(129	)		202			63

	$	4,144		$	11,332		$	872

Significant components of the Company's deferred tax liabilities and assets are as follows:

	December 31,

	2012			2011
Deferred tax assets:
Allowance for doubtful accounts	$	223		$	465
Inventory reserves		445			479
Warranty liability		1,346			1,552
Deferred compensation		383			911
Pension and retiree health benefit obligations		7,072			8,615
Accrued vacation		631			570
Medical claims reserve		261			242
State net operating losses		2,633			2,167
Other accrued liabilities		746			1,583
Valuation allowance for state net operating losses		(1,374	)		(830	)

Total deferred tax assets		12,366			15,754
Deferred tax liabilities:
Tax deductible goodwill and other intangibles		(39,664	)		(34,923	)
Accelerated depreciation		(2,205	)		(2,280	)
Other		(592	)		(556	)

Total deferred tax liabilities		(42,461	)		(37,759	)

Net deferred tax liabilities	$	(30,095	)	$	(22,005	)

Deferred income tax balances reflect the effects of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

State operating loss carry forwards for tax purposes are $58,246 at December 31, 2012, and will result in future tax benefits of approximately $2,633. These loss carry-forwards will begin to expire in 2019. The Company evaluated the need to maintain a valuation allowance against certain deferred tax assets. Based on this evaluation, which included a review of recent profitability and future projections of profitability, the Company concluded that a valuation allowance of approximately $1,374 is necessary at December 31, 2012 for the state net operating loss carry-forwards which are likely to expire prior to the Company's ability to use the tax benefit.

A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:

	2012		2011

Balance at beginning of year	$	320	$	798
Decreases due to settlements with taxing authorities		—		(478	)
Increases for tax position taken in prior years		8		—

Balance at the end of year	$	328	$	320

The amount of the unrecognized tax benefits that would affect the effective tax rate, if recognized, was approximately $213 at December 31, 2012. The Company recognizes interest and penalties related to the unrecognized tax benefits in income tax expense. Approximately $62 and $54 of accrued interest and penalties is reported as an income tax liability at December 31, 2012 and 2011, respectively. The liability for unrecognized tax benefits is reported in Other Liabilities on the consolidated balance sheets at December 31, 2012 and 2011.

The Company files income tax returns in the United States (Federal), Wisconsin (state), Maine (state) and various other states. Tax years open to examination by tax authorities under the statute of limitations include 2011 and 2012 for Federal and 2008 through 2012 for most states. Tax returns for the 2012 tax year have not yet been filed.