11.

INCOME TAXES

The provision for income taxes from continuing operations consists of the following:


	Year Ended December 31,
	2011			2010		2009
Current:
Federal	$	7,493		$	14,635	$	14,731
State		(555	)		405		580
Foreign		(154	)		151		292

		6,784			15,191		15,603

Deferred:
Federal		(412	)		4,053		607
State		28			65		611
Valuation allowance		0			0		(3,749	)

		(384	)		4,118		(2,531	)

	$	6,400		$	19,309	$	13,072

The income tax benefit attributable to discontinued operation consists of the following:


	Year Ended December 31,
	2011		2010			2009
Discontinued operations	$	0	$	(566	)	$	(2,398	)

A reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows:


	Year Ended December 31,
	2011			2010			2009
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and foreign income taxes, net of federal benefit		0			0			1.4
Executive compensation limitation		7.9			3.5			2.6
Food donations		(3.9	)		(2.2	)		(2.4	)
Changes in reserves		(2.0	)		0			0
Tax credits		(1.2	)		0			0
Other		(1.5	)		0			(0.3	)
Valuation allowance		0			0			(7.8	)

		34.3	%		36.3	%		28.5	%

The change in the effective tax rate from 2010 to 2011 was due to the impact of limitations on executive compensation deductions and food donations in comparison to pre-tax income as well as reductions in tax reserves due to the lapse of the statute of limitations during the fourth quarter of 2011 and tax credits and other miscellaneous adjustments occurring throughout the year.

The significant items comprising the Company's deferred income tax assets and liabilities are as follows:


	December 31,
	2011			2010
Deferred tax asset:
Reserves and accruals	$	834		$	1,206
Goodwill/Intangible assets		494			584
Net operating loss carryforward		1,043			1,100
Stock-based compensation		868			1,048
Charitable contribution carryforward		2,549			1,977
Other		1,033			579

		6,821			6,494
Deferred tax liability:
Property and equipment		(3,782	)		(3,839	)

Net deferred tax asset	$	3,039		$	2,655

At December 31, 2011, the net deferred tax asset of $3,039 is comprised of $1,584 included in current assets and $1,455 included in other assets in the accompanying consolidated balance sheet. At December 31, 2010, the net deferred tax asset of $2,655 is comprised of $1,854 included in current assets and $801 included in other assets in the accompanying consolidated balance sheet. At December 31, 2011 and 2010, the Company had net operating loss carryforwards of approximately $12,832 and $13,716, respectively, for state tax purposes. The decrease is due to the utilization of net operating losses. For state tax purposes, there is a limitation on the amount of net operating loss carryforwards that can be utilized in a given year to offset state taxable income. Net operating losses will begin to expire in 2024.

Based on the projected level of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the net deferred tax assets. In 2008, the Company recorded a valuation allowance of $3,749 related to its impairment of its investment in Zero Water since the character of the deduction could be a capital item and there was no history of generating capital gains. In 2009, the Company abandoned its investment in Zero Water (see Note 7) which provided the Company with a current year income tax deduction for its entire original $14,258 tax basis investment in Zero Water. This reduced 2009 federal income tax payments by approximately $4,990. This reduction in ordinary income tax payments resulted in a similar decrease in income tax expense for the year ended December 31, 2009 including a reversal of a $3,749 valuation allowance established in 2008 for deferred tax assets related to prior Zero Water losses and impairment charges. These Zero Water losses and impairment charges were considered realizable during the year ended December 31, 2009 due to the terms of the abandonment which changed the tax loss from capital to ordinary which the Company believes is more likely than not to realize.

The total amount of gross unrecognized tax benefits as of December 31, 2011 and 2010 was $1,919 and $2,478, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate is approximately $1,247 and $1,611, as of December 31, 2011 and 2010, respectively. The Company records accrued interest and penalties related to unrecognized tax benefits as part of interest expense. During 2011, 2010 and 2009, the Company recognized $133, $99 and $70, respectively, in interest and penalties. The Company's federal income tax returns for 2008 through 2011 are open and are subject to examination by the Internal Revenue Service. State tax jurisdictions that remain open to examination range from 2000 through 2011. The Company does not believe that that there will be any material changes to unrecognized tax positions over the next 12 months.

A reconciliation of the beginning and ending amounts of the total unrecognized tax benefit is as follows:


	Year Ended December 31,
	2011			2010			2009
Balance at beginning of year	$	2,478		$	1,375		$	1,193
Increase related to current year tax positions		85			1,184			182
Reductions related to settlement of tax matters		0			(42	)		0
Decrease due to lapse of statute of limitations		(644	)		(39	)		0

Balance at end of year	$	1,919		$	2,478		$	1,375