INCOME TAXES

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

INCOME TAXES

10. INCOME TAXES

The components of the income tax expense (benefit) are as follows:

	2012			2011		2010
Current
Federal	$	9,787,000		$	2,347,000	$	9,688,000
State		132,000			777,000		2,463,000
Total Current		9,919,000			3,124,000		12,151,000
Deferred
Federal	$	(1,210,000	)	$	5,446,000	$	(62,000	)
State		(127,000	)		569,000		(8,000	)
Total Deferred		(1,337,000	)		6,015,000		(70,000	)
Total Income Tax Expense	$	8,582,000		$	9,139,000	$	12,081,000

Deferred tax assets (liabilities) consisted of the following at December 31,

	2012			2011			2010
Deferred Compensation		-			301,000			314,000
Reserves on inventory and sales		336,000			242,000			140,000
Credit and loss carryforwards		692,000			545,000			178,000
Stock compensation		-			-			601,000
Other		690,000			516,000			77,000
Inventory Capitalization		526,000			555,000			-
Sales tax accrual		1,228,000			-			-
Total deferred tax assets		3,472,000			2,159,000			1,310,000
Unrealized gain/loss on investments		(333,000	)		(250,000	)		(145,000	)
Prepaid expenses		(752,000	)		(426,000	)		(429,000	)
Depreciation		(7,729,000	)		(8,075,000	)		(1,317,000	)
Stock compensation		(105,000	)		(109,000	)		-
Total deferred tax liabilities		(8,919,000	)		(8,860,000	)		(1,891,000	)
Net deferred tax liabilities	$	(5,447,000	)	$	(6,701,000	)	$	(581,000	)

The differences between the United States federal statutory tax rate and the Company's effective tax rate are as follows:

	2012					2011					2010
Statutory federal tax	$	8,559,000		35.0	%	$	9,688,000		35.0	%	$	11,093,000		35.0	%
State income taxes, net of federal benefit		679,000		2.8	%		1,015,000		3.7	%		1,699,000		5.4	%
Domestic manufacturer deduction		(902,000	)	-3.7	%		(248,000	)	-0.9	%		(861,000	)	-2.7	%
FTC settlement		1,389,000		5.7	%		-					-
Other permanent differences		(190,000	)	-0.8	%		71,000		0.3	%		75,000		0.2	%
Research and development and jobs credits		(267,000	)	-1.1	%		(336,000	)	-1.2	%		-
Other state income tax benefits		(686,000	)	-2.8	%		(1,051,000	)	-3.9	%		-
Other		-					-					75,000		0.2	%
	$	8,582,000		35.1	%	$	9,139,000		33.0	%	$	12,081,000		38.1	%

The 2012 and 2011 effective tax rate is impacted by the Company’s extensive state income tax planning.  This planning includes taking advantage of Maryland’s apportionment methodology.  As a manufacturing entity based in Maryland, the Company utilizes the single sales factor apportionment method in addition to claiming new state jobs credits and research & development credits.  These benefits were offset by a $3.7 million FTC nondeductible settlement in 2012.

The Company has federal capital loss carry forwards of approximately $287,000 that can be carried forward for five years and will expire in 2014 through 2017.  Separate company state net operating loss carry forwards totaling $5.4 million start expiring in 2031.  Maryland state credits carry forwards totaling $293,000 and a Pennsylvania credit carry forward totaling $29,000 will expire in 2017.