Income Taxes

12 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

13) Income Taxes

Income tax expense is comprised of the following for the indicated periods (in thousands):

	Years Ended September 30,
	2012		2011		2010
Current:
Federal	$	2,168	$	3,216	$	726
State		1,495		3,676		1,575
Deferred		12,913		15,831		13,331
	$	16,576	$	22,723	$	15,632

The provision for income taxes differs from income taxes computed at the Federal statutory rate as a result of the following (in thousands):

	Years Ended September 30,
	2012			2011		2010
Income from continuing operations before taxes	$	42,565		$	47,067	$	43,952
Provision for income taxes:
Tax at Federal statutory rate	$	14,898		$	16,473	$	15,383
Impact of Partnership income or loss not subject to federal income taxes		697			1,631		1,239
State taxes net of federal benefit		2,801			3,493		3,087
Permanent differences		28			54		(44	)
Change in valuation allowance		(14	)		672		(3,928	)
Change in unrecognized tax benefit		(1,669	)		189		667
Other		(165	)		211		(772	)
	$	16,576		$	22,723	$	15,632

The components of the net deferred taxes and the related valuation allowance for the years ended September 30, 2012 and September 30, 2011 using current tax rates are as follows (in thousands):

	September 30,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	8,626		$	9,263
Vacation accrual		2,586			2,687
Pension accrual		5,201			6,308
Allowance for bad debts		2,845			4,328
Fair value of derivative instruments		—			3,060
Insurance accrual		18,085			17,520
Inventory		869			702
Alternative minimum tax credit carryforward		261			261
Other, net		2,188			2,523
Total deferred tax assets		40,661			46,652
Valuation allowance		(658	)		(672	)
Net deferred tax assets	$	40,003		$	45,980
Deferred tax liabilities:
Property and equipment	$	1,947		$	1,077
Intangibles		20,164			14,102
Fair value of derivative instruments		484			—
Total deferred tax liabilities	$	22,595		$	15,179
Net deferred taxes	$	17,408		$	30,801

As of the calendar tax year ended December 31, 2011, Star Acquisitions, a wholly-owned subsidiary of the Partnership, had an estimated Federal net operating loss carry forward (“NOLs”) of approximately $12.8 million. The Federal NOLs, which will expire between 2018 and 2024, are generally available to offset any future taxable income but are also subject to annual limitations of between $1.0 million and $2.2 million.

FASB ASC 740-10-05-6 Income Taxes, Uncertain Tax Position, provides financial statement accounting guidance for uncertainty in income taxes and tax positions taken or expected to be taken in a tax return. At September 30, 2012, we had unrecognized income tax benefits totaling $0.7 million. These unrecognized tax benefits are primarily the result of State tax uncertainties. If recognized, these tax benefits would be recorded as a benefit to the effective tax rate.

Tax Uncertainties (in thousands)

Balance at September 30, 2011	$	2,524
Additions based on tax positions related to the current year		—
Additions for tax positions of prior years		578
Reduction for tax positions of prior years		(1,972	)
Reductions due to lapse in statue of limitations/settlements		(430	)
Balance at September 30, 2012	$	700

We believe that the total liability for unrecognized tax benefits will not materially change during the next 12 months ending September 30, 2013. Our continuing practice is to recognize interest related to income tax matters as a component of income tax expense. We file U.S. Federal income tax returns and various state and local returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. For our Federal income tax returns we have four tax years subject to examination. In our major state tax jurisdictions of New York, Connecticut, Pennsylvania and New Jersey, we have four, four, four, and five tax years, respectively, that are subject to examination. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, based on our assessment of many factors including past experience and interpretation of tax law, we believe that our provision for income taxes reflect the most probable outcome. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.