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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Income tax expense (benefit) consisted of the following (in thousands):

Current:	2011		2010		2009
Federal	$	23,481	$	15,812	$	(2,763	)
State		3,622		758		103
		27,103		16,570		(2,660	)
Deferred:
Federal		2,434		564		(16,231	)
State		405		1,788		(1,971	)
		2,839		2,352		(18,202	)
Income tax expense (benefit)	$	29,942	$	18,922	$	(20,862	)

Reconciliation of income tax expense (benefit) at the statutory federal rate

The following table provides a reconciliation between the statutory federal income tax rate and our effective income tax rate:

	2011			2010			2009
Statutory federal income tax		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		3.2			2.9			4.7
Manufacturing deduction		(2.9	)		(2.7	)		-
Changes in unrecognized tax benefits		(0.8	)		1.8			5.0
Change in valuation allowance		-			-			(182.7	)
Other		(1.4	)		0.5			(4.0	)
Effective tax rate		33.1	%		37.5	%		(142.0	)%

Deferred income taxes

The tax effects of temporary differences that give rise to deferred income taxes were as follows (in thousands):

Deferred tax assets:	2011			2010
Current:
Compensation and benefits	$	1,175		$	1,254
Warranty and returns liabilities		2,492			1,584
Deferred rent and lease incentives		862			911
Other		107			570
Long-term:
Property and equipment		1,119			3,541
Stock-based compensation		6,380			5,964
Deferred rent and lease incentives		2,411			2,416
Warranty liability		1,047			1,419
Net operating loss and capital loss carryforwards		2,090			2,773
Other		417			469
Total gross deferred tax assets		18,100			20,901
Valuation allowance		(693	)		(639	)
Total net deferred tax assets	$	17,407		$	20,262

Reconciliation of unrecognized tax benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for 2011, 2010 and 2009 was as follows (in thousands):

	Federal and State Tax
	2011			2010			2009
Beginning balance	$	1,354		$	1,375		$	152
Increases related to prior-year tax positions		355			621			243
Decreases related to prior-year tax positions		-			(572	)		-
Settlements with taxing authorities		(1,506	)		(138	)		-
Lapse of statute of limitations		(70	)		-			-
Increases related to current-year tax positions		292			68			980
Ending balance	$	425		$	1,354		$	1,375

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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