INCOME TAXES

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE I - INCOME TAXES

The income tax provision consisted of the following (in thousands):

	Year ended December 31,
	2012			2011			2010
Current
Federal	$	1,782		$	1,965		$	1,901
State		116			275			239
		1,898			2,240			2,140
Deferred
Federal		(761	)		(299	)		(691	)
State		2			(213	)		(234	)
Change in allowance		(4	)		174			18
		(763	)		(338	)		(907	)
Income tax expense	$	1,135		$	1,902		$	1,233

Our temporary differences are summarized as follows (in thousands):

	December 31,
	2012			2011
Deferred tax assets:
Goodwill and intangible assets	$	2,928		$	1,669
Inventories		436			451
Non-deductible accruals and allowances		482			1,428
Net operating loss carryforwards		192			180
Asset retirement obligation		321			299
Share-based compensation		358			207
Tax credit carryforwards		139			205
Capital loss carryforwards		117			121
Other		38			76
Gross deferred tax assets		5,011			4,636
Deferred tax liabilities:
Property and equipment		(2,937	)		(3,311	)
Other		(13	)		—
Gross deferred tax liabilities		(2,950	)		(3,311	)
Valuation allowance		(336	)		(340	)
Net deferred tax asset	$	1,725		$	985

The net deferred tax asset is classified in our accompanying consolidated balance sheets as follows (in thousands):

	December 31,
	2012			2011
Current deferred tax asset		$	1,008		$	2,028
Long-term deferred tax asset (liability)			717			(1,043	)
Net deferred tax asset		$	1,725		$	985

Activity in the valuation allowance for deferred tax assets is as follows (in thousands):

	Year ended December 31,
	2012			2011		2010
Valuation allowance, beginning of period	$	340		$	166	$	148
Increase in allowance		—			174		18
Release of allowance		(4	)		—		—
Valuation allowance, end of period	$	336		$	340	$	166

We periodically evaluate the recoverability of the deferred tax assets and recognize the tax benefit only if reassessment demonstrates that they are realizable. At such time, if it is determined that it is more likely than not that the deferred tax assets are realizable, the valuation allowance is adjusted. The remaining allowance at December 31, 2012 relates primarily to certain capital loss carryforwards and certain state net operating loss carryforwards for which we believe it is more likely than not that the benefit will not be realized.

A reconciliation of the statutory federal income tax rate and our effective tax rate follows:

	Year ended December 31,
	2012			2011			2010
Tax expense at applicable federal rates		34.0	%		34.0	%		34.0	%
State tax, net of federal tax effect		3.6			2.6			2.8
Non-deductible share-based compensation		1.4			2.2			3.0
Non-deductible lobbying expenses		.7			.3			1.1
Non-deductible compensation (162m)		—			2.3			2.4
Valuation allowance		—			3.5			—
Domestic production deduction		(5.7	)		(4.2	)		(5.0	)
Federal tax credits		—			(1.1	)		(2.0	)
State investment tax credit		—			(2.0	)		(1.4	)
Other		.7			.7			2.4
Effective tax expense		34.7	%		38.3	%		37.3	%

Substantially all of our state net operating loss carryforwards expire in 2025.

We account for investment tax credits under the flow-through method, which results in the recognition of the credit as a reduction of income taxes in the year in which the credit arises. We have state investment tax credit carryforwards of $139,000 which expire in 2020.

We have evaluated our tax positions for the tax year ended December 31, 2012, and for the tax years ended December 31, 2009, 2010 and 2011, the tax years that remain subject to examination by major tax jurisdictions as of December 31, 2012. With few exceptions, we are no longer subject to U.S. federal, state and local, or income tax examinations by tax authorities for years prior to 2009. We have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements.