H. INCOME TAXES:

The following table summarizes the provision for income taxes:



	For Years Ended December 31 (in thousands)
	2012		2011		2010
Current:
Federal	$	22,165	$	17,596	$	30,318
State		4,187		4,365		5,905
		26,352		21,961		36,223
Deferred:
Federal		(3,938)		4,972		(997)
State		(865)		124		598
		(4,803)		5,096		(399)
Total tax provision	$	21,549	$	27,057	$	35,824

The effective rate of the provision for income taxes as shown in the Consolidated Statements of Comprehensive Income differs from the applicable statutory federal income tax rate for the following reasons:



	Percent of Pre-tax Income
	2012	2011	2010
Statutory rate	35.0%	35.0%	35.0%
State tax, net of federal benefit	3.6%	3.9%	4.6%
Tax exempt interest and dividends	(0.3%)	(0.5%)	(0.7%)
Other	(2.6%)	(2.3%)	(2.8%)
Effective rate	35.7%	36.1%	36.1%

Deferred tax assets and liabilities are recorded based on the differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. The tax effects of the cumulative temporary differences resulting in deferred tax assets and liabilities are as follows at December 31:



	(In thousands)
	2012		2011
Deferred tax assets
Doubtful accounts	$	3,245	$	541
Insurance (primarily product liability)		2,412		2,306
Vacation		961		951
Environmental		745		894
Goodwill and other intangibles		697		859
Other		846		589
Total deferred tax assets		8,906		6,140

Deferred tax liabilities
Depreciation		7,339		9,366
Other		29		39
Total deferred tax liabilities		7,368		9,405

Net deferred tax assets (liabilities)	$	1,538	$	(3,265)

The Company establishes tax reserves in accordance with FASB ASC 740, Income Taxes. As of December 31, 2012, the carrying amount of the Company’s gross unrecognized tax benefits was $209,000 which, if recognized, would affect the Company’s effective income tax rate.

The following is a reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2012 and 2011:



	(In thousands)
	2012		2011
Balance at January 1	$	248	$	418
Additions for tax positions taken related to the current year		56		87
Additions for tax positions taken related to prior years		115		12
Settlements		(210)		(269)
Balance at December 31	$	209	$	248

It is the Company’s practice to include interest and penalties in tax expense. During the years ended December 31, 2012 and 2011, the Company accrued approximately $13,000 and $11,000 in interest, respectively.

The Company is subject to U.S. federal income tax as well as income taxes of multiple states. During the year ended December 31, 2012, the Company finalized its most recent audit by the Internal Revenue Service for the tax years 2009 and 2010. For all states in which it does business, the Company is subject to state audit statutes.