NOTE 9 - INCOME TAXES

Income tax expense consists of the following:

	2016			2015			2014
Current:
Federal	$	28,765		$	29,638		$	25,937
Foreign		2,670			3,021			2,141
State		2,483			2,982			2,412
Deferred:
Federal		(7,114	)		(6,815	)		(5,772	)
Foreign		52			58			85
State		106			(1,543	)		(577	)
Total income tax provision	$	26,962		$	27,341		$	24,226

The provision for income taxes differs from the amount computed by applying the Federal statutory rate of 35% to earnings before income tax expense due to the following:

	2016			2015			2014
Income tax at Federal statutory rate	$	29,027		$	30,471			26,968
State income taxes, net of Federal income taxes		1,510			556			1,182
Domestic production activities deduction		(3,299	)		(2,709	)		(2,567	)
Other		(276	)		(977	)		(1,357	)
Total income tax provision	$	26,962		$	27,341			24,226

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2016 and 2015 were as follows:

	2016		2015
Deferred tax assets:
Inventories	$	2,378	$	1,432
Restricted stock and stock options		5,100		4,956
Other		2,629		807
Total deferred tax assets		10,107		7,195
Deferred tax liabilities:
Amortization	$	56,111	$	49,726
Depreciation		27,435		22,464
Prepaid expense		-		658
Other		48		752
Total deferred tax liabilities		83,594		73,600
Net deferred tax liability	$	73,487	$	66,405

There is no valuation allowance for deferred tax assets at December 31, 2016 and 2015. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. The amount of deferred tax asset realizable, however, could change if management’s estimate of future taxable income should change.

Provisions of ASC 740-10 clarify whether or not to recognize assets or liabilities for tax positions taken that may be challenged by a tax authority. A reconciliation of the beginning and ending amount of unrecognized tax benefits, which is included in other long-term obligations on the Company’s consolidated balance sheets, is as follows:

	2016			2015			2014
Balance at beginning of period	$	6,570		$	5,205		$	3,076
Increases for tax positions of prior years		332			943			1,922
Decreases for tax positions of prior years		(406	)		(120	)		(417	)
Increases for tax positions related to current year		141			542			624
Balance at end of period	$	6,637		$	6,570		$	5,205

All of the Company’s unrecognized tax benefits, if recognized in future periods, would impact the Company’s effective tax rate in such future periods.

The Company recognizes both interest and penalties as part of the income tax provision. During the years ended December 31, 2016, 2015 and 2014, the Company recognized approximately $94, $138 and $37 in interest and penalties, respectively. As of December 31, 2016 and 2015, accrued interest and penalties were $2,486 and 2,405, respectively.

The Company files income tax returns in the U.S. and in various states and foreign countries. In the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2012. The Company does not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.