
6.	Income Taxes. The provision (benefit) for income taxes consists of the following:


Year Ended December 31	2011		2010			2009
Current taxes - Federal	$	22,678,000	$	—		$	86,000
Current taxes - State		2,383,000		28,000			29,000
Deferred taxes - Federal		5,226,000		1,086,000			645,000
Deferred taxes - State		319,000		95,000			56,000
Benefit from adjustment of valuation allowance		—		(6,883,000	)		(701,000	)

Provision (benefit) for income taxes	$	30,606,000	$	(5,674,000	)	$	115,000


	Significant components of the deferred taxes are as follows:


As of December 31	2011			2010

Current Deferred Tax Assets:
Accrued compensation	$	304,000		$	—
Accrued expenses		147,000			119,000
Inventory reserve		27,000			29,000
Other		5,000			3,000
Current deferred tax assets before valuation allowance		483,000			151,000
Less valuation allowance		—			—

Current deferred tax assets	$	483,000		$	151,000

Long-Term Deferred Tax Assets (Liabilities):
Accrued compensation	$	304,000		$	—
Net operating loss carryforwards		36,000			6,291,000
Depreciation		(692,000	)		55,000
Stock options		26,000			107,000
Alternative minimum tax credits		—			125,000
Other		—			3,000
Long-term deferred tax assets (liabilities) before valuation allowance		(326,000	)		6,581,000
Less valuation allowance		—			(1,030,000	)

Long-term deferred tax assets (liabilities)	$	(326,000	)	$	5,551,000


	At December 31, 2010, the Company had federal net operating loss carryforwards of approximately $18,744,000, which were fully utilized in 2011. The Company had previously determined that these carryforwards are not subject to the limitations of Internal Revenue Code Section 382 which provides limitations on the availability of net operating losses to offset current taxable income if an ownership change has occurred.

	At December 31, 2010, the Company had indefinite-lived alternative minimum tax credit carryforwards of $125,000, which were fully utilized in 2011.


	During the year ended December 31, 2010, the Company recorded a $6,883,000 net release of the valuation allowance. The release was due to the taxable income generated from the News America lawsuit settlement on February 9, 2011. During the year ended December 31, 2009, the Company recorded a $701,000 net release of the valuation allowance related to the utilization of loss carryforwards and determined that it was still more likely than not that none of the remaining deferred tax assets would be realized. The Company evaluates all significant available positive and negative evidence, including the existence of losses in recent years and its forecast of future taxable income, in assessing the need for a valuation allowance. The underlying assumptions the Company uses in forecasting future taxable income require significant judgment and take into account the Company's recent performance.

	The tax benefit related to the partial release of the valuation allowance against deferred tax assets for the year ended December 31, 2010 was $5,674,000. Included as part of the Company's net operating loss carryforwards at December 31, 2010 were approximately $2,700,000 in tax deductions that resulted from the exercise of stock options. When these tax deductions were realized in 2011, the corresponding income tax benefit of the change in the valuation allowance was recorded as additional paid-in capital.

	The actual tax expense attributable to income from continuing operations differs from the expected tax expense (benefit) computed by applying the U.S. federal corporate income tax rate of 35% to the net income as follows:


Year Ended December 31	2011			2010			2009
Federal statutory rate		35.0	%		34.0	%		34.0	%

Change in valuation allowance		—			(674.9	)		(35.3	)
Stock options		(0.2	)		19.6			3.0
State taxes		2.0			2.6			0.5
Meals and entertainment		—			3.6			0.8
Impact of uncertain tax positions		0.5			—			—
Other		0.2			(0.3	)		—

Effective federal income tax rate		37.5	%		(615.4	)%		3.0	%

The Company has recorded a liability of $424,000 for uncertain tax positions taken in tax returns during the year ended December 31, 2011. This liability is reflected as Accrued Income Taxes on the Company's Balance Sheets. The Company files income tax returns in the United States and numerous state and local tax jurisdictions. Tax years that are open for examination and assessment by the Internal Revenue Service are 2008 and forward. With limited exceptions, tax years prior to 2008 are no longer open in major state and local tax jurisdictions. The Company does not anticipate that the total unrecognized tax benefits will change significantly prior to December 31, 2012.