NOTE 9. INCOME TAXES

The components of income before income taxes were as follows:


	Year Ended December 31,
	2012			2011			2010
United States	$	80,565		$	45,259		$	43,306
Foreign		(2,079	)		(2,234	)		(564	)

Total Income before Income Taxes	$	78,486		$	43,025		$	42,742

The provision for income taxes consists of the following:


	Year Ended December 31,
	2012			2011			2010
Current
Federal	$	26,949		$	12,291		$	10,231
State		4,195			2,063			1,945
Foreign		118			13			—

Total Current		31,262			14,367			12,176
Deferred
Federal		(387	)		2,483			3,926
State		(164	)		498			522
Foreign		711			(579	)		(148	)

Total Deferred		160			2,402			4,300

Total Provision for Income Taxes	$	31,422		$	16,769		$	16,476

The reconciliation of significant differences between income tax expense applying the federal statutory rate and the actual income tax expense at the effective rate are as follows:


	Year Ended December 31,
	2012					2011					2010
Income Tax Expense at Federal Statutory Rate	$	27,470		35.0	%	$	15,059		35.0	%	$	14,960		35.0	%
Increases (Decreases):
State Income Taxes, Net of Federal Income Tax Benefit		2,542		3.2	%		1,632		3.8	%		1,478		3.5	%
Valuation Allowance		1,267		1.6	%		—		0.0	%		—		0.0	%
Foreign Taxes		283		0.4	%		208		0.5	%		49		0.1	%
Other		(140	)	(0.2	%)		(130	)	(0.3	%)		(11	)	(0.1	%)

Total	$	31,422		40.0	%	$	16,769		39.0	%	$	16,476		38.5	%

The tax effects of temporary differences that result in significant portions of the deferred tax accounts are as follows:


	December 31,
	2012			2011
Deferred Tax Liabilities:
Prepaid Expenses	$	402		$	372
Depreciation and Amortization		12,729			11,629
Other		655			—

Total Gross Deferred Tax Liabilities		13,786			12,001

Deferred Tax Assets:
Stock-Based Compensation Expense		3,211			3,914
Reserves		2,782			2,243
Employee Benefits		1,685			118
Inventory Capitalization		3,454			2,168
Foreign Operations		1,267			728
Other		—			342

Total Gross Deferred Tax Assets		12,399			9,513

Less Valuation Allowance		(1,267	)		—

Total Net Deferred Tax Assets		11,132			9,513

Net Deferred Tax Liability	$	(2,654	)	$	(2,488	)

In the fourth quarter of 2012, Canadian operations were in a cumulative loss position and the Company recorded a full valuation allowance of $1,267 on the net deferred tax assets in Canada. In future periods, the allowance could be reduced if sufficient evidence exists indicating that it is more likely than not that a portion or all of these deferred tax assets will be realized.

As of December 31, 2012, the Company had Canadian net operating losses carryforwards of $5,446 which begin to expire in 2030. These net operating losses may be carried forward up to 20 years to offset future taxable income.

The Company made income tax payments of $29,035, $7,067 and $14,282 in 2012, 2011 and 2010, respectively.

The Company files income tax returns with the U.S. federal government and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. The Internal Revenue Service has completed audits of the Company’s federal income tax returns for years through 2009.