NOTE 6 - INCOME TAXES

The provision for income taxes consists of the following as of December 31:

	2012		2011		2010
Federal - current	$	6,206	$	7,833	$	14,970
State and local - current	1,197		1,375		2,938
Deferred	3,753		4,371		2,770
	$	11,156	$	13,579	$	20,678

A reconciliation of the statutory to the effective rate of the Company is as follows as of December 31:

	2012		2011		2010
Tax provision using statutory rate	35.0	%	35.0	%	35.0	%
State and local taxes, net of Federal benefit	4.1	%	3.9	%	4.3	%
Valuation allowance	-0.6	%	0.0	%	0.3	%
Other, net	0.7	%	0.6	%	0.6	%
Tax provision for continuing operations	39.2	%	39.5	%	40.2	%

The Company has provided a valuation allowance against certain net deferred tax assets based upon management’s estimation of realizability of those assets through future taxable income. This valuation allowance was based in large part on the Company’s history of generating operating income or losses in individual tax locales and expectations for the future. The Company’s ability to generate the expected amounts of taxable income from future operations to realize its recorded net deferred tax assets is dependent upon general economic conditions, competitive pressures on revenues and margins and legislation and regulation at all levels of government. There can be no assurances that the Company will meet its expectations of future taxable income. However, management has considered the above factors in reaching its conclusion that it is more likely than not that future taxable income will be sufficient to realize the deferred tax assets (net of valuation allowance) as of December 31, 2012.

During 2012, the valuation allowance decreased by $169, of which $159 was a decrease due to a change in expected realizability of deferred tax assets for states operating loss carry-forwards. The change was primarily generated by a structural reorganization enabling additional expected utilization of state net operating loss carry-forwards upon which a valuation allowance had been previously placed on the related deferred tax assets.

The principal tax carry-forwards and temporary differences were as follows as of December 31:

	2012			2011
Deferred tax assets
Non-deductible reserves and allowances	$	4,331		$	5,376
Insurance accruals	2,212			2,415
Net operating loss carryforwards	1,251			1,254
	7,794			9,045
Valuation allowance	(960		)	(1,129		)
Deferred tax assets	6,834			7,916

Deferred tax liabilities
Intangibles	(15,525		)	(12,904		)
Accelerated depreciation	(1,514		)	(1,172		)
Deferred tax liabilities	(17,039		)	(14,076		)
Net deferred tax liabilities	$	(10,205	)	$	(6,160	)

Deferred tax (liabilities) assets are reflected in the accompanying balance sheet as:
Current assets	6,580			7,470
Long-term liabilities	(16,785		)	(13,630		)
Net deferred tax liabilities	$	(10,205	)	$	(6,160	)

The Company had book goodwill of $57.5 million and $56.9 million at December 31, 2012 and 2011, respectively, which was not deductible for tax purposes.

State operating loss carry-forwards totaling $22.2 million at December 31, 2012 are being carried forward in jurisdictions where we are permitted to use tax losses from prior periods to reduce future taxable income. If not used to offset future taxable income, these losses will expire between 2013 and 2032. Due to uncertainty regarding our ability to use some of the carry-forwards, a valuation allowance has been established on $16.1 million of state net operating loss carry-forwards. Based on our historical record of producing taxable income and expectations for the future, we have concluded that future operating income will be sufficient to give rise to taxable income sufficient to utilize the remaining state net operating loss carry-forwards.

The Company concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. The evaluation was performed for the tax years ended December 31, 2006, through 2012. For federal tax purposes, the Company is currently subject to examinations for tax years after 2008, while for state purposes, tax years after 2006 are subject to examination, depending on the specific state rules and regulations. The Internal Revenue Service completed an examination of the December 31, 2009 tax year.

The Company may from time to time be assessed interest and penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to its financial results. Assessments for interest and/or penalties are classified in the financial statements as general and administrative - other.